PAYING FOR POWER

While it is important to ensure the New England states have enough electricity to light homes and power factories, the region’s utility customers shouldn’t be forced to pay for new power plants that may never be built. A plan proposed by ISO-New England, the company that coordinates the region’s power supply, would require customers to pay up to $13 billion over five years as an incentive to encourage power companies to build new generating facilities in the region. If the power plants aren’t built, however, utility customers won’t get their money back. This is the wrong way to solve a real problem.

That’s why 28 of New England’s 33 members of Congress have written to the Federal Energy Regulatory Commission asking it to reject the Locational Installed Capacity, or LICAP, scheme. Maine Reps. Michael Michaud and Tom Allen signed the letter. Sens. Olympia Snowe and Susan Collins wrote their own letter asking FERC to reject the LICAP plan and to more fully evaluate alternatives that will cost less and actually ensure that more power is produced if necessary.

The rush to implement LICAP is odd given that New England is expected to have excess power supplies for the next decade. While it makes sense to plan for the day when this is no longer true, such planning must seek to ensure that any solutions proposed really address the problem. LICAP doesn’t and that’s why it has also been opposed by all six New England governors, attorneys general and public utility commissions. In Maine, the public advocate and the state’s largest power company have also opposed the plan.

Instead, real market-based approaches have been suggested. The Maine Public Utilities Commission favors an approach that relies on three- to five-year contracts that would specify a set amount of power to be generated. Companies would then bid on the contracts, taking into consideration the possibility of having to build new generation facilities to meet the requirements. Under this scenario, utility companies – not consumers – would bear the risk of deciding whether new generation capacity was needed or not. This shifting of risk away from rate-payers to corporate entities was a major reason for utility deregulation.

Now, FERC is moving in the opposite direction.

With the unprecedented support of New England’s congressional delegations and governors, both Democrat and Republican, it should be clear to FERC that it has more work to do on this issue.

Approving LICAP may not solve a looming problem and will cost New England residents and businesses a lot of money. Federal regulators should want what the lawmakers want – a guaranteed solution that will cost less.