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Capacity Markets Again Harming Retail Choice: New England States Seeking to Buy Large Hydro due to Frustration With Wholesale Market Five New England states have announced a regional initiative to import low-cost, large-scale hydro power from Canada to, among other reasons, bring "cheaper power options" to customers.
Massachusetts, Connecticut, Maine, and Rhode Island -- all states with retail choice -- plus Vermont are part of the collaborative.
According to the states, the regional approach, "will seek to utilize economies of scale to unlock imports from the significant resources in neighboring Canadian provinces, including the Maritimes and Quebec. The partnering states recognize the benefits of clean hydro electricity, including reducing and stabilizing electricity prices, enhancing fuel diversity, increasing electric grid reliability, reducing environmental impact from the energy sector, and encouraging an energy future that utilizes resources from within the region and nearby borders." [emphasis added]
Although theoretically any hydro procurements could be designed in a competitively neutral manner, the emphasis on the price-reducing benefits of hydro suggest an application directly to the customer's commodity bill, which could only be accomplished through the use of hydro as part of the default service portfolio.
Indeed, this is why, despite whatever flaws were inherent in its design and proposal process, it was imperative that the Connecticut retail auction be adopted (and be supported by all retail suppliers), in order to sever default service as anything but a backstop service prior to the introduction of a managed portfolio which increasingly looks as if it will rely on large hydro
The application of the hydropower to default service is increasingly likely if the power is subject to various offer floors or other import restrictions in the Forward Capacity Auction, which would limit non-energy benefits from the power and force its use in the default service portfolio in order to unlock its value.
"We will explore every option to reduce greenhouse gas emissions and save residents and businesses money," said Massachusetts Governor Deval Patrick
Specifically, the New England States Committee on Electricity (NESCOE) will evaluate the opportunities, options and issues relating to the expansion of large hydro into New England. Massachusetts and other states will consider those findings and, as warranted, incorporate them into a strategic plan to be presented to the New England Governors for their consideration later this year. The Massachusetts Department of Energy Resources (DOER) will play a lead agency role for this new large hydro initiative on behalf of the Commonwealth, and work closely with NESCOE to develop options for expanded large hydro imports.
The regional hydro initiative will build upon NESCOE's current work on a coordinated regional procurement for renewable energy. NESCOE has developed a draft RFP and Power Purchase Agreement (PPA) and plans on announcing an RFP release date soon.
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June 18, 2013
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Copyright 2010-13 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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