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And then.....
On February 5th, ISO NE announced the results for the capacity auction for June 2017 through May 2018. Before going any further lets discuss what capacity is and why ISO NE holds an auction.
What is Capacity?
Capacity is the power product that assures that there are enough power plants available to keep the lights on. The product was created to provide generators an income stream even when they do not produce power.
The Auction
To make sure that there is just enough and not excess generation, ISO NE holds a reverse auction. Essentially ISO NE begins with a high price and round by round lowers that price until there is just enough generation to serve the market. To allow time for new generation to become active the auction held this year is for service to be provided three years from now.
Typically capacity has contributed less $.01/KWh to your price of electricity but recently there have been a number of announcements about power plant closings which over the next five years will reduce New England capacity by 3,400 MW or roughly 11%. A partial list is shown below below:
- Salem Harbor
- Norwalk Harbor
- Brayton Point
- Vermont Yankee
The Impact
Okay so now back to the results. For Connecticut, ISO NE announced a price of $7.05/KW Month for the period June 2017 through May 2018. This is a 156% increase over $2.74/KW Month cost for the year June 2016 - May 2017. The impact on individual bills is dependent on the way a business consumes energy but a small commercial customer could expect to add another $.0125/KWh to their price of power. For those that are operating around Boston the additional cost will be roughly $.025/KWh!
If you would like Howell Energy Consulting to discuss how the change in capacity costs will affect your energy procurement plans please contact me at [email protected] or via phone at 860-205-3863.
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