By Michael Kuser

HARTFORD, Conn. — New England regulators are struggling to deal with how rapidly public policy is transforming the region’s wholesale electricity markets, state officials said Monday at the New England Conference of Public Utilities Commissioners’ (NECPUC) 72nd annual symposium.

As if to drive home the point about the pace of change, Connecticut Gov. Ned Lamont alerted the conference that his state would expand its offshore wind commitment more than six-fold.

“We had a 300-MW commitment, and our legislature, virtually as we speak, is going to up that commitment to 2,000 MW … over the next five to seven years,” Lamont said. (Two OSW bills — Senate Bill 975 and House Bill 7195 — were on Monday’s Senate agenda.) He was speaking just days after the Massachusetts Department of Energy Resources issued a report calling for that state to solicit an additional 1,600 MW on top of an existing 1,600-MW procurement.

“We’re doing the right thing to make sure we have a carbon-free future and a reliable, predictable energy source that allows our region to continue to grow and prosper,” Lamont said.

The governor said he had faced an energy crisis shortly after being elected last November.

“I got a call from [Department of Energy and Environmental Protection Commissioner] Katie Dykes, who said we may have an issue with Millstone, the nuclear power plant that supplies 50% of our electricity,” Lamont said, referring to Dominion Energy’s threat to shut down the 2,111-MW plant, claiming it was no longer financially viable.

In December, Millstone was thrown a lifeline as one of the winning bidders in a state solicitation for nearly 12 million MWh of zero-carbon energy, securing purchase of about half its output for 10 years. (See Conn. Zero-Carbon Awards Include Nukes, OSW, Solar.)

“We solved that Millstone problem … and I’m going to make sure that no governor gets stuck again in the same situation I was,” Lamont said.

Market Disconnect

Restructuring of the electricity industry was meant to shift risks from ratepayers to the market players who stood to profit from their investments, said Sharon Reishus, president of Reishus Consulting and former chair of the Maine Public Utilities Commission.

“There was not an explicit design of the wholesale markets to address state environmental goals. There was an assumption that you would not harm environmental goals,” Reishus said.

In moderating a panel on markets, Reishus asked: “How do state energy procurements keep from shifting risks back to consumers, and what are the risks of unintended consequences?” She added that the regional wholesale market may not survive if states continue to pursue their own separate goals.

New England has seen a disconnect between the roles of state policymaking and the design of the markets, said Vermont Department of Public Service Commissioner June Tierney.

“There’s this tension in the market design between affording the states the proper” authority to pursue environmental goals and the mission of the grid operator to secure reliable energy at the lowest cost possible, Tierney said.

“The market exists to serve the needs of six sovereign states … which push much more in the same direction than in contrary ones,” she said. “It’s about using American ingenuity to … meet a basic need our citizens have, which is the need for electricity.

“When we were struggling with CASPR [Competitive Auctions with Sponsored Policy Resources] … the bottom line of that issue was that ISO-NE was engaged in tweaking market design,” Tierney said.

Pointing to Split FERC Approves ISO-NE CASPR Plan.)

Commissioner Richard Glick’s dissent caught her attention, she said. Glick contended that FERC had misinterpreted the Federal Power Act, failing to respect “that states, not the commission, are the entities primarily responsible for shaping the generation mix.”

“It isn’t FERC’s job to interpret the Federal Power Act as if the states didn’t have legitimate interests in propagating laws that effectuate renewable energy policy,” Tierney said.

Answering Reishus’ question about unintended consequences, Maine PUC Commissioner R. Bruce Williamson said, “In Maine, it’s a constant battle. We have to remind, even to unwilling ears, that there are cost implications to some of the great ideas.”

The region sees the benefit of retaining existing carbon-free resources in the market, but there is a misperception that state procurements of energy drive prices higher, Massachusetts Department of Public Utilities Chairman Matthew Nelson said.

“Out-of-market contracts get seen as the bogeymen here, but the most recent one occurred in Massachusetts and actually saw real reductions to ratepayers,” Nelson said. “We live in a complicated market, and ISO-NE is doing its best … but there’s no going back to a vertically integrated electricity market.”

“Folks start realizing they are paying for a renewable project in their bills, but [they] don’t understand the benefits,” said Nicholas Ucci, deputy commissioner of energy with the Rhode Island Office of Energy Resources.

“No system is perfect, especially one that is two decades old,” Ucci said. “This is a work in progress.”

Prayers Answered?

DEEP Commissioner Dykes said Connecticut has “gone from a minimal percentage of our load contracted to … close to 100%.”

“The contracting will only go so far,” Dykes said. “We have to assume that states are going to continue pursuing their environmental goals. The real question is: Are we going to do so in a coordinated way?”

New Hampshire Public Utilities Commissioner Kathryn Bailey noted that in 1996, her state was the first in the country to pilot restructuring utilities.

“Customers now have the ability to purchase their energy through competitive suppliers,” Bailey said, adding that the emphasis on least-cost generation resulted in an overreliance on natural gas.

Now, as regulators and ISO-NE work to both mold and adapt to a new resource mix, “utility-scale storage will be the answer to the prayer that we have today, and we’ll be able to balance the reliability with the long-term contracts that continue to be negotiated,” Bailey said.

“Having storage is really flexible and it’s probably going to be the answer … when we still need flexible resources, but 50% of the demand is powered by long-term contracts,” Bailey said.