Why Ratepayers Should Be Demanding Early Retirement for Salem Harbor Station

Shanna Cleveland

Articles in this morning’s Boston Globe and Salem News describe an important shift in the status of Salem Harbor Station and highlight the need for ISO New England (ISO-NE) to go beyond the analyses it has done in the past so that it can finally identify an alternative that will actually solve the reliability issue that has dogged efforts to retire the plant since 2003.  That is the subject of the recent protest filed by CLF asking the Federal Energy Regulatory Commission to require ISO-NE to perform an expedited analysis of the alternatives and establish a timeline for implementation.

ISO-NE’s failure to identify solutions that will relieve the need for Salem Harbor Station has resulted in decisions that will cost ratepayers up to $18.5 million in above market payments in 2012-2013 and up to $16.9 million in 2013-2014. ISO-NE could avoid imposing these costs on ratepayers by implementing an alternative that would allow the plant to retire by 2012.

However, if ISO-NE rejects Dominion’s recent “permanent delist bid” – its latest and most telling signal that it wants to retire the plant – on the basis of reliability, ratepayers face the risk of even higher costs. The reality is that ratepayers pay more per kilowatt for electricity from Salem Harbor Station than they pay for other sources of electricity in the capacity market ranging from natural gas to nuclear and renewable.  This dispels the perception that coal is a cheap source of electricity.   Importantly, these additional costs aren’t spread among ratepayers throughout New England; instead, they are passed on solely to the ratepayers in northeastern Massachusetts, the same people who already bear the costs of additional medical expenses from the heart and lung diseases and other illnesses caused by pollution from the plant.  A study released by Clean Air Task Force concluded that pollution from the Salem Harbor Station causes 20 deaths, 36 heart attacks and 316 asthma attacks every year.

These costs diminish any economic benefits that the City of Salem receives from tax payments and jobs at the plant, and the likelihood that Dominion will retire in 2014 if its de-list bid is accepted makes it more important than ever that an alternative use for the site be developed to replace the facility.

Dominion’s claims that it is not planning to retire the plant contradict its own filings before the Federal Energy Regulatory Commission.  Continuing a tradition of telling the story that best suits its interests depending on the audience, Dominion told the Commission in a 2009 filing that it estimated only three more years of economic viability for the plant.  Dominion spokesman Dan Genest told the Salem News, “We know what it costs us to produce a megawatt of electricity at Salem Harbor Station, and the lower price at auction is not enough to cover our costs to generate electricity.” Despite its claims that it can continue to make profits in other markets, Dominion has said in its own filings that it was likely to lose money in those markets.

The bottom line is that ISO-NE has a responsibility to find an alternative to replace Salem Harbor Station that will cost less.  Now that the threat of even higher costs looms, protecting ratepayers demands a solution by no later than 2014, and the public health and environmental harms caused by the operation of this 60 year old coal and oil-fired relic weighs heavily in favor of shutting down the plant as soon as possible.

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