Electricity transmission tower under gray sky
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Consumer watchdogs from four New England states hope to block a proposed increase in electric generation rates by the non-for-profit corporation tasked with providing reliable and reasonably-priced wholesale electricity for the region. 

Connecticut’s Consumer Counsel Claire Coleman said her office joined the protest effort on Friday to contest the changes to the IEP pricing formula. 

Late last month, the Massachusetts Attorney General, the Connecticut Consumer Counsel, the New Hampshire Office of the Consumer Advocate and the Maine Office of the Public Advocate filed the joint protest with the Federal Energy Regulatory Commission. 

New England consumers may have to pay triple for LNG – liquified natural gas – that goes into the region’s Inventoried Energy Program (“IEP”), which is designed to prepare for fuel shortages during winter months when those resources are most stressed, according to these officials.

“The cost of the IEP could jump from $300 million to more than $800 million,” according to a statement issued by Connecticut’s Consumer Counsel. “Those increased costs would ultimately be borne by ratepayers in the six New England states that ISO-NE serves.”

In April, ISO-New England, along with New England Power Pool, filed a request to redesign the IEP program. The filing included a proposed adjustment of its payment rates and natural gas contract eligibility requirements, a move the company says is a just and reasonable move in light of market conditions.

“These proposed modifications to provisions addressing the IEP rate calculations and cost allocation are just and reasonable because they better align the rates with prevailing market conditions and afford additional transparency into the data used to calculate the rate and how costs will be allocated,” according to ISO-New England’s filing. 

However, in the joint protest filing, officials counter that the payment rates will result in soaring costs for ratepayers. 

“Although ISO-NE characterizes its proposal as ‘parameter updates,’ the IEP Redesign alters the compensation structure of the IEP in a manner that shifts substantial risk to ratepayers in the form of potential tripling of program costs without a demonstration of roughly commensurate benefits,” according to the filing. 

Coleman said the changes proposed will cause a significant burden to ratepayers, adding that ISO-NE did not provide evidence to prove such a change is necessary.

“This program should not be redesigned to add even more costs onto consumers’ electric bills without adequate substantiation of need and reliability benefits.  ISO-NE did not even try to justify these changes with in-depth study or analysis.  That’s unacceptable,” Coleman said in a prepared release.  “While we understand that maintaining reliable fuel resources during the winter months is fundamental to our region’s power grid, ISO-New England needs to do its homework before proposing to burden Connecticut’s residents and businesses with even higher electricity prices.”

The current effective base rate is $82.49 per MWh of inventoried energy, and the spot rate is $8.25 per MWh for each trigger event during a delivery period. A “trigger event” happens when the average of the high and low temperatures for a day at Bradley International Airport is at or less than 17 degrees. The proposed IEP updates would cap the base rate at $288 per MWh, while the proposed change to the spot payment is at one-tenth of the fixed base rate.

Matt Kakley, a spokesman for ISO-NE, said Wednesday that the IEP program, a two-year program for the next two winters, was approved by the Federal Energy Regulatory Commission before the war in Ukraine which led to price volatility in the global LNG market. 

“Indexing rates to actual prices in the global marketplace would ensure the program acts as intended to increase system reliability during cold weather events. If global LNG prices decline in the coming years, rates in the program would decline, as well,” Kakley said. “This approach–indexing to actual prices to account for inflation–is similar to how some New England states are looking to deal with price volatility in offshore wind supply chain.”

He added that the cost estimates mentioned in the Connecticut Consumer Counsel’s press release are the upper end of the potential costs, “and are based on all eligible resources participating fully and global LNG costs reaching the program’s proposed cap. The rate calculated using the indexed formula has never reached this capped price, even during the most volatile market periods in 2022.”

The ISO is requesting a June 6 effective date for the changes. 

“The IEP updates are necessary in light of changes in the global energy markets, including increasing price levels and volatility, 26 and eliminate the use of pricing based on stale data utilized to design the fixed rate in 2019,” according to its filing.