(November 2008)Economic uncertainties are raising doubts over utility returns. Will regulators feel the need to consider broader economic effects when engaging in ratemaking? While...
Transmission is Bubbling
A billion-dollar ‘gold rush’ could send grid rates through the roof.
would produce a perverse rate-making result, in effect transferring costs to retail ratepayers, in the form of higher regional transmission rates, that otherwise ordinarily would fall under the responsibility of power-plant developers.
Massachusetts DPU chairman Paul Hibbard explained this idea in July in his “not for citation” presentation before the ISO’s new ESP Stakeholder Group:
“Price will be determined by the marginal price of natural gas fired, generation … We cannot change this. We cannot change it by building different types of generation. We cannot change it by building transmission to remote generation. And we cannot change it by selecting the types of wholesale generation resources added to our region—whether fossil, nuclear, or renewable.”
Hibbard now explains the discouraging reality of banking on a big grid build-out to bring distant renewables to urban markets:
“Separately funding transmission from new generation resources whether in Southern New England, offshore, or to bring power in from New York, Northern New England or Canada cannot materially impact the wholesale cost of power in the region. On the other hand, it would affect the price of delivered power at the retail level, but only by increasing it by the cost of transmission that otherwise would remain the responsibility of the generation developer.”
Is it true what they say: “As Maine goes, so goes the nation?”
If so, then Massachusetts regulator Hibbard offers some sobering advice:
“The price tag for the Maine Power Connection (and interconnection projects under consideration by this working group) is extraordinary—in the billions.
“So it simply won’t be enough to just assert or model that a project or plan provides carbon benefits—they will have to be certain.”