Brian Murphy, Business Manager of IBEW 104, wrote the following Editorial Opinion. The “NEPGA: Pay no attention to the billions behind the curtain” was published in the Nashau Telegraph on April 18. The Telegraph online reaches 300,000 visitors and more than 1 million page views monthly.
The article text is below. If you are a Telegraph subscriber you can see the article online.
NEPGA: Pay no attention to the billions behind the curtain
When it comes to New England’s energy market and the high cost of electricity, the fox is in the henhouse. There is wide agreement that New England needs new sources of energy – both increased access to natural gas and clean, renewable resources – and home and business owners here struggle with some of the highest energy costs in the country. As a region, we are closer than ever to enacting solutions that will help ease volatile supply and prices, yet the New England Power Generators Association doesn’t want to change a thing! Why? Because they’re laughing all the way to the bank.
The members that make up NEPGA represent more than 80 percent of the existing generation in New England. This group has made no secret of its opposition to the various efforts to add energy supply and lower electricity costs, including: a competitive RFP process to procure renewable energy and hydropower, Massachusetts’ legislative attempts to contract for large scale hydro, the Northern Pass project, and the New England Governors’ 2014 infrastructure agreement.
NEPGA claims all of these attempts to increase supply and lower costs will threaten jobs, stifle local renewable projects and increase costs. In addition, NEPGA repeats the false echo that there is no energy crisis in New England and that the competitive market takes care of itself. The region’s electricity costs, however, have remained as much as 60 percent higher than the national average throughout the deregulation era.
Why is NEPGA ignoring the facts and trying to whitewash the region’s challenges? You may have already figured out the obvious answer: money. They have billions of dollars to lose.
Like any other competitive marketplace, New England’s deregulated energy market works on the principal of supply and demand. Independent power producers make energy to meet demand. When there’s plenty of supply to meet the demand, prices are low. When supply is tight, prices are high. Let that sit for a minute. Now consider that more than ten percent of the region’s generation has recently or is about to retire. Supply is tight. Prices are high. And NEPGA’s members make up more than 80 percent of the generation in New England.
NEPGA’s generators are positioned to make billions of dollars a year simply for pledging to be available when needed. This money, called a capacity payment, is guaranteed even before a power plant generates and sells a single kilowatt of electricity. Capacity payments are an insurance policy, paid for by all electric utility customers in New England, which carry a premium when supply is tight.
Capacity payments in New England currently add up to about $1 billion a year. But looking ahead two years, when several power plants will retire without replacements, those capacity payments total $4 billion, with most of those dollars going to NEPGA members. Tight supply, high prices. Three years from now, when three new power plants are scheduled to come online, capacity payments total $3 billion. Supply increases, prices decrease. NEPGA members lose hundreds of millions of dollars.
In early February, Moody’s Investors Service issued a negative outlook for NEPGA’s members, saying that future increased supply and decreased prices, “confirm our expectations that the downturn in the merchant sector is likely to persist.” According to CommonWealth Magazine, Moody’s goes on to predict, “These developments, along with the likelihood of new electric transmission lines that will support importing power from Canada, bode ill for long-term capacity prices in the region, although ISO-New England remains the most lucrative among US merchant markets.”
Multiple studies point to a real problem in New England’s energy landscape that will only be solved by adding new energy infrastructure. Even our independent grid operator, ISO New England, says that both increased natural gas pipeline capacity and transmission to connect renewable sources are necessary to ensure a stable supply. Yet NEPGA’s members naysay every major attempt to make both a reality. It’s no wonder, considering the billions they have to lose if New England really does solve its energy challenges.
Brian Murphy is the Business Manager of International Brotherhood of Electrical Workers Local Union 104. Local 104 represents more than 1,000 New England workers in the electrical construction industry.