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Feds Delay Implementation of New England LICAP, Set Oral Argument

FERC last Wednesday scheduled oral argument for Sept. 20 in an ongoing proceeding involving ISO New England's (ISO-NE) locational installed capacity (LICAP) plan for the region. At the same time, the agency postponed LICAP implementation, if it proceeds, until no earlier than Oct. 1, 2006 instead of January 2006 as originally scheduled.

In response, ISO-NE said that it was disappointed with FERC's decision to delay LICAP, but the grid operator added that it will continue to work with its stakeholders in whatever process FERC establishes.

ISO-NE, a FERC-certified regional transmission organization (RTO), said its proposal is designed to attract private investment in new supply and encourage expenditures to maintain and continue to operate existing resources to meet the growing energy needs of the region and its economy.

"If FERC does not implement LICAP in October 2006, FERC's decision could delay implementation of an efficient and competitive capacity market by at least two years," the grid operator noted. "While electricity use continues to grow, investment in generating supply has evaporated. Moreover, several existing generating plants may be deactivated, some of which are located in heavy demand areas, such as Greater Boston or southwest Connecticut."

As early as 2008, New England may face electricity shortages that could require emergency actions to meet peak demand in the summer, the RTO warned. "Further delay in implementing a capacity solution has ramifications for consumers and the economy. Costly, stopgap measures will continue to be necessary to protect reliability."

A FERC administrative law judge (ALJ) this summer issued an initial decision on the LICAP plan and ISO-NE had asked the full Commission to act on the ALJ's decision by Sept. 15.

But the LICAP plan has faced strong opposition from several quarters. Just last week, a large collection of U.S. lawmakers representing states in New England told FERC Chairman Joseph Kelliher that the Commission should delay any decision on the LICAP plan for one year.

Meanwhile, several parties urged the Commission to hold oral argument on the LICAP proposal. A large group of Connecticut-based parties, including that state's attorney general, said FERC should allow for oral argument related to the LICAP plan's demand curve.

In a July 28 filing at FERC, several New England-based entities collectively said that the Commission should hold an oral argument prior to issuing a ruling on exceptions to the initial decision. The filing was made by the New England Conference of Public Utilities Commissioners, the Maine Public Utilities Commission, Maine Public Advocate, the Vermont Department of Public Service and Vermont Public Service Board.

FERC will hold an oral argument in the case on Sept. 20 at the Commission's headquarters in Washington, DC. The Commission will issue a subsequent notice with the times, agenda and other information for the oral argument.

"Given our decision in this order to schedule oral argument for Sept. 20, the Commission will not be issuing an order on the initial decision by Sept. 15," FERC said. "At this time, the Commission cannot commit to a date by which it will issue an order."

ISO-NE has said that it does not implement major projects during the summer months (July through September) because the possibility of service disruptions due to the introduction of new projects during these months is high.

"Recognizing the importance of the LICAP proposal to the New England region and the likelihood that, if the Commission were to retain the LICAP mechanism, there would be a short time frame between our issuance of an order on the initial decision and the currently established Jan. 1, 2006 implementation date, we have determined that the implementation of the LICAP mechanism, if it proceeds, will not be earlier than Oct. 1, 2006," FERC said.

FERC Commissioner Nora Brownell offered a concurring statement, which was attached to the order. "I agree with this order, however, ISO-NE has raised the issue whether a delay of LICAP will have timing consequences for other market enhancements approved by the Commission," she wrote. "I would clarify that our action today does not delay any other market enhancements, including the creation of a Southwest Connecticut load zone in the energy markets effective Jan. 1, 2006."

"This is a very welcome decision by FERC, and a big victory for the coalition that has been fighting this anti-consumer electricity rate increase," said U.S. Rep. Ed Markey (D-MA) on Wednesday. "Coming just a day after most of the New England delegation signed onto my letter calling for a delay in any decision regarding LICAP and consideration of alternatives, this is a very important development."

Markey said that Kelliher and the other FERC Commissioners "should be commended for rejecting the ISO's request for accelerated approval of LICAP and instead scheduling this matter for oral argument so that they can hear directly from those opposed to this proposal. I believe that in the September hearing FERC will hear some compelling arguments against LICAP, and I hope they will consider the harm this proposal would inflict on the entire New England region very carefully before they move forward."

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