(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.
development of a proposed 800-MW capacity wind farm in Maine’s Aroostook County, see below.) Connecting MPS with New England would mean an expansion of the ISO market area, with major implications for state energy policy, since the Maine PUC previously openly questioned whether the state’s utilities should withdraw from the New England RTO.
Earlier this year, in response to inquiries from the state legislature, the PUC argued that RTO methods for transmission-cost allocation tended to distort resource-planning decisions. The Maine regulators pointed out that regional “socialization” of grid-expansion costs (through postage-stamp rates) for projects designed to enhance reliability tended to favor grid solutions over generation sited closer to load (See, Final Report to Utils. & Energy Committee, Me.PUC, Jan. 15, 2008) .
Also, by boosting grid capacity into and out of its service area, MPS would make possible the development of the planned 800-MW Aroostook Wind Energy (AWE) venture, not to mention imports from Canada of massive amounts of renewable energy (wind and hydro), that likely will become available in the future. Some say that New England will need projects such as the MPC, if ever it should entertain realistic hopes of complying with state-imposed renewable mandates, or its equally ambitious goals for carbon control, as put forth in the Regional Greenhouse Gas Initiative (RGGI).
Thus, CMP and MPS submitted their project as an economic grid expansion, known in New England as a METU (Market Efficiency Transmission Upgrade), which presumably would qualify for FERC incentives by reducing the cost of delivered electricity by reducing congestion (See, FERC Dkt. EL08-77, filed July 18, 2008).
Nevertheless, as with CMP’s MPRP project, the Maine Power Connection has run into problems. In short, despite adding wind energy to the regional portfolio, the project might not actually reduce power prices, since Maine would remain export-constrained, which would limit sales of cheaper Aroostook wind power across the region—not to mention that experts believe gas-fired turbines (the unit of choice in New England) likely would continue setting the marginal clearing price in the RTO’s regional spot energy markets. Also, the project certainly will not reduce congestion, but in fact might increase it, by inviting imports of Canadian power into Maine, where they would remain bottled up without enough grid capacity to move the power further to Southern New England, where it would be needed to meet renewable mandates. The only constraints that MPC might relieve would be the congestion that it would cause itself—the traffic added to the grid from the Aroostook wind farm, which would exist only on condition of building the new line.
As the Connecticut Consumer Counsel and state utility commission explain, incentive rates for the MPC project will allow the sponsors to “insulate themselves from all risks and collect hundreds of millions of dollars to build a transmission line to nowhere.”
Donald Downes, chairman of the Connecticut DPUC, writing to ISO-NE president and CEO Gordon Van Welie on July 10, likened the MPC project more to a gen-plant proposal or resource-development venture, rather than a classic regional transmission project. He suggested a simultaneous evaluation of