Expect to see a premium for power prices in Northeast Massachusetts (NEMA) and Southwest Connecticut (SWCT) over the next eight years, a new report issued by Energy Security Analysis Inc. (ESAI) projects. More broadly, ESAI believes that investment in generation will tank over the coming years in the wake of Enron Corp.’s financial collapse and the “credit crunch” that is starting to loom over the industry.

ESAI made its forecasts in its new “Power Quarterly,” an eight-year price outlook for the Northeast power pools. “The price of power for most of the New England Power Pool [NEPOOL] will fluctuate at around $30 over the next eight years,” said Ed Krapels, ESAI’s director of gas & power services. “However, we calculate the NEMA and SWCT premium to be $4-$5 during that time.”

ESAI noted that it is the first company to develop “zonal” pricing models for NEPOOL and that the price differences highlighted in its report are expected to have a significant impact on investments and new generation and transmission projects. “While a premium in NEMA may not be very surprising since the region covers Metro Boston, our analysis indicates that there is room for new generation or transmission into SW Connecticut,” Krapels said.

“This point hasn’t been lost on transmission developers as Northeast Utilities and the Neptune project have submitted proposals aimed at increasing capacity in this zone. It’s a market likely to be won in the permitting trenches,” the ESAI official went on to say.

The Neptune regional electrical transmission system project is designed to connect power-short urban load centers in New York City, Long Island, Connecticut and Boston with energy rich locations in Nova Scotia, New Brunswick, Maine and New Jersey. When complete, the system will provide 4,800 MW of electric transmission capacity to serve urban loads.

Meanwhile, ESAI expects generation investment to drop substantially over the next eight years as the effects of Enron and the credit crunch ripple through the industry. “The Calpine business model is dead,” Krapels argued. “Companies will be very selective when they have to build plants on-balance sheet. Our project assessment program is already reporting that a growing list of proposed plants have been withdrawn or shelved.”

Along with his role at ESAI, Krapels also serves on the board of directors for the Neptune regional transmission system.

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