Are New Englanders being overcharged for electricity?

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Senator Edward Markey (left) and Representative Joseph P. Kennedy III.

US Senator Edward Markey and US Representative Joseph P. Kennedy III say changes are needed to protect consumers from being overcharged as part of New England's system for ensuring there is enough electricity during peak demand times.

Known as the forward capacity market, the auction system pays power plant owners for what is essentially an insurance policy to keep the lights on. The latest auction will cost ratepayers $3 billion.

"Ratepayers at this point are being stuck with a bill that they don't even know yet and some folks might not be able to afford it," Kennedy, a Democrat who represents Massachusetts' Fourth Congressional District, said in a telephone interview.

Markey and Kennedy are challenging the forward capacity market on two fronts. They sent a letter to the Federal Energy Regulatory Commission this week, urging the agency to closely scrutinize the results of the latest auction. The letter has been signed by the nine other members of the state's delegation.

And Markey and Kennedy are pushing bills that would allow representatives for consumers to challenge the commission's approvals in the event of a 2-2 tie.

A spokesman for Kennedy said the House approved his bill on a voice vote on Monday. Markey, meanwhile, said he is hopeful that the Senate's energy committee can approve his version this spring.

The legislation was filed following a split decision by the federal energy commission two years ago, on that year's capacity auction. A quirk in federal law prevents any appeal of a tie vote by the commission, but Kennedy and Markey hope their legislation can change that.

The commission again consists of four members today, instead of its usual five, presenting the potential for more tie votes in the near future.

"Right now, consumers don't have the ability to protect themselves if there's a 2-2 vote," said Markey, a Massachusetts Democrat who has served in the Senate since 2013.

Markey and Kennedy also said they're concerned that ISO New England, the regional power grid's operator, underestimated the amount of solar energy that was built in Massachusetts and the full benefits of new transmission capacity in southern New England and Rhode Island. Those miscalculations, they said, could cost ratepayers extra money unnecessarily.

When spread across all of New England's businesses and residents, the $3 billion charge will result in a modest increase in monthly electric bills. The exact amount is still unclear.

The most recent auction for capacity covers a 12-month period that begins on June 1, 2019. That's when wholesale charges will go into effect, although how that will translate at the retail level will depend on how each electric utility buys power, ISO New England spokeswoman Marcia Blomberg said.

She said the typical residential customer, one who uses about 750 kilowatt-hours per month, could end up paying about $17 a month for capacity as a result of last month's auction, according to one rough estimate.

Blomberg said ISO New England makes adjustments in its market regularly to reflect new information, such as the proliferation of solar power and the expedited transmission improvements in the Southeastern Massachusetts area.

Capacity costs previously rose in New England, she said, due to the past or pending retirements of older power plants. But as new power plants are proposed, she said, the capacity costs can come down. The capacity auction in February 2015, for example, will cost about $4 billion. But the new auction for capacity, she noted, has dropped significantly from that level to $3 billion.

Dan Dolan, president of the New England Power Generators Association, said the promise of capacity payments has helped spur the development or construction of at least seven natural gas power plants in New England during the past three years. Collectively, those seven plants will contribute as much as 3,200 megawatts to the grid — roughly twice as much as capacity as what's currently provided by the giant coal- and gas-fired Brayton Point power plant in Somerset that's due to close next year.

"We're seeing a market that is driving tremendous amounts of new investments ... to replace retiring generation capacity and bring in the next fleet that is going to power the New England economy for decades to come," Dolan said.

Markey has been involved in energy for years, both during his time in the House of Representatives and now as a senator.

But the complexities of New England's wholesale energy market were new to Kennedy until about two years ago after a new owner announced it would close the Brayton Point plant. That turned the arcane nature of wholesale power rules into an easy-to-see issue in his congressional district.

"Talking to my colleagues, and when they ask, 'What are you working on?' and you say, 'forward capacity auctions,' their eyes glaze over pretty quickly," said Kennedy, a former state prosecutor who joined Congress in January 2013. "[But] one of the lessons I've had since I've come to Congress is, the more complex the system, the more likely it is that somebody is being taken advantage of."