In December 2013, the New England Governors communicated their collective perspective that New England consumers can benefit if the states collaborate on energy infrastructure issues to advance the states’ common energy, environmental and economic objectives. In 2014, the Governors worked, through NESCOE, to advance a regional energy infrastructure initiative. Its purpose was to advance cost-effective energy infrastructure that would increase access to clean power and to address ISO New England’s operational and reliability concerns about the precarious position of the New England power grid, and the associated costs that have increased the electricity price disparity between New England and neighboring regions. Indeed, even before the most recent supply-related price increases across New England, the United States Energy Information Administration (EIA) reported that residential electricity prices in New England grew three times the national average when comparing rates in the first half of 2014 to the first half of 2013. In early 2015, energy prices for many New England residential consumers increased even further – in some cases, dramatically.
Related to the Governors’ expressions, in 2014, NESCOE dedicated significant time to regional and federal discussions regarding electric system operational challenges and potential risks to reliability arising from natural gas infrastructure constraints. In addition, NESCOE participated actively in NEPOOL stakeholder discussions about ISO New England’s proposed market rule changes designed to address reliability concerns in the short -and long- term due to natural gas supply constraints.
Similarly, to ensure consumers would have reliable power service in the short-term at the lowest possible price despite the natural gas infrastructure constraints, NESCOE substantially engaged in ISO New England’s development of the second annual winter reliability program. NESCOE evaluated ISO New England’s risk assertion, components of the program design and associated consumer costs and benefits. In 2014, NESCOE supported ISO New England’s final proposed winter program, which included critical design changes NESCOE suggested as a means to lower consumer costs.
NESCOE also monitored and provided comments on the myriad studies that examined New England’s gas-electric challenges, all of which were directionally consistent with NESCOE 2013 Gas-Electric Study conducted by its consultant Black & Veatch. All studies, including those funded and designed by ISO New England, entities in the gas and electric industries, state governments of the Commonwealth of Massachusetts and the State of Maine, and the U.S. Department of Energy, concluded that New England needs additional natural gas supply infrastructure to satisfy New England’s power system demand.
Despite many years of conversation about potential market mechanisms to address New England’s critically needed energy infrastructure, not one has been proposed that is expected to solve the region’s natural gas constraints. According to an ISO New England consultant, ISO New England’s recent capacity market reforms approved by the Federal Energy Regulatory Commission, referred to as Pay-for-Performance, are likely to result in greater use of fuel oil as a back-up fuel source when they are in place a few years from now. One concern about this trend is that it would reverse progress on New England’s environmental objectives.
On behalf of the six New England states, NESCOE proposed generic cost recovery mechanisms in connection with infrastructure in the region, which was the subject of stakeholder discussions through NEPOOL. Had NESCOE continued to pursue these mechanisms, such funding vehicles would ultimately have been considered by FERC following its public process. As proposed by NESCOE, this funding would have only become effective after FERC’s consideration and approval and after : (1) a competitive solicitation process to enable the New England states to determine if any potential projects can provide consumer benefits that outweigh consumer costs, and (2) other required state and federal processes—with public input opportunities—to consider the project(s).
Throughout 2014, the New England states, through NESCOE, met with NEPOOL sectors (generators, transmission owners, alternative resources, consumer representatives, environmental advocates, public power, and others) to discuss these issues; solicited multiple rounds of comments on various open questions from NEPOOL stakeholders and others in the Gas-Electric Focus Group; and began the process of advancing conceptual proposals for discussion through NEPOOL’s technical committees, a prerequisite to any proposal to be proposed to FERC for its process and consideration. NESCOE paused the stakeholder discussion mid-year in light of a state legislative impediment and then to allow for the Commonwealth of Massachusetts to undertake additional study. NESCOE valued NEPOOL stakeholders’ diverse perspectives and feedback throughout the year and greatly appreciated NEPOOL’s continued accommodation.
Going forward NESCOE will, at the direction of the New England Governors, continue to support and/or coordinate as appropriate their representatives’ efforts to explore and execute cost-effective solutions to the region’s power system reliability challenge, which would enhance reliability and mitigate the associated price disparity between New England customers and customers elsewhere, and improve New England’s economic competitiveness.