ISO’s Ninth Forward Capacity Auction Good News For New England

Feb 10, 2015 by  | Bio |  5 Comment »

On Monday, February 2, the ISO-New England conducted its ninth annual Forward Capacity Auction.  The purpose of the auction was to secure enough electricity supply to keep the lights on in New England in the future.  The outcome of the auction was very good news for New England because, unlike last year, the ISO’s auction this year ended with a (slight) overall surplus.  This occurred because new power plants and energy efficiency programs are replacing old, uneconomic power plants that are “retiring” (that is, leaving the market).

The ISO is the operator of the New England electricity grid.  As with all things related to the ISO, the results of the February 2 Forward Capacity Auction require a bit of explanation.

If you want some background about the ISO (and CLF’s work on several ISO committees) you can see that here and here.

Capacity and Electricity Markets:  How They Fit Together

Once a year, ISO holds what it calls a “Forward Capacity Auction” (FCA) for a one-year period of time three years in the future. The purpose of these FCAs is to ensure that there will be an adequate supply of electricity in the region to meet the expected load.  (“Load” is electricity demand.)  ISO’s ninth FCA (called, appropriately enough, FCA-9) was held February 2.

The ISO runs both New England’s electricity market and New England’s capacity market.  Although those two markets are related in the sense that electricity generators can participate in both, the two markets are not identical.  And by “electricity generators,” I mean both conventional generators (like gas, coal, and nuclear) and renewable generators (like wind, solar, and small hydro).

The capacity market is designed to ensure that there will be sufficient electricity supply available in New England in the future.  In a Forward Capacity Auction, electricity generators compete for what is called a “Capacity Supply Obligation” (CSO).  Generators that “clear” (bid successfully) in one of these auctions acquire a CSO for a future period; in the just-completed FCA-9, the relevant period was June 1, 2018 to May 31, 2019.

Generators that clear in the auction, and get a CSO, will receive a stream of income (called “capacity payments”) in the future; and they can use that guarantee of future revenue to collateralize a loan now — that is, use those loan proceeds (now) to build a power plant that can produce electricity three years from now when their obligation starts.  The specific obligation that generators acquire when they get a “Capacity Supply Obligation” is to produce electricity if and when they are called on to do so by the ISO during the relevant period.  (And, as I said, the “relevant period” for the just-completed FCA-9 is three years from now, June 2018 through May 2019.)

The electricity market is the real-time market of actually producing electricity for real-time use throughout New England.

Thus, in broad terms, the money that goes to generators from the capacity market can be, and often is, used to generate funds to construct electricity generating power plants.  The money that goes to generators from the electricity market is used to run those power plants, which is mostly fuel costs.

The Results of This Auction

In the just-completed FCA-9, the ISO was trying to purchase 34,189 megawatts (MW) of capacity.  As I explained in a prior blog post, this figure is referred to as “Installed Capacity Requirement” (ICR).  Don’t be put off by the fancy acronym; ICR is just the amount of electricity that ISO believes New England will need during the relevant period.

And, in the auction just concluded, 34,695 MW of generation actually cleared the auction and got a CSO – that is, 506 MW more than the ICR.

Why This Matters

A year ago, in FCA-8, the ISO failed to acquire all the capacity it said it needed for the period June 1, 2017 to May 31, 2018.  The shortfall, such as it was, was very, very small.  In the last auction (FCA-8), the ISO’s ICR (the amount it wanted to procure) was 33,855 MW; the amount of capacity it actually procured was 33,712 MW, a shortfall of a mere 143 MW.

The reasons for the (very, very small) shortfall were mostly things that made environmentalists cheer.  In the period leading up to the auction (FCA-8) a year ago, several dirty, old fossil-fuel and nuclear plants decided to close down, partly in response to years of activism by environmentalists:

  • New England “lost” 1,535 MW of capacity when the dirty, old Brayton Point coal-fired plant decided to shut down by 2017. You can read about CLF’s long, and ultimately successful, efforts to close Brayton Point here, here, and here.
  • New England lost 604 MW when the Vermont Yankee nuclear plant decided to close. You can read about CLF’s long efforts on Vermont Yankee here, here, and here.
  • New England also “lost” another 342 MW when the very dirty old oil-fired Norwalk Harbor Station decided to close.

Each one of these retirements was a good thing.

Even though the auction shortfall a year ago (in FCA-8) was insignificant, it created a lot of very scary press coverage.  One ISO press release on the auction results was headed, in part:  “Shortfall in Power System Resources Needed for 2017-2018 in New England.”  The sub-title was:  “Resource shortage pushes up capacity market costs.”  Another ISO press release a year ago said:  “The auction concluded short of the capacity required, resulting in higher prices for capacity for 2017-2018 . . . . Before the auction was conducted, resources totaling about 3,135 MW announced plans to retire, resulting in an insufficient level of resources in the auction . . . .”

Scary headlines and scary broadcast news stories followed.  A year ago, everyone was talking about a supposed “crisis” that was looming.  The six New England Governors worked feverishly on a plan to build new gas pipeline into New England to address the purported “crisis.”  (CLF worked actively against the proposed build-out of long-lived fossil-fuel infrastructure, and the Governors’ proposal, at least in its original form, has been abandoned.)

What A Difference A Year Makes!

Where last year, the post-auction press narrative was all about shortages and the need for more fossil fuels, this year the narrative is all about how well the market is working.  The headline on the ISO’s press release this year is:  “Annual Forward Capacity Market Auction Acquires Major New Generation Resources for 2018-2019.”  The take-home message in this year’s ISO press release is this:

“The capacity market is working as designed.  The price signals from last year’s auction helped spur investment in new resources, including more than 1,000 megawatts of new generating capacity, which will help . . . meet peak demand in 2018-1019,” according to Gordon van Welie, president and CEO of ISO New England . . .

Gordon is correct.  The capacity market is working the way it was meant to work.  It is creating the right incentives to ensure that there is sufficient generation capacity in New England.  In fact, as the ISO press release correctly states, ISO has recently re-designed the actual mechanics of how the capacity market operates in two significant ways in order to enhance its operations.  CLF is an active member of NEPOOL, the ISO’s stakeholder entity, and supported and voted in favor of both of those market re-designs.

The results on February 2 of FCA-9 do not, alone, prove that CLF was correct in 2014 to oppose the Governors’ proposal for new multi-billion-dollar gas (that is, fossil fuel) pipeline infrastructure – but the the result does provide useful evidence of that fact.  For additional useful evidence of the same fact, see my colleague Christophe Courchesne’s excellent January 14 blog post, entitled “As Cold Sets In, New England Winter Energy “Crisis” Fizzles.”

Even This Winter, PSNH Coal Plants Aren’t Cheap

Nov 14, 2014 by  | Bio |  Leave a Comment

With electric rates headed up for the winter, more than a few people are admiring the perennially high but stable rates of PSNH, New Hampshire’s largest utility and the owner of the state’s two coal-fired power plants. But what’s behind PSNH’s rate’s new luster—the first time in the state’s decade-plus experience with a restructured electric market that PSNH’s rate is appreciably lower than other utilities?

PSNH's Schiller Station in Portsmouth

PSNH’s coal and wood-fired Schiller Station in Portsmouth

Just like they did last winterPSNH and its parent company Northeast Utilities are touting PSNH’s ownership of coal plants as a “hedge” against the natural gas-driven volatility in the overall market for electric power. In fact, they’ve been repeating similar things for years, and this winter’s rates might seem like vindication. That’s probably why it’s popping up as fact in letters to the editor and in news stories, to the extent that some are second-guessing the state’s ongoing review of whether PSNH should own its power plants.

Franklin Pierce University Professor Michael Mooiman, the author of an assiduously even-handed and deeply researched blog on New Hampshire energy issues, put that idea to the test. He burrowed into PSNH’s most recent regulatory filing to analyze the costs of PSNH generation. And he reached a conclusion directly at odds with the PSNH talking point:

PSNH rates are low this winter but this is not a consequence of owning their generating assets. Instead, it is a result of their low cost purchases through a portfolio of long-term power purchase agreements and wholesale market purchases.

Professor Mooiman pegs the all-in cost of PSNH generation at a year-round 13.2 cents per kilowatt-hour. Even with this winter’s dramatic price spikes, the year-round average retail rates for the state’s and region’s other utilities are much less than this, and competitive suppliers are offering year-long fixed rates well below that figure. Compared with the contracts available for new wind power or energy efficiency, PSNH plants are much more costly. (If the Merrimack Station scrubber is fully added to rates, PSNH’s generation will only look worse.) In other words, PSNH customers could replace all the power from its power plants with other resources available in the market, and its customers would pay lower rates than they are now. So PSNH’s talking point about the “value” of its coal plants in keeping PSNH rates “low”? It’s just not true.

You can read Professor Mooiman’s full analysis here.

If you’re looking for the straight story on what’s happening with winter price spikes, be sure to read my colleague Shanna Cleveland’s post on the 3 things no one is telling you about rising energy costs. And, if you’re looking for ways to save money on your energy bills this winter, look no further than Shanna’s video series demonstrating low-cost ways to save energy at home. You also can learn more about competitive supply options from EmpowerNH.

3 Things No One is Telling You About Rising Energy Costs

Oct 3, 2014 by  | Bio |  5 Comment »

Rahm Emanuel, President Obama’s first White House chief of staff, was once quoted as saying “You never want to let a serious crisis go to waste,” referring to the opportunities to pass sweeping bills in the wake of the 2008 financial meltdown. Over the past weeks, we’ve seen that sentiment put into practice by some of New England’s major energy industry players. They’ve been fanning the flames of fear over expected winter price spikes to support their continued push for building massive new gas pipelines, even though new pipelines have no chance of helping to address the risk of price spikes for this winter.

Here are 3 things you’re not being told about what’s really responsible for the increased rates and how to deal with rising energy costs now:

  1. New pipelines can’t and won’t address the rising rates for this winter (or the next three winters).
    • Even under the most optimistic scenarios, new natural gas pipelines of the scale that were being considered as part of the now-stalled New England Governors’ initiative could not be permitted and built earlier than November 2018. Even if they lived up to the Governors’ promises after that, they would do nothing for consumers this winter and the next three winters.
    • New England isn’t the only region of the country that experienced price spikes this past winter. New York, an area that had just expanded its pipeline capacity still experienced higher prices last winter, and the regional electric grid known as PJM (because it covers, in part, Pennsylvania, New Jersey and Maryland) also experienced price spikes even though it is located in the epicenter of abundant Marcellus shale gas supplies.
  2. The real problem isn’t a major deficit of pipeline capacity, but a failure to deal adequately with the increased use of natural gas for power generation.
    • We now use a lot of natural gas for power generation in New England, which helped modernize the system by moving us away from old, polluting, and inefficient sources like coal and oil. Because of this, and the way the regional grid’s electric market works, natural gas prices now generally set the price for electricity in New England.
    • Unlike natural gas utilities that supply homes and businesses with gas for heating, which buy gas on long-term “firm” contracts that guarantee access to gas, the companies that own natural gas power plants typically buy cheaper “interruptible” contracts because there isn’t currently a mechanism that allows them to pass-through the additional costs of buying firm supply.
    • In the winter time, people are often turning on the heat at the same time that they are turning on the lights, so the system experiences high demands on gas for both uses in the mornings and afternoons. These “coincident” demands led to price spikes between 10-42 days in each of the last winters, and retail electric prices are now catching up as the market is expecting a repeat of last winter’s high prices.
    • Now that natural gas makes up so much of the electricity we use, the volatility of gas prices has a bigger impact on electric prices and leads to higher rates. We have been far too slow in deploying demand-reducing energy efficiency measures in homes and businesses and in increasing the amounts of local renewable energy on the system, both of which would help reduce market prices for electricity and protect us from volatile gas prices.
    • The increased use of liquefied natural gas (LNG) imports should help to moderate the price spikes to some extent this year, but more can be done through market reforms without risking overbuilding gas capacity.
  3. Energy efficiency is the best way to reduce your bills and stay warm this winter.
    • Even though rates are going up, you can still lower your total bill by lowering your demand. Massachusetts has some of the best energy efficiency programs in the country which means that you can apply for rebates, incentives, and assistance to help you install efficient measures. Other New England states have programs as well.
    • If you don’t own your home or apartment, there are still some inexpensive steps you can take to cut your bills. There are many ways to conserve energy for a very small investment of time or money. Check back in for a look at how Senior Attorney Shanna Cleveland is getting her apartment ready for the winter.

Setting the Table for Clean Energy Progress in the Granite State

Aug 12, 2014 by  | Bio |  Leave a Comment

Without much fanfare, New Hampshire lawmakers took important steps in 2014 toward clean energy progress. This spring, the legislature completed what is arguably the most successful session for energy issues in many years with a series of significant bills each addressing different parts of the clean energy puzzle: a pathway to ending the state’s inexcusable subsidies for its two coal plants, scaling up energy efficiency, reforming the process and standards for siting new energy facilities, ensuring sound utility planning, and protecting our natural resources from the ongoing risks of fossil fuels. Notably, this work steered clear of the risky and controversial gas and transmission infrastructure plans that captured most energy headlines. With Governor Hassan’s signatures this summer, these bills are now New Hampshire law:

clean-energy-progress

(photo credit: flickr/gcimms)

PSNH Divestiture: New Hampshire’s single biggest clean energy opportunity is the new pathway, established by House Bill 1602, that could lead to the sale and eventual retirement of PSNH’s coal-fired power plants in Bow and Portsmouth.  As CLF highlighted when the bill passed, these old and inefficient plants—historically, New Hampshire’s largest sources of toxic and carbon pollution—have no prospect of providing net benefits to customers, who are now subsidizing the plants by tens of millions of dollars per year. Now the Public Utilities Commission has a clear mandate to open a proceeding and compel PSNH to take appropriate steps to sell the plants, which will then be forced to compete with cleaner, cheaper resources in the marketplace.

Energy Efficiency and C-PACE: In June, CLF profiled the two major bills focusing on energy efficiency, our cheapest and cleanest energy resource. With House Bill 1129, New Hampshire continues its progress toward implementing an Energy Efficiency Resource Standard, which would allow the state to capture much greater levels of cost-effective energy efficiency; the bill creates a stakeholder process to develop energy efficiency goals and policies, including legislation for consideration in 2015, and encourages state government to increase its own efficiency efforts. House Bill 532 provides a major boost to privately funded energy efficiency projects using the property assessment financing known as C-PACE, substantially raising the former cap on such projects. A third bill, Senate Bill 268, helps channel funds available for energy efficiency to proven programs that were at risk of shutting down and to municipal energy efficiency projects, many of which are shovel-ready. As CLF has pointed out, New Hampshire is lagging the rest of New England in energy efficiency, and these new laws are important steps along the road to changing that.

Senate Bill 245: CLF summarized this major bipartisan reform of the state’s energy facility siting law after it passed the Senate in March. Under the leadership of Representative Amanda Merrill and others, the House made many technical improvements to the bill, through a process that continued to be an unusual example of collaboration and compromise among very diverse stakeholders, including CLF. Despite the changes, its core remained: the addition of non-agency members and a professional staff to the committee charged with reviewing projects, a reduction in the committee’s overall size, increased opportunities for public participation, and the requirement that all large energy projects affirmatively “serve the public interest.” For wind farm projects, the legislature—in a section of the PSNH divestiture bill—offered a strong endorsement of their potential role in the state’s future energy portfolio and provided some clarity on the issues that must be considered by the siting committee when it sets rules for such projects.

Other bills: In House Bill 1540, the legislature approved changes to the statute governing utility long-range planning to modernize the requirements and ensure full consideration of energy efficiency, grid modernization, and distributed generation. And in House Bills 1224 and 1376 and Senate Bill 325, the legislature focused on addressing the risks of transporting fossil fuels by pipeline and rail, through increased state regulatory oversight over oil pipelines and initiating a full legislative review of the safety requirements for oil and gas transportation.

The State House isn’t the only place we’re seeing progress. The New Hampshire Office of Energy and Planning and a council of state officials are working on a state energy strategy that, judging from the draft released in May, is likely to prioritize local, small-scale, and climate-friendly energy solutions. And the state’s Public Utilities Commission (“PUC”) is finalizing regulations that should help kick-start adoption of group net metering, a way for communities and other groups to invest in clean, distributed energy projects that would be too large for a single individual or business to take on. The PUC also is working to develop a framework for advancing an Energy Efficiency Resource Standard, which will help chart the course for the stakeholder process under House Bill 1129 and eventual adoption of a strong energy efficiency goal.

What these efforts have in common is that they together set the table for the bold actions that will be necessary for New Hampshire to live up to our aspirations to become a real leader in clean energy innovation and energy conservation and to mount a meaningful response to climate change. It will be up to everyone—from lawmakers and regulators to advocates, businesses, and ordinary homeowners—to take our seats and engage together in the hard work to make a thriving clean energy future a reality for the Granite State.

New Hampshire’s Biggest Clean Energy Opportunity: PSNH Divestiture Bill Heads to Governor’s Desk

Jun 6, 2014 by  | Bio |  1 Comment »

Just a year ago, the headline would have been hard to imagine in a New Hampshire newspaper. Yesterday’s Concord Monitor reported, “House, Senate Approve PSNH Divestiture Bill.” The state is now on a path that will likely lead to the sale of power plants owned by Public Service Company of New Hampshire, New Hampshire’s largest electric utility, including the state’s two coal-fired power plants—two of the last three surviving coal plants in New England.

Such a sale would put to an end the state’s crazy practice of subsidizing those decades-old plants’ operation to the tune of hundreds of millions of dollars, a giveaway to PSNH that far exceeds the state’s modest investments in the clean energy of the future and that has left hundreds of thousands of New Hampshire households with rising rates and the dirtiest energy mix in New England.

The legislation (House Bill 1602) passed both houses of the New Hampshire legislature in big bipartisan votes. Under the legislation, the state’s Public Utilities Commission (“PUC”) will open a legal proceeding by the beginning of next year to decide whether PSNH’s ownership of power plants is in the “economic interest” of PSNH customers. While the bill that just passed the Legislature does not order an immediate sale of PSNH’s plants, it does mean that the rigorous review of PSNH’s power plants that CLF has been advocating (and the PUC has been reluctant to undertake) will now proceed. During that review, PSNH’s misleading talking points about the supposed insurance value of its coal plants will finally be put to the test.

If the PUC determines that the risk of operating PSNH’s power plants should not fall on its shrinking customer base, as it does today, but on the shareholders of power plant owners, as is the case for all other power plants in New England and in many other markets throughout the country, PSNH’s plants will be sold to one or more other companies. As a part of that process, the PUC will decide whether, which, and how much customers should pay for “stranded costs,” that is, the difference between the sales price of the plants and the value of the plants on PSNH’s books (which the PUC staff has estimated at roughly $400 million). PSNH has several hydro facilities and contracts that may have value in the marketplace and, when sold, could help reduce stranded costs.

As the PUC’s staff has concluded in two damning analytical reports last June and this April, PSNH’s fossil fuel plants provide no net benefits to PSNH customers and are in fact poised to lose hundreds of millions of customer dollars in the coming years.

Case in point: the coal boilers at Schiller Station in Portsmouth, which went into service in 1952 and 1957. They are among the least efficient fossil fuel power plants in the country and—even during a time when PSNH claims they have great value to customers—they now operate less than a third of the year. According to an updated analysis by Synapse Energy Economics that CLF presented to the Legislature, this is what the cash flow of Schiller’s coal units will look like in the coming years, taking into account the plant’s fixed costs, PSNH’s guaranteed profits, and the market revenues from feeding the plant’s power and other services to the grid, across a range of scenarios. Red as far as the eye can see.

clean-energy-opportunity

Present Value of Net Losses at Schiller Coal Units (source: Synapse Energy Economics)

In short, there is no prospect of the plant providing a net benefit to customers, even if natural gas prices go much higher or the plant is free of any new environmental requirements. Indeed, next month PSNH’s energy service rate is slated to rise to about 10 cents/kwh, its highest-ever level and far exceeding the rates of other utilities and competitive suppliers in New Hampshire, even without fully including the cost of the $422 million Merrimack Station scrubber project.

After a sale, the owners will have to operate the plants in the region’s competitive marketplace, where—it could not be plainer—inefficient, dirty coal plants cannot compete with other power plants. Without PSNH’s guaranteed profits and its perverse protection from market forces, new owners will have every incentive to repower the plants with cleaner or renewable fuels or use the sites for other purposes.

Remarkably, the bill that passed the Legislature earlier this week earned support from nearly all quarters, including PSNH itself, the state’s business community, other New England power generators, competitive energy suppliers, and environmental and consumer advocates. It’s a stark contrast to the icy reception that greeted the last PSNH divestiture bill, which was filed and quickly killed in 2012. CLF and EmpowerNH—the coalition CLF helped create to promote retail energy competition in New Hampshire—testified in favor of the bill in both the House and Senate, building on comprehensive input provided last August to the joint House-Senate committee overseeing electric utilities. CLF emphasized the risks of inaction:

As New Hampshire is developing an energy strategy for the next decade that prioritizes efficiency and cost-effectiveness, sending massive amounts of ratepayer money to PSNH, [Northeast Utilities], and its shareholders to keep uneconomic fossil plants running is unquestionably a tremendous policy failure…. [The plants] are losing millions of dollars per year, and even the most favorable possible forecast shows that the losses will continue to mount. Much damage has been done already. Absent divestiture, all of these future losses will be borne by PSNH default service ratepayers. It is time for the Legislature and then the Commission to act.

In its testimony, EmpowerNH highlighted how divestiture would promote competition:

EmpowerNH believes that the energy generating market place should be open, and that to create a level playing field, PSNH should… not [be] in the energy generation business…. The New Hampshire energy market should be a competitive market place. The coalition supports any solution that clearly preserves and promotes a competitive marketplace. HB1602 opens the door for that process. New Hampshire consumers are benefitting from a very competitive market, and the benefits are circular. More competition leads to cheaper electric bills over the long run which leads to less energy coming from polluting coal plants. It’s a win-win-win for NH residents, our economy and the environment, and the more people who exercise their power to choose, the stronger the circle will be.

Congratulations to the Legislature for recognizing, at long last, the writing on the wall for PSNH’s plants and taking an important step toward to overcoming New Hampshire’s twisted system that subsidizes coal—the state’s most glaring obstacle to clean energy progress and to bringing the benefits of a truly competitive market to all of the state’s electric customers.

They’re Still Number 1: PSNH’s Merrimack Station Leads the State Again in Toxic Chemical Releases

Feb 20, 2014 by  | Bio |  1 Comment »

It’s clear to anyone paying attention to air pollution trends in New Hampshire that PSNH’s coal plants are a huge health and environmental liability for the state. And according to EPA data released last week, PSNH’s coal fleet continues to lead the state in toxic chemical releases: Merrimack Station in Bow remained New Hampshire’s number one toxic polluter in 2012, and Schiller Station in Portsmouth was number four.

Toxic-Chemical-Releases

“Merrimack-Station” by PSNH on flickr is licensed under CC by-nd 2.0

That these largely coal-burning facilities (one of Schiller Station’s units burns wood) are still the biggest releasers of toxic chemicals in the state is even more sobering given that the capacity factors (the ratio of utilization of a unit compared to its potential) for PSNH’s coal units hit their lowest levels ever in 2012:

I’ll say it again: a coal plant running at less than 1/3 capacity (the Merrimack units together ran at 32.23% in 2012) still releases more toxic chemicals than any other facility of any type in New Hampshire. 2012 was also the first full year that the $420 million scrubber was operational at the plant.

While Schiller Station dropped from second place in 2011 to fourth place in 2012 in toxic chemical releases, it’s a good bet that Schiller will be back in the number 2 spot when the 2013 numbers are released next year. Why? Though they’re still very low, the capacity factor for Schiller’s coal units nearly doubled between 2012 and 2013 (from 12.54% to 22.95%).

The bottom line: Even with a $420 million pollution control project online and rock-bottom capacity factors, PSNH’s coal-burning units are the state’s worst and fourth-worst toxic chemical releasers. The Public Utilities Commission and New Hampshire Legislature should keep this in mind as they discuss the future of PSNH’s electricity generating assets.

Toxic-Chemical-Releases

Source: ISO-NE and EPA Air Markets data

CLF’s Most Read Blog Posts for 2013

Jan 2, 2014 by  | Bio |  Leave a Comment

CLF’s Case Against PSNH’s Coal Plant for Clean Air Act Violations Moves Forward

Dec 5, 2013 by  | Bio |  Leave a Comment

Merrimack-Station

Yesterday, CLF won a resounding early victory in our 2011 federal lawsuit against Merrimack Station, Public Service of New Hampshire’s (PSNH) coal-fired power plant in Bow, for blatant violations of the federal Clean Air Act.

The impetus for our suit dates back to 2008 and 2009, when PSNH made major upgrades to Merrimack Station that allowed the plant to increase its emissions of air pollution — upgrades that triggered permit and other requirements under federal law (and under the state regulations implementing federal law). But PSNH didn’t get those required permits and continues to operate the plant without complying with the modern limits on the plant’s air pollution that should apply. Even after constructing a $422 million scrubber, which helps reduce some pollution from the plant, PSNH still emits more pollution than federal law requires, harming air quality and public health.

CLF brought the suit against PSNH in 2011, seeking penalties (payable to federal taxpayers) and immediate compliance with the law.

It’s been more than two years since I last provided an update on the litigation. During that time, CLF has been fighting diligently to move the case forward. In numerous briefs, CLF urged U.S. District Court Chief Judge Joseph Laplante to reject PSNH’s motion to dismiss. CLF also brought to light additional Clean Air Act violations associated with PSNH’s upgrade projects and petitioned the Court to consider those violations as part of the original case.

Yesterday, Chief Judge Laplante issued an order (PDF) that denied PSNH’s motion to dismiss and granted CLF’s request to bring new claims. The Court agreed with CLF that PSNH’s motion relied on the wrong rules, holding that the motion’s foundation “cannot bear weight”; the Court also determined that CLF followed all applicable requirements to bring its new claims in the lawsuit.

Judge Laplante’s ruling means that our case against PSNH can finally move forward. Now, CLF will have the opportunity to work with engineering and other experts, obtain more documentation from PSNH, and ultimately prove our allegations to the Court.

As regulators and legislators consider the future of Merrimack Station and PSNH’s other inefficient, costly power plants, CLF will be working to ensure that PSNH is held accountable and isn’t allowed a free pass to evade the bedrock requirements of the Clean Air Act.

Brayton Point Retirement Means Game Over for Coal in New England

Oct 17, 2013 by  | Bio |  2 Comment »

Last week, Conservation Law Foundation and its allies cheered the news that New England’s largest coal plant, Brayton Point Station in Somerset, Massachusetts, will shut down by 2017. Brayton Point has loomed over Somerset and neighboring environmental justice communities on the South Shore for nearly 50 years, belching pollution into the air and destroying wildlife in Mt. Hope Bay.

Brayton’s retirement means game over for coal in New England. If the largest coal plant in New England with the lowest cost to make coal-fired electricity can’t survive in the New England market, no coal plant can. New England’s remaining coal plants are all older than Brayton, produce electricity that is more expensive than Brayton’s, and will face the same fate in the near term.

A recent report by the staff of the New Hampshire Public Utilities Commission (issued prior to Brayton Point’s retirement announcement) uses Brayton Point as the benchmark against which the economic viability of other coal plants should be judged. The report notes that Brayton Point is “the most economic coal plant” in New England and that all other coal plants “are substantially behind Brayton Point” in terms of their cost to produce power. Put another way, the economic prospects for all of the remaining coal plants in New England are worse for their owners than are Brayton Point’s.

One by one, our region’s oldest and biggest polluters are succumbing to the market and the march of technology:

Somerset Station, Somerset, MA SHUT DOWN
AES Thames, Montville, CT SHUT DOWN
Salem Harbor Station, Salem, MA WILL SHUT DOWN in 2014
Brayton Point, Somerset, MA WILL SHUT DOWN in 2017
Mt. Tom Station, Holyoke, MA Expected to SHUT DOWN by 2016
Bridgeport Harbor State, Bridgeport, CT Running at 4% capacity
Schiller Station, Portsmouth, NH Running at 12% capacity
Merrimack Station, Bow, NH Running at 35% capacity

*2012 capacity data from EPA and Energy Information Administration

CLF empathizes with the challenges faced by workers, businesses and communities bearing adverse economic impacts from the now-clear demise of the region’s antiquated coal fleet. We firmly believe that no plant closing can be truly celebrated without a viable plan to ensure a just transition to a healthier future. For the past two years, a major element of our advocacy (along with our colleagues at the Toxics Action Center) has been to urge state and municipal leaders to begin planning for these retirements and their local impacts, both positive and negative. We have seen the writing on the wall for this polluting and increasingly obsolete method for producing electricity for at least five years now.

CLF and many other organizations have had a long history of holding Brayton Point’s feet to the fire in order to protect public health and the environment. And as has been pointed out by many, the evolution of the power market to cleaner and more efficient power plants and energy resources has had a big role. As a member of the New England Power Pool (NEPOOL) which helps make the rules for and oversee the region’s electricity market, CLF has had not only a bird’s eye view to these market factors, but a role in shaping them.

In February, 2013, CLF released a report exposing Brayton Point’s financial vulnerability. Entitled Dark Days Ahead, the report showed that a perfect storm of factors – including low natural gas prices– spelled imminent doom for the plant. As Paul McMorrow said in his thoughtful article covering the retirement announcement in Commonwealth Magazine:

[T]he Conservation Law Foundation [] report on Brayton’s financials [] reads like an obituary.

The CLF report, co-authored by Schlissel, the Belmont-based energy consultant, outlined a bleak financial future for Brayton. The plant was losing the fight with natural gas, and running at a fraction of its capacity. The plant’s earnings had dropped from $345 million in 2009, to around $24 million in 2012, at a time when the plant was wrestling with $1 billion in new costs—the plant’s new cooling towers and air pollution scrubbers. The size of those improvements, Schlissel argues, shows how quickly the ground shifted under Dominion: In 2005, Brayton Point was worth a billion-dollar upgrade, but not long after those improvements came online, Dominion sold Brayton “for piddling,” he says. Brayton and a pair of midwestern power plants netted Dominion $472 million, but industry observers believe that Brayton was a throw-in to the sale—the property that the buyer, Energy Capital Partners, had to take to get the others. The sale closed earlier this year.

In fact, CLF’s report, prepared by the Institute for Energy Economics and Financial Analysis, accurately predicted the future – a future which no plant owner, including the recent buyer of Brayton Point, could ignore. As CLF noted previously, Brayton Point was sold to Energy Capital Partners for its scrap value – in effect given away – immediately after a $1 billion capital improvement.

To its credit, Energy Capital Partners apparently read and agreed with CLF’s report. A recent post  in Eco RI News discussed the new owners’ perspective on the future of Brayton Point when they purchased it:

James Ginnetti, spokesman for EquiPower, a subsidiary of Brayton’s new owners, Energy Capital Partners, said the company knew when it bought Brayton Point it would struggle to operate beyond May 2017, because of low natural gas prices and the high costs to maintain the facility and adhere to environmental regulations.

“We bought three power plants from Dominion and did not ascribe much value to Brayton Point for these reasons,” he said.

It bears repeating: A plant with a book value of over $1 billion due to recent investment is essentially worthless.

There was a time when extracting million year old carbon rocks from under the ground, shipping them over long distances, crushing them and then blowing them into large vessels with air to make fire was the state of the art in how to generate power in New England. In that era, the country’s population was roughly half of what it is today. Taking and despoiling large swaths of what is now prime waterfront property and disposing the detritus of that combustion into the air and water shared by everyone seemed like an acceptable practice. In New England, the retirement announcement from the region’s largest coal-fired power plant signifies the official end to that era. Technology and New England’s competitive electricity market have made the 50 year old Brayton Point power plant obsolete. Newer, cleaner, more efficient, and lower cost energy sources and the value of energy efficiency to reduce electricity demand are instituting a new era for New England, and following in our footsteps, the rest of the country.

Brayton-point-retirement

The announced closing of the Brayton Point Power Plant signals the demise of coal power in New England.

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