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LICAP New England

LICAP New England. Joel S. Gordon PSEG Energy Resources & Trade, LLC Massachusetts Restructuring Roundtable March 18, 2005. New England Capacity. Total Capacity 30,958 MW. 9,000 MW of Gas & Dual Fuel built since 1999. Source: RTEP 04. Capacity by Fuel Type. Total Capacity 30,958 MW.

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LICAP New England

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  1. LICAP New England Joel S. Gordon PSEG Energy Resources & Trade, LLC Massachusetts Restructuring Roundtable March 18, 2005

  2. New England Capacity Total Capacity 30,958 MW 9,000 MW of Gas & Dual Fuel built since 1999. Source: RTEP 04

  3. Capacity by Fuel Type Total Capacity 30,958 MW 45% of New Gas/Oil Units have failed in the NE Market.

  4. New Gas Units • “Results of the wholesale market operations to date show that the price signals from the energy markets alone are not sufficient to support new entry and may not even support continued operation of existing units needed to reliably meet system or local load requirements.” • “Actual revenues available …only support about 30 to 40 percent of the [cost of a peaker]”

  5. Return to Cost of Service • Over Half Of the Oil Fleet has Left the Market Nearly ALL in highly Transmission Constrained Areas. New Boston: 350 MW Oil/steam • Devon 121 MW Oil/steam • Middletown 770 MW Oil/steam • Montville 494 MW Oil/steam • Kendall 53 MW Oil/steam • New Haven 448 MW Oil/steam • Bridgeport 2 130 MW Oil/steam • Salem Harbor IV 443 MW Oil/steam • Yarmouth 4 604 MW Oil/steam • Mystic 7 550 MW Oil/steam • W. Springfield 101 MW Oil/steam Total 4,100 MW

  6. Other Units Responses • Highly Efficient Units in Constrained Areas are Also Trying to Leave the Market. • Milford I & II 593 MW GCC • Bridgeport Energy 451 MW GCC • Wallingford 176 MW GCT • Salem I-III 330 MW Coal • Mystic 8,9 1,393 MW Gas Total 2,943 MW

  7. It’s The Market Design • 10 Separate Generating Companies • 14 Separate Generating Stations • 37 Generating Units • 7,043 MW of Capacity • Most Operating in CT and NEMA • 23% of the Total Installed Capacity And we need them all for reliability…..

  8. Got Surplus? • The Long Touted Surplus is Long Gone in New England. • Certain sub-areas are critically short of capacity In 2006 there are shortages under ISO’s 90/10 case

  9. Promise of LICAP • Properly Value Existing Resources. • Eliminate the Need for RMR Contracts. • Send Price Signals for New Investment: • When needed • Where needed • Allow Continuation of Price Caps for Energy. • Encourage Bilateral Contracting Activity.

  10. New England Circle of Thumbs • Lack of Clarity on Who is Responsible for Long Term Reliability. • We should be in crisis mode now, who is stepping up? • Unwillingness to Recognize Value • Or at least to pay for it. • NYISO, NYSDPS, and NY Stakeholders all Support the NY LICAP design.

  11. Proposed Design • Capacity as a product: Deliverable? • Disconnect with how units operate. • Disconnect between obligations and payments. • Disconnect between pricing and supply. • Disconnect between need and purchase. • Capacity is infrastructure and should be treated as such.

  12. Competition Can Work • Reasonable capacity values do not have large retail rate impact. • Long term contracting for capacity has low risk for stranded costs. • Continued investment improves overall efficiencies. • LICAP will help maintain the benefits of competitive energy markets.

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