NSTAR Files With FERC For Consumer Protection Order

Business Wire, May 14, 2001

Business/Technology Editors

BOSTON--(BUSINESS WIRE)--May 14, 2001

NSTAR today asked the Federal Energy Regulatory Commission (FERC) to prevent two electricity generators in the Northeastern Massachusetts Area (NEMA) from charging customers excessive rates when it is impossible to import cheaper electricity from competing plants into the region. This is the second time in less than a year that NSTAR has asked FERC to provide customer protection while a competitive electricity market continues to develop.

NSTAR Vice President of Energy Supply Paul Vaitkus said today's filing claims that two generating companies, affiliates of Sithe Energies and PG&E, control almost 90 percent of electricity production in NEMA including the City of Boston. The peak demand for electricity in this area last year was about 5200 megawatts and about 3200 megawatts can be shipped into the area from other plants around New England.

According to the NSTAR filing, the problem arises when transmission lines are fully loaded and customers are forced to buy more expensive power from local plants. Vaitkus said, "With two local companies controlling almost 90 percent of that supply, they have the ability to corner the market and dictate excessive prices that we and our customers believe are unjust and unreasonable."

Vaitkus said the higher electric prices that utilities have to pay when cheaper outside power is not available are called "transmission congestion charges" and last year those charges amounted to more than $70 million in NEMA. He said that cost can be greatly reduced by FERC limiting these two local power generators to charging only their "out of pocket expense" for power sold during periods of transmission congestion.

"We are asking FERC to do what they have recently done in California and prevent generators from charging excessive prices to energy companies and their customers when the market is not workably competitive", said Vaitkus. He added that during the past three years, NSTAR has spent more than $63 million adding new transmission lines, transformers and substations and increasing the capacity of several lines in Northeastern Massachusetts.

The NSTAR filing requests FERC to:

- Order both generating companies (affiliates of Sithe Energies and PG&E)
to refund to customers all overcharges to date.

- Revoke the authority of both generating companies to charge market-based
rates when energy imports from outside sources are not available.

- Limit the future prices of both generating companies during congestion
periods to actual production costs.

- Require both generating companies to divest of some generating units if the
companies want to retain the ability to charge market-based rates in the
future.

- Require public disclosure of price reductions imposed by the ISO when it
finds generators exercising market power (what prices were reduced, when and
why).

- Limit the ability of both companies to impose excessive limits on unit
operations.

Vaitkus said NSTAR believes that power generators have an obligation to be fair to consumers and to refund the money they have collected above and beyond their "out of pocket expenses" during periods of transmission congestion. He estimates those refunds would be in the range of tens of millions of dollars.

Vaitkus said this is not the first time that NSTAR has identified inefficiencies in the relatively new wholesale market and asked FERC to take action on behalf of electrical customers. Last year when wholesale electricity prices soared to about $6000 a megawatt-hour (MWH), NSTAR obtained from FERC a temporary price cap of $1000 MWH to ensure customers would not be subjected to price gouging. He noted that the $1000 price cap was to have ended last October but remains in place as a further indication that consumers must be protected as the new market evolves.

He said, "We have an obligation to our customers to monitor the market and bring to the attention of regulators market inefficiencies and imperfections. As we move from a fully regulated energy market to a competitive market, there will be obstacles that regulators need to address so the market will benefit all participants."