US Representative Joseph P. Kennedy III was a prosecutor, not an energy analyst, before he became a congressman. But in the past year, Kennedy has steeped himself in the arcane world of New England electricity markets.
The latest example: At Kennedy’s invitation, Federal Energy Regulatory Commission chair Cheryl LaFleur and grid operator ISO New England chief executive Gordon van Welie plan to meet with members of New England’s congressional delegation Tuesday in Washington.
Kennedy helped schedule this summit out of concern that consumers will unfairly pay higher prices in the coming years because of a wholesale market system aimed at rewarding generators for being available at times of peak demand.
“If a supermarket jacks up the prices, you can go someplace else,” Kennedy said. “What are you going to do if your electricity provider doubles your rates?”
New Englanders just endured a winter in which their electricity rates soared by double-digit percentages from the prior year. But this meeting’s focus will be on future rates, two to four years from now. That is when the retail rates will reflect the outcome of the last two annual auctions for peak-demand capacity payments.
Kennedy complains that the cost of this system rose to $3 billion at last year’s auction, triple the previous year’s, and rose again to $4 billion last month. These costs will be absorbed by ratepayers spread across New England. But those in Southeastern Massachusetts and Rhode Island probably will see even higher costs to reflect constraints caused by the 2017 retirement of the massive Brayton Point coal- and gas-fired plant in Somerset.
“The whole idea behind these auctions was that they were supposed to be an incentive for investment [in generation] to meet the demand going forward in our region,” Kennedy said. “What we’ve seen is the exact opposite. You’ve got rules of the road that are allowing generators to use their market power to drastically increase prices and leave consumers with no other choice other than to turn off the lights and not use electricity.”
Kennedy became involved last year because the Brayton Point plant is in his district. He said that when members of the state’s congressional delegation met for dinner a few weeks ago, energy policy dominated the conversation. That dinner discussion helped set the stage for Tuesday’s meeting. Representative Richard Neal also worked to arrange the meeting.
ISO New England spokeswoman Ellen Foley said it is too early to know exactly how the high prices seen in these auctions will affect consumers. The auctions are working as planned by spurring development of plants, she said. Those will help fill a gap caused by the shutdown of a series of older power facilities.
“It’s really basic economic fundamentals,” Foley said. “When there’s a shortage of supply, prices will rise. That’s what happened in the last auctions.”
She pointed to several power plant proposals — including an Exelon plant planned in West Medway — as evidence of the system’s effectiveness.
“We think the market is working pretty well,” said Dan Dolan, president of the New England Power Generators Association. “There’s a tremendous amount of interest for new capital to come in and build new power plants to replace some of the retired ones like Brayton Point.”Jon Chesto can be reached at email@example.com. Follow him on Twitter @jonchesto.