By Tom Dalton
Staff writer
— This article has been corrected since publication. To read the correction, please click here.
SALEM — A request by the owner of Salem Harbor Station to withdraw from a New England energy auction is "the beginning of the end" for the coal-burning power plant, the state's top energy official said.
Ian Bowles, the secretary of energy and environmental affairs for Massachusetts, issued the statement late yesterday afternoon after being asked about Dominion's recent request to withdraw the Salem plant from a June 2011 auction, an event that is held annually to ensure the region can meet its future energy needs.
"This seems to me the beginning of the end of coal-fired electric power generation in Salem," Bowles said.
Dominion would not comment on Bowles' statement but said earlier that it has asked to withdraw because it makes good business sense, not because it plans to shut down the coal- and oil-burning facility.
Repeating a past statement, the company said it will continue to operate Salem Harbor Station as long as it can do so safely, profitably, and in compliance with state and federal pollution regulations.
Although Dominion has faced these doom-and-gloom predictions before, the circumstances appear slightly different this time. For starters, this prediction comes from the state's top energy official, not environmental activists lobbying to shutter the facility.
And even though, for the past two years, the Virginia-based energy giant has asked to pull the Salem plant out of the so-called "forward capacity auction," those requests were for a single year. This is the first time it has asked to pull out permanently.
In addition, Dominion was one of only two power companies in the six-state region to submit so-called "permanent de-list bid" requests for the June auction out of more than 600 large and small power generators, according to Independent Systems Operator-New England, which oversees the regional energy market.
Dominion also owns four power plants in New England, including Brayton Point, a larger coal plant in Somerset, but asked to withdraw only Salem Harbor Station from ISO's forward capacity auctions.
The rare move set off alarms at the Conservation Law Foundation, an environmental group that has filed a pollution lawsuit against the Salem plant and is conducting a "Coal Free New England" campaign.
In a blog post last week, a CLF official wrote: "By filing to permanently withdraw Salem Harbor Station from the forward capacity market, Dominion is signaling that it does not believe the market will be able to provide sufficient revenue to run the plant profitably and that it cannot maintain the plant going forward."
Seth Kaplan, the author of the CLF blog post, went on to quote an energy analyst who claimed that a company that files such a request "is laying the groundwork to shut down."
Dominion said it made the request not because it plans to close, but strictly for business reasons. It does not want to lock into a low price for future years — the forward capacity auctions are typically for three years down the road — and believes it can get higher prices on the daily "spot" markets and from other energy users, possibly even outside New England.
"I can't speak for other generators, but, for us, it makes sense," said Jim Norvelle, a Dominion spokesman in Virginia.
When Dominion made similar but shorter-term requests the past two years, ISO denied the moves and ruled that two of Salem's four generating units are needed to ensure future reliability. It will not rule on this latest request until after next June's auction.
The CLF has filed protests with the Federal Energy Regulatory Commission, claiming Dominion is only doing this to receive "above-market payments" of millions of dollars given out when plants are ordered to sell their electricity to the New England pool.
Dominion insists it is doing what is best for the Salem plant.
"We know what it costs us to produce a megawatt of electricity at Salem Harbor Station, and the lower price at auction is not enough to cover our costs to generate" electricity, said Dan Genest, another company spokesman.
Mayor Kim Driscoll said she is not an expert on the complex field of energy auctions but does know how important the plant and its workers are to the city. Salem Harbor Station is the city's largest taxpayer, sending $4.5 million to the city last year in taxes and other payments.
The mayor said she is grateful for a $200,000 state grant the city received earlier this year to study the likely lifespan of the plant, reuse options and other key issues related to the future of that site.
"It's a very complex field — that's why we are commissioning this study and hope that will give us the information we need to better understand what is happening and prepare us."
In his brief statement, Bowles also mentioned the Salem study.
"Gov. Patrick and I have worked closely with Dominion Power and with Mayor Driscoll, providing a grant to help city leaders understand options for re-powering the facility or reusing the site. The time is ripe for older, inefficient, high-emission power plants to prepare for an orderly transition to a cleaner energy future."
