HB 5525 and the City's Power Plant

On a separate front involving the power plant that is yet to be completed in Meriden, there is a bill in the General Assembly that, among other things, would allow the regulated utilities, (read CL&P, UI) to re-enter the energy generation market, one that was de-regulated several years ago to improve efficiencies and stabilize rates. In reading the bill, I think this section is detrimental to Meriden, in that it would forestall and perhaps eliminate the completion of this plant, one that was allowed in the first place for the taxes it would generate, and the land that would be transferred to the City. After a long hard-fought battle, it appears the land will be Meriden's soon. With this bill, however, the tax part of the deal is now in danger. I wrote the following email to our delegation and copied the Council tonight.

It is my understanding that this bill, "An Act Establishing an Energy and Technology Authority" contains provisions that could be detrimental to Meriden. If approved as proposed, it could seriously delay and even suspend the completion of the independent power project in Meriden currently owned by NRG. (Detailed status on the bill can be tracked here).
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Specifically, allowing the regulated utilities back into the generation business will upset the capital markets that have financed existing efforts by the private sector since energy deregulation was implemented, and will increase ,not decrease rates. Currently, private investors have several billion dollars invested in generation in CT as designed by de-regulation. The incremental re-regulation envisioned in HB 5525 will serve to put all of those assets at greater risk in the market. Lenders will respond as they always do by requiring higher return for their investment. Cost of debt service will increase at the vast majority of the plants in CT.

Consequently, allowing regulated utilities back into generation will cause the cost of capital for proposed approved projects, not only in Meriden, but also Oxford and Middletown, to increase to the point that they cannot be competitive. The result is they will not be built now or ever. Meriden's reason to allow its plant to be built was to assure a strong and increasing tax revenue over time. Passage of this bill will negate Meriden's efforts to accomplish that goal.

Another part of the bill, as I understand it, specifically excludes natural gas as a fuel for a plant proposed under the RFP. (Meriden's plant is designed to be fueled by natural gas, which is why it was located where it is, near the Algonquin Gas Line). It mandates that coal, utilized as fuel for an IGCC plant, be the only fuel allowed. This despite the fact that integrated gasification combined cycle technology (IGCC) is not a competitive source of energy and cannot be financed without a placing most of the risk (as much as two billion dollars of risk in the bill) on rate payers. Financial markets / lenders will not underwrite an unproven technology, constructors will not guarantee operation or performance and component manufacturers will not guarantee more than their individual component's operation. The risk of technology failure rests on rate payers. $2,000,000,000.00 of risk! I strongl believe that the state's rate payers, if asked, would pass on that risk. They are relying on their legislators to make that decision for them.

Buddy, I know you voted for this in committee, and there are parts of the bill that make sense for the state, I'm sure. But I think the delegation should work to remove language that allows the re-entry of the regulated utilities into the generation business, one the state was compelled to de-regulate because they were not efficient when they DID generation before, and let the private markets do their job when the energy industry and its financing stabilizes. Otherwise, Meriden will have a mausoleum on its hillside, instead of a tax generator.

Thanks for considering this long post. I do not speak for the City Council, but am copying them as they should be interested in how this bill could reduce the possibility of future tax revenues they worked hard to obtain, over a difficult 6 years.

This is one of those issues discussed at the State level which isn't sexy, but could have a real impact on our City in the long run. A lot of money is on the table surrounding energy (just consider what it is costing us to heat our homes, light our rooms, and fuel our cars, and the punishing changes occuring there on a daily basis, not just monthly or yearly). A lot of Meriden's future revenue is on the table with this bill, and we need to make sure Meriden's interests are protected. What do you think?