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February 3, 2014

NU biomass plant lands multimillion CT contract

CONTRIBUTED PHOTO The NRG Energy plant in Montville was not among the three power plants that received renewable energy credit contracts from the state, despite NRG's effort to find a buyer necessary to convert the plant to biomass.

EDITOR'S NOTE: This is a modified version of a previous story.

A New Hampshire biomass plant owned by a Northeast Utilities subsidiary won a 10-year, multimillion contract designed to lower the cost of renewable energy in Connecticut.

The NU agreement is part of a deal made by the state Department of Energy & Environmental Protection for the state’s two utilities to buy 29.6 megawatts of renewable energy credits from three biomass plants in New Hampshire and Vermont, in order to meet the state’s renewable portfolio standards, or RPS.

The largest of the three contracts is the 10-year contract for 21.5 megawatts from a plant owned by the Public Service of New Hampshire, which is a subsidiary of NU. This contract – along with the other two – will be paid by Connecticut electric utilities United Illuminating and Connecticut Light & Power using ratepayer funds. CL&P also is a subsidiary of NU.

The other two contracts are a five-year agreement for 5.4 megawatts from a Vermont facility owned by the Burlington Electric Department and a 10-year agreement for 2.7 megawatts from a Vermont facility owned by Green Mountain Power.

DEEP arranged these contracts using powers granted by the state legislature in 2013, designed to lower the cost of meeting the RPS. By offering long-term contracts to power plants producing renewable energy credits, DEEP seeks to get better pricing than what the utilities would pay by seeking credits on a shorter term basis.

In the three biomass contracts arranged by DEEP, ratepayers will pay less than three cents per kilowatt hour for the credits, when the average market price is 5.5 cents per kilowatt hour. DEEP estimates the total savings over the life of these contracts to be $15 million.

Ratepayers not only benefit from these savings but also receive the profits when CL&P and UI sell the credits back on the spot market, said Katie Scharf Dykes, DEEP deputy commissioner for energy.

The three biomass contracts are not for the power generated by the facilities but for the renewable energy credits the plants receive for using clean fuel. All renewable energy facilities receive RECs for the power they generate, and those plants can sell the RECs to utilities, or anyone looking to support clean energy. Connecticut has arranged for CL&P and UI to buy these RECs from power plants in Vermont and New Hampshire.

Neither CL&P nor UI benefit financially from buying and selling these credits, as all costs and benefits are passed onto the ratepayers.

However, the biomass plants that sell the credits do benefit financially from the contracts. In this deal, the largest financial benefit goes to NU subsidiary Public Service of New Hampshire, as it gets the largest contract.

To avoid any conflict of interest, CL&P officials were not allowed in the room for any part of the negotiations with the Public Service of New Hampshire plant, said Dykes. Only UI officials worked on that contract with DEEP. CL&P and UI officials negotiated together with DEEP for the two Vermont contracts that did not involve any NU subsidiaries.

Using the same authority to arrange power contracts, DEEP put together two deals valued at more than $1 billion combined for CL&P and UI to buy 250 megawatts of power from a Maine wind farm and 20 megawatts of power from a Lisbon solar center. Former DEEP Commissioner Dan Esty was sued in December over the size of the Maine contract, which alleged he overstepped his authority.

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