One of New England's largest coal plants appears to be damned if it closes -- and damned if it doesn't.
Owners of the 1,492-megawatt Brayton Point Power Station announced last year that the behemoth plant would power down in 2017. EquiPower, a subsidiary of Energy Capital Partners that owns the plant, decided to retire the unit after learning its estimated operating costs would be $35 million more than the New England independent system operator's (ISO) independent market monitor-approved bid price.
At the time, the pending closure of the plant in Somerset, Mass., was met with thunderous applause from environmental groups like the Sierra Club, which hailed the demise of the 150th coal-fired power plant -- one of the biggest polluters in New England's six states -- since 2010.
But in a sharp turnaround, the closure is now triggering debates and calls for investigations by unions, Connecticut's attorney general and consumer advocates.
Last week, Public Citizen, Connecticut Attorney General George Jepsen (D) and a local union in Somerset accused Capital Energy Partners, a private equity firm that bought the Brayton Point plant from Dominion Power last year, of gaming the New England energy markets by closing the Massachusetts facility to boost profit at its other gas-fired facilities.
They have all called on the Federal Energy Regulatory Commission to investigate.
Jepsen argued that Energy Capital Partners' decision to close the plant triggered a shortage of capacity in ISO New England's annual capacity auction for 2017-2018, pushing up prices from $277 million per year to $617 million per year. The hedge fund, Jepsen said, earned an additional $77 million at its other plants in New England -- 1,600 megawatts' worth of generation -- that profited from the Brayton Point closure. Capital Energy Partners also owns three gas-fired plants in Connecticut and another gas-fired unit in Massachusetts.
"This cost increase represents an overall increase in costs of $1.733 billion, or a 140 percent increase," Jepsen wrote. "The additional incremental costs to Connecticut consumers will be $340 million for one year."
One major point consumer advocates and Jepsen pointed to was the region's capacity auction last year, which saw prices skyrocket as grid operators failed to secure enough generation to meet demand in 2017 through 2018.
The shortage -- unlike in past years that saw generation surplus -- saw prices jump to a total cost of about $3 billion, up from about $1 billion in 2013 and around $1.8 billion in 2009. The grid operator, ISO New England, pointed out in a news release that more than 3,000 megawatts of plant closures were announced before the auction, resulting in insufficient resources and triggering "administrative" pricing rules to protect consumers from any one company exercising market power and raising prices.
Tyson Slocum, the director of Public Citizen's energy program, said Capital Energy Partners knew that closing the coal plant would force ISO New England to pay other plants more money to commit power in the future -- including $100 million to the equity firm's other generators in the region.
"It's not that we're saying they need to keep Brayton Point open, it's that we need serious reforms in the [regional transmission organization] capacity markets," he said. "We're looking at a billion-dollar rate increase, not because of EPA rules but because of an arcane and uncompetitive market structure. This isn't about coal."
Energy Capital Partners says the accusations are baseless.
Curtis Morgan, CEO of Energy Capital Partner's generation portfolio, said during an interview last week that myriad studies have found the plant is not economical -- a common theme in the United States today, where coal plants across the country are struggling to compete with cheap gas amid increasing economic pressure from new U.S. EPA clean air rules.
The Conservation Law Foundation, for example, commissioned a report last year that found the plant would not recoup more than $1 billion in investments Dominion had made in environmental upgrades or return to a profitable state, thanks to a surge of cheap natural gas, waning demand and the notoriously low capacity prices in New England.
"We said from the beginning that we'd try to make a go of it," Morgan said. "But we couldn't make it."
Still, other experts say the situation shines a light on a more complicated and evolving landscape in New England -- one in which large generators like Brayton Point and the Vermont Yankee nuclear plant are closing, infrastructure to tap a surge of cheap gas is expanding, and energy efficiency and solar in Massachusetts are on the rise.
The Brayton Point case "highlights the importance of writing the rules and getting the market design right so that money moving around the system during this transition is put to productive use building the clean energy resources that we need to power our economy and clean up our environment," said Seth Kaplan, vice president of policy and climate advocacy at the Conservation Law Foundation.
Dan Dolan, the president of the New England Power Generators Association (NEPGA), noted that New England's grid operator is following FERC's order to fast-track crafting a plan to eliminate price volatility while ensuring that the region has enough power to meet demand.
The grid operator this month asked FERC to approve a new method for running its auctions as early as this summer -- a model that aims to avoid the "boom and bust" seen with the Brayton coal plant closure and smooth over price instability while ensuring that generators keep running, Dolan said.
"There's nothing that unit could have done to please anyone," he said.
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