In the 1990s, many northeastern states, including Rhode Island, restructured (or deregulated) utility markets. Before restructuring, electrical utilities like National Grid owned the power plants that produced the power. The rule then was that before building a power plant, these providers/generators wanting to build a new power plant had to go to the Public Utilities Commission (PUC) and show that the plant would be needed and good for ratepayers in terms of pricing. Once given permission to build the power plant, these companies could recover the cost of the power plant from ratepayers and make a profit.
These companies were known as “vertically integrated utilities,” where one company owned the generation, transmission and distribution of electricity.
This led to the following kind of bad situation: A big company like Westinghouse, for instance, wants to build large, expensive nuclear power plants (think between $1 and $3 billion each) and then the power plants are either never finished or never used, leaving ratepayers on the hook for billions of dollars in costs.
To avoid this, Rhode Island passed the Utility Restructuring Act (URA) in 1996. Under this act, utilities like National Grid, that deliver the electricity to ratepayers, have to divest themselves from power plants. In other words, one company cannot own both the means of producing electricity and the means of transmitting and distributing the energy. Since 1996 power plants are forced to compete in competitive markets, hence ISO New England and the Forward Capacity Auction system we use today. (See glossary below)
A company like National Grid, under this new system, owns just the distribution portion of the electrical system.
Can we please ask a favor?
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ISOs were invented because it was realized that someone had to run the markets for power and mediate between carriers and generators. The theory behind this new system is that in a capitalist society, free markets are always good. Instead of a governing body determining who can and cannot build power plants, free markets will decide. If a private company wants to build a power plant, let them. If the plant is profitable, great. If the plant fails, the costs of that failure will not fall on the ratepayers.
Invenergy, which wants to build a $1 billion fracked gas and diesel oil burning power plant amid the pristine forests of northwest Rhode Island, points out that if they build their proposed plant, and the plant turns out not to be needed, ratepayers won’t suffer, the cost of the power plant’s failure will be on them. (Of course, Invenergy has already cost New England ratepayers tens of millions of dollars as demonstrated here.)
Invenergy has argued that, “the URA effectively repealed[ed] by implication the much older need assessment provision of the [Energy Facility Siting Act].” (Invenergy Aug. 18, 2016 Post-Hearing Memorandum in PUC Docket # 4609, p. 2)
In other words, the Energy Facilities Siting Board (EFSB), established in 1986, used to have to establish need, but because of the URA, that section of the law has been “effectively repealed.” The EFSB, which is the Board that will make the ultimate decision about licensing the proposed power plant, no longer has to consider the question need, maintained Invenergy, because the company is taking on all the financial risk for the plant.
During the final hearing, however, Chicago-based Invenergy Attorney Michael Blazer said the exact opposite. “We are not suggesting,” said Blazer, “that the URA implicitly or sub silentio overruled some portion of the facility siting act. We don’t suggest that at all.”(Oct. 31, 2018 Transcript, p. 79, line 22 –p. 80, line 1)
You would think that this admission, made by the leader of Invenergy’s very well paid legal team, would be Invenergy’s final word on this failed and silly argument, but it is not. On page 16 of Invenergy’s Post-Hearing Memorandum, Invenergy strongly implies that the statute requiring that the EFSB consider need has been effectively repealed:
“As a result of the 1996 restructuring of the wholesale and retail electricity markets, [Invenergy’s proposed power plant] will be a merchant plant, ‘which will sell power on the open market at competitive market prices,'” writes Invenergy. “Since no buyer will be obligated to purchase the output of the plant at predetermined prices, the competitive market will ensure that the [F]acility is cost-justified and producing energy at the lowest cost to the consumer.”
Invenergy wants to have it both ways. When pressed in an open hearing, Invenergy’s legal team will tell the truth: The EFSB must certainly take into account the need for a power plant before granting the proposed power plant a license. But in their legal filings, which are easily ignored by a public pressed for time, Invenergy will slyly argue the opposite, that the statute on need has been “effectively repealed” and should not be considered when the EFSB debates licensing the proposed plant.
In some ways, Invenergy’s rehash of this argument is a tacit admission that the plant is not needed. Instead of making the case for the plant being needed (which they can’t do), Invenergy is looking for a way around the issue. As CLF points out in their Post-Hearing Memorandum:
“The plant is not needed. As the ISO figures show, electricity demand in New England is declining while supply is increasing. As Invenergy’s expert witness testified, this has caused the crash in FCA clearing prices in every one of the four consecutive auctions since this Docket was opened. And, of course, the lack of need allowed the ISO to cancel Invenergy’s CSO – the first time in the history of the ISO that it has ever believed it appropriate to take that drastic action, an action that Invenergy told FERC ‘must be reserved for the most egregious cases.'”
Invenergy’s strategy here seems to be that if they can’t win their argument on the merits, they can at least try to baffle the EFSB with bullshit.
- ISO – ISO New England, which oversees the power grid in New England and holds periodic auctions that determine the price of electricity throughout the region.
- FCA – Foward Capacity Auction – Held every year, prospective power providers bid into the auction and promise to deliver power at a pre-determined price three years later on demand from the ISO. FCAs are number FCA-1, FCA 2, etc. FCA-1 is the most recent, FCA-14 will be held this winter.
- CSO – Capacity Supply Obligation – Power providers who successfully compete in a Forward Capacity Auction are granted CSOs. These are contractual agreements to provide power at the price determined in the auction when needed.
- FERC – The Federal Energy regulatory Commission -The Federal agency that oversees power generation throughout the United States.
- DEM – The Rhode Island Department of Environmental Management – The State agency that oversees the natural environment in Rhode Island.
- TNC – The Nature Conservancy – and environmental organization that does on the ground science for threatened ecosystems.
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