FERC has accepted a proposal by ISO New England (ISO-NE) that would pay $406 million in cost-of-service compensation to Constellation Mystic Power LLC in an effort to keep two natural gas-fired generating units in Massachusetts open through May 2024.
ISO-NE made the request of the Federal Energy Regulatory Commission to retain for two extra years the two units, which Exelon Generation plans to shutter by June 2022, "to ensure fuel security in New England for the period of June 1, 2022 to May 31, 2024," according to the order [ER18-1639].
In April, Engie SA, which unloaded its global upstream liquefied natural gas (LNG) business in a mega-deal with Total SA, agreed to sell the Everett, MA, import terminal near Boston to Exelon to ensure a "reliable supply of gas" for Mystic Generating Station. Exelon said it plans to shutter Mystic units 7-9 and the Jet unit by June 2022.
Mystic Generating Station is a 2,000 MW natural gas- and oil-fueled power plant. Units 7-9 are the operating units at the plant, while units 1-6 are decommissioned. The two units covered by the ISO-NE proposal, Mystic 8 and 9, provide about 1,400 MW of capacity and are fueled exclusively by the Everett Marine Terminal, according to the FERC order.
"Exelon indicated that unless it obtains cost-of-service compensation for Mystic 8 and 9, it will retire those units," FERC said.
Mystic's proposed annual fixed revenue requirement for the units is $219 million for 2022-2023 and $187 million for 2023-2024. The company proposed to recover the capital expenditures over the two-year term of the agreement.
Commissioners Robert Powelson and Richard Glick, who voted against the order, submitted dissenting opinions arguing that FERC's decision sets a bad precedent and is bad for energy consumers.
"Although this approach may provide Exelon with certainty in the near-term, the fundamental economic and legal questions created by today's order will ultimately create far greater uncertainty for every other market participant," Glick wrote. "The eventual consequence of the Commission's action will be New England ratepayers bearing significant additional costs without even a cursory examination by the Commission of other options for addressing potential fuel security concerns more efficiently."
According to the dissenting commissioners, the majority disregarded "alternative options that may be considerably more cost-effective at addressing New England's fuel security issues than paying $400 million for a temporary solution."
The Everett Marine Terminal, aka the Distrigas terminal, is the longest-operating LNG import facility of its kind in the United States. In late 2010 Everett was the first domestic import facility to receive 1,000 LNG cargoes.The Engie facility serves nearly all of the gas utilities in New England and key power producers, including a connection to a 1,550 MW power plant that serves the Greater Boston area.
The terminal also has been an LNG supplier to a network of 46 utility-owned, above-ground LNG storage tanks that serve New England's gas storage needs. Because of geological conditions in the region, underground gas storage is not feasible.