New England currently has a deregulated market for electricity generation. This means that electricity generators compete to provide the electricity necessary to meet demand and that consumers are supposed to reap lower prices from this competition. When it comes to electricity, other services are also important, including having enough generators (sufficient ‘capacity’ in the world of electricity) to make sure black outs don’t occur during periods of high electricity demand. The New England Independent System Operator, the electric grid operator, has even managed to design a market for electric generating capacity to ensure consumers get the best deal possible. Thus, the current system seeks to balance both competition and reliability.
However, New England is in danger of veering off the path of creating a competitive and reliable electricity grid in attempting to solve the electricity price spikes and grid reliability concerns of the last several winters. The New England States Committee on Electricity (NESCOE), led by appointees of the New England governors, recently proposed for New England consumers to subsidize natural gas generators by allowing these generators to submit bids against other resources such as renewables, nuclear, and other fossil generators that are lower than the true cost of generating electricity. The final cost is likely to be over $2 billion dollars. The subsidy comes in the form of all electricity consumers being charged for the construction of new natural gas pipelines which the natural gas generators can then use at will. Ratepayers foot the bill for new pipelines. Natural gas generators can submit lower bids into the marketplace because their cost of obtaining gas is being subsidized. Not only could this lead to natural gas unfairly outcompeting other sources of generation, but it could also artificially depress the revenue of other electric generators in New England, stifling the profitability and feasibility of alternative generation projects such as renewables, and could “lock in” our dependence on natural gas for years to come. By forcing ratepayers to pay for these pipelines through a special electricity surcharge, the current proposal hides the true cost of natural gas based electricity generation and reduces the ability of the electricity markets to find lower cost solutions to our energy security issues.
Keeping New England Electricity Markets Robust
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