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February 06. 2014 7:32PM

Electricity shortfall means higher prices on way

The market reflects the need for greater energy resources, the operator of the region's power system reports.

ISO New England said the "forward capacity market," which is designed to cover future needs, wrapped up Monday with about 33,700 megawatts of the 33,855 megawatts of capacity required for 2017-18.

The slight shortfall will result in rising prices.

Prices are set through the capacity market developed from a 2006 settlement among market participants, the states and ISO New England, and approved by the Federal Energy Regulatory Commission.

The auction concluding Monday yields preliminary results. A final report will be filed with the FERC later this month.

The capacity clearing price of $15 per kilowatt-month will be paid in 2017-2018 to about 1,370 megawatts of new capacity resources. About 24,885 megawatts of existing resources will be paid $7.025/KW-month, according to ISO New England.

"The large number of resource retirements — nearly 10 percent of the region's total capacity — announced in just the past few months has caused a dramatic shift in the region's power supply landscape," Gordon van Welie, ISO New England's president and chief executive officer, said in a press release. "The region abruptly went from a capacity surplus and low prices in previous auctions to a capacity shortfall and relatively high prices. The slim capacity margin and the resulting auction prices are a clear signal to the marketplace that the region needs more power generation and demand reduction capacity."

The major power plants to retire by June 1, 2017 include Vermont Yankee and Salem Harbor, a power plant in northeastern Massachusetts.

Dan Dolan, president of New England Power Generators Association, said the capacity auction indicated a classic example of supply and demand. The results are a clear signal to the marketplace to invest in additional resources and work to ensure reliability, Dolan said in a phone interview.

"For the first time in more than a decade, New England is now signaling the need for new investments," he said.

For his perspective, he said, everything should be on the table, from new investments to refurbishing existing facilities. He expects continued focus on price and availability of power generation.



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