SalemNews.com, Salem, MA

Local News

July 28, 2012

Power plant rider bogs down energy bill

BOSTON — A key section of the House energy bill inserted by Rep. John Keenan to facilitate the redevelopment of the Salem Power Plant has severely complicated negotiations between the House and Senate over a final bill in the waning days of formal sessions for 2012.

According to lawmakers close to the negotiations and outside groups who have tried to offer alternative solutions to long-term contracting that could help clean up the Salem site, the overtures have thus far been unsuccessful.

While some throughout the week began to worry the disagreement could sink the entire bill, some lawmakers and officials from the administration late Thursday and Friday morning reported forward progress being made.

Energy and Environmental Affairs Secretary Richard Sullivan has been meeting with Keenan and Sen. Benjamin Downing, the lead Senate conferee, to try to find a solution that does not involve offering Footprint Power, the New Jersey-based developer seeking to covert the Salem plant from coal to gas, a 15-year contract for energy.

The conference committee being led by Keenan and Downing also includes Reps. Kate Hogan and Matthew Beaton, and Sens. Stephen Brewer and Robert Hedlund.

Footprint has reached an agreement to purchase the plant from Dominion Energy and convert the 745-megawatt coal-fired plant, which is scheduled to be shut down in June, 2014, into a 720-megawatt gas powered plant, though the deal has not yet been finalized.

Sullivan told the News Service that the Patrick administration has "significant concerns" about the language in Section 42 of the bill, but is "supportive of the concept of partnering with Salem on their redevelopment plan."

"We're still hopeful we can come to a resolution," Sullivan said earlier this week. Sullivan said the administration was concerned about the impact a long-term contract for a specific plant would have on the deregulated energy generation market, including ISO-New England's planning for future energy needs.

The House bill calls for distribution companies to enter into 15-year energy contracts for small amounts of natural gas-generated electricity from facilities located on the sites of former coal or oil-fired power plants, provided that the contract will have a positive impact on pricing.

Keenan has said the ability to sign a long-term contract would give a buyer for the Salem plant, and potentially plants in Somerset and Holyoke, the financial stability to invest in costly conversion and remediation of coal and oil sites.

"I've been very open about it. Is it going to be beneficial to Salem? Absolutely. I hope so. But will it be beneficial to Holyoke or Somerset someday? I hope so," Keenan told the News Service earlier this month. "We're going to cleaner energy, and I know some now complain that natural gas is no longer clean, but it is."

Asked this week about the negotiations and the Patrick administration's opposition to Section 42, Keenan said, "We continue to make progress. We're working with them in mind, hearing their concerns."

With formal legislative sessions set to end at midnight Tuesday, a concerted effort to eliminate the section from a final compromise bill has been building by environmental groups and power generators. Attorney General Martha Coakley this week came out against Keenan's proposal, stressing the need for competitive bidding for long-term contracts, and Senate President Therese Murray said locking consumers into natural gas contracts with select generators does not make sense.

"The attorney general came out today and said that it's the wrong thing to do and we shouldn't be doing it, and now we've seen all the other plants are saying, 'Hey, if that happens, then I need to be covered by this too. It's just not something we can do. That type of long-term contract is not something we should be entering into," Murray said late Thursday.

Asked if she would insist on the section being removed from a final bill, Murray said, "I'm not the chair. That's Sen. Downing, and I think they're trying to work out some kind of language that will be beneficial."

The legislation is a complex bill that, among other things, would more than double the amount of renewable energy utilities are required to purchase through long-term contracts, and allow owners of solar and wind installations to sell more surplus energy back to the grid.

The battle over the future of the Salem plant, however, has consumed much of the attention, with the New England Power Generators Association running radio ads opposed to the section, and lawmakers such as Rep. Lori Ehrlich, of Marblehead, trying to rally her colleagues to pressure the committee to drop what opponents have called a "sweetheart deal" for Footprint.

More than 25 House and Senate members signed on to Ehrlich's letter to conferees warning that Keenan's proposal would "saddle ratepayers with the risk and cost of inevitable increases and fluctuation in natural gas and diesel prices over the next 15 years and beyond."

"We just don't think giving a subsidy for a brand new power plant that's not needed at a billion dollars is the right solution for the $50 million to $60 million problem they have with the cleanup," said Dan Dolan, president of the NEPGA. "We think there are different options that can be done there, but unfortunately it looks like right now there isn't any agreement as to where we can end up."

Dolan said his organization has met with Downing and Keenan, and proposed an alternative that would include a charge on utility bills to "socialize some of cost" and a bond issued through MassDevelopment to provide up-front capital to tear down the Salem plant and remediate the site for a future development.

Dolan said paying for the site's clean-up that way would be "infinitely cheaper" for consumers than a long-term power contract and consistent with the way the state has approached redevelopment at places like Devens.

"Our view is let's see what the market needs. There isn't a real liability need right now for a new plant there and we don't think we should be gold-plating the system. The market has worked very well. It's provided the lowest wholesale energy prices in a decade," Dolan said.

Associated Industries of Massachusetts described itself in a letter as "vehemently opposed" to Section 42 because of the risk of higher electricity costs and a lack of evidence that the incentive is needed to have the Salem site cleaned for redevelopment.

The CEO's of four energy generation companies wrote a letter to Gov. Patrick and legislative leaders urging them to oppose the section, arguing that there are other tax credits and programs that could help prepare the site for redevelopment without building an "unnecessary new power plant."

"Undermining the successful competitive market by requiring consumers to subsidize a favored fossil fuel plant threatens our substantial existing investments, along with the accompanying jobs and tax revenue," wrote the head of Exelon Corporation, EquiPower Resources, Essential Power and NextEra Energy.

 

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