Regulators Approve New Electricity Pricing System For New England

By Lolita C. Baldor

Associated Press

WASHINGTON, D.C. — Federal regulators approved a new electricity pricing system for New England Tuesday that will increase rates for some Connecticut consumers in order to provide incentives for more energy generation.

In two unanimous votes, the Federal Energy Regulatory Commission (FERC) reaffirmed its decision to approve the proposed plan outlined by ISO New England, which operates the region’s power grid. And it agreed to split Connecticut into two pricing regions — the southwestern part and the rest of the state.

Final FERC action on exact rates, which will affect Connecticut and the Boston region, will not take place until later this year, and the plan would not go into effect until January 2006.

“We believe the proposal represents the best course of action for New England to ensure power plants here in the region are appropriately valued by their location,” said Ellen Foley, spokeswoman for ISO New England. “And investors will have a clearly defined market signal to target their infrastructure investment.”

The plan, called Locational Installed Capacity, would shift some energy costs currently shared across New England to southwestern Connecticut and the Boston region. The extra money would be funneled to electricity generators as an incentive to build new modern transmission lines and power plants to meet the growing energy demands.

FERC spokesman Bryan Lee said the plan is an effort to more fairly assign costs for the energy inefficiencies in southwestern Connecticut, where consumers are dependent on older power plants that are more costly to operate.

But state officials have opposed the plan, and have vowed to block it in court.

“Federal regulators seek to slap more than $300 million in new charges on Connecticut consumers and businesses,” said Connecticut Attorney General Richard Blumenthal. “These charges will reward generators with an unwarranted windfall and fail to spur construction of new power plants.”

FERC, Blumenthal said, “must stop using Connecticut as a guinea pig for its unwise and unworkable policies.”

Lee, however, said it is not fair for the rest of New England to bear the costs of Connecticut’s failure to develop more power generation.

“The potential for California-style blackouts is the economic threat Connecticut should be concerned about,” Lee said.

According to Foley, consumers in southwestern Connecticut would pay about $230 million in new charges during 2006, while customers in the rest of the state would pay $163 million.

She said southwestern Connecticut customers would see about a 2.1 percent increase in their average bill. Customers in the Boston region and in other parts of Connecticut, she said, may actually save money under the new pricing plan, compared to what they would be paying next year in projected energy costs without the new plan.

Connecticut and Boston area customers, under the current system, pay additional fees to subsidize the operation of the older, inefficient plants because they are not economical for power companies to run. If the pricing plan is not implemented, Foley said those costs will continue to increase and could be higher next year than those under the new pricing plan.

Beginning next January, the additional fees would start flowing to power generating companies as incentives to build more power plants or transmission lines. But there is nothing in the agreement that requires such construction, only mandates that energy capacity be met.