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Middletown Explosion Causes Uncertainty about Electric Rates
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The ill-fated Kleen Energy power plant in Middletown was being built to expand the state’s capacity to produce electricity. Its developers took advantage of incentive payments that state regulators hoped would free Connecticut from massive federal congestion charges. The February 7th explosion at the plant threw many things into uncertainty and confusion. One of the unknowns is how the delay to the plant’s completion will affect electric rates in the state in the long term. WNPR’s Harriet Jones reports.

Although it had yet to produce a watt of power, the Kleen Energy plant under construction in Middletown had already been the recipient of a promised share in $340 million of ratepayer cash. That’s because it was going to increase the state’s capacity to produce electricity by some 620 MW, enough to power about half a million homes. Phil Dukes, spokesman for the state Department of Public Utility Control says such capacity payments were incentives to attract private investment into Connecticut’s power generation industry.

"To try and bring down some of the penalties that we were paying to the federal government for excessive congestion that were well into the hundreds of millions of dollars on an annualized basis."

The problem is, Kleen Energy’s plant won’t start to have an effect on those congestion charges until its capacity is online and available. Dukes says they’re working to assess what the implications of the delay might be.

"There are a lot of variables that have been changing over the last couple of months, whether that be a decrease in demand, other resources coming on line. It’s very difficult to assess this early in the process, when we’re really only a few days past the incident and when the energy hadn’t actually come on market."

Meanwhile, grid operator ISO New England, which is responsible for the reliability of the power system throughout the region, had not been anticipating Kleen Energy’s plant coming online until the summer of 2011. ISO’s Erin O’Brien says we may never know what effect the delay will have on electricity prices, because the system is so complex.

"Whether there’s adequate supply available, what the power demands on the system look like, and a significant driver for wholesale electricity costs is the cost of fossil fuels, and those are factors that can’t accurately be predicted. So we can’t really assess what the long-term impact might be on wholesale prices."

She says in fact ISO is predicting a slight excess capacity for electric power generation in the region next year, even without the Middletown plant. Connecticut Light & Power, the state’s largest utility, actually held the capacity contracts with Kleen Energy. Spokesman Mitch Gross says in the short-term he sees no implications for ratepayers.

"The loss or delay of this facility will have no impact on our supply or the price of power for CL&P customers. You have to understand we had previously purchased the power for all of 2010. We’ve already purchased most of the power needed for 2011, so we’re in good shape.'

The Middletown plant’s developers attracted cash for the project largely on the strength of the promised capacity contract payments – Ratings service Fitch has put a negative ratings watch on two loans to Kleen Energy, saying the company must give an estimate for repair costs, and a revised completion date before the watch is lifted.

For WNPR, I'm Harriet Jones.