N.E. utilities OK new electricity pricing system Deal cuts projected federal costs by half

HARTFORD, Conn. – State regulators, utilities and at least one consumer representative on Monday announced a proposed electricity pricing system for New England that would sweep aside a contentious federal plan.

The agreement, negotiated over four months among 100 parties, would replace a two-tiered federal price plan with a single-zone program that establishes prices in a competitive auction. The new system is set to be fully operating by 2010, if approved by the Federal Energy Regulatory Commission.

In a transition period beginning Dec. 1, the settlement would provide for fixed “capacity payments” that would be about half the projected costs in the federal plan, known as Locational Installed Capacity, or LICAP, for that period.

In an average $100 monthly bill, residential customers would pay an additional $4.50. Opponents argue that the LICAP plan would boost electricity bills by as much as 25 percent for some consumers.

“This agreement is a critical step forward in the development of a reliable, efficient power system for the region,” said Gordon van Welie, president and chief executive of ISO-New England, the region’s grid operator.

“It addresses one of the most significant challenges we face: ensuring there are enough resources to meet New England’s growing demand for electricity.”

Officials have been vexed for years by how to ease transmission bottlenecks in southwestern Connecticut and northeastern Massachusetts.

Also announcing support for the plan Monday were representatives of Connecticut Light & Power, United Illuminating, Connecticut Municipal Electric Energy Cooperative and the New England Power Generators Association, the region’s largest trade association that represents competitive electric generating companies.

Maine utility regulators last month withdrew from settlement talks for a proposed electric rate plan for New England, saying they cannot accept increases that would give energy companies an unjustified windfall.

Donald Downes, chairman of the Connecticut Department of Public Utility Control, said the agreement represents the best efforts of 90 percent of officials, utilities and consumer representatives. Opponents will not succeed in bringing down the plan, he said.

“There is no more time,” Downes said.

The attorneys general in Connecticut and Massachusetts oppose the plan.

“A LICAP look-alike, it means more of the same windfall profits and subsidy payments to power generators, more of the same failed and flawed federal market policies and more of the same injury and insult for ratepayers,” Connecticut Attorney General Richard Blumenthal said.

Massachusetts Attorney General Tom Reilly called the proposal “nothing more than a $5 billion bailout for generators.”