NSTAR seeks New England power price cap

In a move that could heighten market uncertainty, New England's NSTAR Tuesday asked the US Federal Energy Regulatory Commission to impose a $1,000/Mw-hr electricity price cap between July 1 and Apr. 1, 2001. NSTAR is the parent company of Boston Edison, Commonwealth Electric, Cambridge Electric, and Commonwealth Gas.

Jun 13th, 2000


In a move that could heighten market uncertainty, New England's NSTAR Tuesday asked the US Federal Energy Regulatory Commission to impose a $1,000/Mw-hr electricity price cap between July 1 and Apr. 1, 2001.

NSTAR, Boston, is the parent company of Boston Edison Co., Commonwealth Electric Co., Cambridge Electric Light Co., and Commonwealth Gas Co.

Complaining of an irrational market, NSTAR Vice-Pres. of Supply Palu Vaitkus said wholesale power prices soared to $6,000/Mw-hr May 8, about 200 times the normal price.

"Left unabated, this behavior will stunt the growth of retail competition and will expose consumers to higher energy prices," Vaitkus said. "If the competitive market is to develop properly and live up to the promise of reduced energy costs for customers, temporary controls such as the price caps we are seeking must be implemented."

The filing also asks that FERC direct the New England Power Pool (NEPOOL) and the New England Independent System Operator (ISO-NE) to develop operating procedures that will allow the ISO to determine if the energy market is workably competitive.

"New England is at the end of virtually every type of fuel pipeline, and thus has historically had some of the highest energy prices in the nation," said NSTAR CEO Thomas J. May. He complained New England is the only region in the country with a competitive energy market, operated by an ISO, that does not have price limits.

He said California, Pennsylvania, New Jersey, and Maryland already have price caps in place and noted the New York ISO June 6 approved a price cap of a $1,000/Mw-hr (OGJ Online, June 22, 2000). Defending the request for price controls, May said even the US stock market uses "circuit breakers" to halt trading if irrational behavior is detected.

New York and New England have projected they might not be able to meet peak generation needs. Although about 1,000 Mw of generating capacity has been added in New England since last summer, the extra power has been partially offset by the loss of transmission capacity in Vermont, an outage at the Indian Point No. 2 nuclear plant, and the failure of the Hudson transformer serving New York City, according to NERC.

Price caps have not been popular with the industry. In testimony filed with FERC, Dynegy Inc. urged the agency to "resist the temptation to endorse price caps" and their functional equivalents. The Houston energy firm said price caps discourage future investment in generation and transmission, balkanize markets, and nullify meaningful market signals that would otherwise stimulate new construction.

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