Power market change could affect prices

BOSTON – Power costs in greater Boston could increase more than any other New England area when a new method of operating New England’s wholesale electric market is implemented in March, a study released by the power grid’s manager said. Wholesale prices in Maine, however, might drop by more than 7 percent.

The Boston Globe reported that a study by the Independent System Operator-New England said the power costs in the greater Boston area could increase by as much as 14 percent.

All of New England is now treated as one wholesale power market, with the costs of “electrical congestion” in areas like Greater Boston and southwestern Connecticut, spread to electric ratepayers across the region.

But in an effort to deregulate the power market, ISO plans to adopt a new method that would break New England into eight regional markets, each with its own wholesale price. Massachusetts would be split into three zones with the other five states in their own zones. The greater Boston zone extends roughly from Boston to Sudbury to Billerica to Haverhill to Rockport, including most communities along Route 128 from Weston going north.

ISO said the actual wholesale price increase could be smaller as new power plants, including one in Everett, are put in service this winter and spring. Any wholesale market price increase could also take months or years to reach utility customers of firms such as NStar and Massachusetts Electric.

The study was not intended to predict future electricity prices per se, but to inform the industry regionally of what to expect when the new market arrangement is introduced. Gordon Van Welie, ISO chief executive, said any increases in wholesale prices “do not necessarily translate to higher prices in the consumer market.”

NStar Electric, which primarily serves the Greater Boston area, lobbied unsuccessfully to have ISO treat all of Massachusetts as one zone in order to spread the cost statewide.

“We’re concerned that our customers would be burdened by higher prices,” NStar spokesman Michael J. Monahan said.

In its preliminary analysis, ISO predicted that greater Boston’s price increases would be followed by a possible 10.2 percent price hike in Connecticut. Maine, on the other hand, could see wholesale price dropping by about 7.6 percent.

Power traders such as Gary K. Markowitz of Kilojolts Consulting in Lexington said they have already seen brokers raising bids significantly to supply wholesale power in greater Boston because of the new market plan.

The new method would make electric markets more competitive, said Paul B. Vasington, chairman of the Massachusetts Department of Telecommunications and Energy, which controls utility rates.

“This is a more efficient market system. How this works in terms of retail rates, that’s our next task.”

Vasington said many Bay State electric customers now have fixed-price contracts for this year, so they would see no impact until 2004 or 2005.