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oil spikes to help coal, nuclear

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    Oil Spikes May Help Coal, Nuclear Plants
    State Officials Want Change In Pricing System
    September 13, 2005
    By JOHN M. MORAN, Courant Staff Writer State consumer advocates are asking federal energy regulators to change the system for setting wholesale electric prices in the state, a system they said is providing windfall profits to the state's nuclear and coal-fired power plants.

    Attorney General Richard Blumenthal and state Consumer Counsel Mary Healey said Connecticut consumers and businesses could pay as much as $970 million more next year if the wholesale electric market system is not modified.


    For the average residential consumer, that could mean an extra $200 to $220 in electricity costs, according to Joseph Rosenthal, a lawyer for the state Office of Consumer Counsel.

    ISO New England, operator of the region's power grid, said changes are unnecessary because the existing wholesale power system is working to reward efficiency, provide the state with cleaner and more reliable power and encourage the construction of more generating capacity.

    But Blumenthal and Healey argued that the current wholesale system unjustly rewards nuclear and coal-fired power plants, which are allowed to charge the same price as generating plants using high-cost oil and natural gas for fuel.

    They called on the Federal Energy Regulatory Commission to temporarily impose a regulated pricing system until a more workable wholesale system can be devised. Doing so, they said, would deliver the "just" and "reasonable" electricity prices required by law.

    "Repealing this unfair, unlawful rule would save Connecticut consumers almost $1 billion a year on their electricity bills," Blumenthal said. "Pegging nuclear power rates to the cost of oil and gas leads to federally approved price gouging."

    Healey and Blumenthal were joined in their petition to FERC by the Connecticut Municipal Electric Energy Cooperative, representing municipal utilities, and the Connecticut Industrial Energy Consumers, representing large industrial electric users.

    The petition asks that FERC act quickly to change the wholesale pricing system, but it was not immediately clear how soon the agency might rule. Federal energy regulators confirmed Monday that they had received the petition to review the wholesale electric system, but declined to comment further.

    ISO New England said the petition advanced by Blumenthal and Healey represents a retreat from a market-based system for setting wholesale electric rates.

    "This proposal would take us back to the days when utilities were guaranteed profits from their investments through a regulated rate of return and consumers were responsible for the full investment risk whether those investments were wise or not," the organization said. "As ISO has previously indicated, rate regulation is more expensive and less efficient than markets."

    Concern about the wholesale electric market comes as the state's utilities are lining up power supply contracts for 2006.

    Mitch Gross, a spokesman for Connecticut Light & Power, the state's largest electric utility, said the company has already locked in contracts for half the electricity it needs for 2006 and expects to finalize arrangements for the other half in the near future. Gross said he could not say how much next year's electricity prices would change, but he acknowledged that there has been "tremendous pressure" on energy costs.

    Since 2000, Connecticut has been deregulating its electricity markets in the hope that competition will cut costs and improve performance. As part of that effort, federal regulators, in cooperation with ISO-New England, have been working to fashion a wholesale marketplace where power generators can compete to offer the lowest prices.

    But Blumenthal said the system as it now stands does not accomplish that goal and raises costs to consumers and businesses, damaging the state's economy.

    "The so-called competitive electricity market created by FERC and ISO-New England is an expensive farce," Blumenthal said. "FERC and ISO-New England should scrap the system and start over, restoring sanity and fairness to power prices."

    ISO New England disagreed, saying: "The proposal filed with FERC today to stop the market takes a step in the wrong direction, with consumers paying the costs.",0,2442041.story?coll=hc-headlines-business
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