"Under this proposal existing electricity generators will receive economic benefits without any assurance that they will in fact invest in new capacity for their customers in New England, yet it will cost Maine homeowners and businesses upwards of a billion dollars," said the Senators in a joint statement. "Our region and our ratepayers cannot afford these extraordinary increases on top of already rising electric bills due to higher fuel charges, transmission upgrades, and other system costs."
All six of New England's governors, utility commissions, and attorney's general, as well as Maine's Public Advocate, business owners, and trade associations also oppose the LICAP proposal.
The following is the full text of the joint letter by Senators Snowe and Collins:
Dear Mr. Chairman,
We are writing to express our deep concern over the Locational Installed Capacity ("LICAP") proposal currently pending before the Federal Energy Regulatory Commission (FERC) (Devon Power LLC, et.al., Docket No. ER03-563-030). This proposal, as defined by the FERC Administrative Law Judge in her June 15, 2005 "Initial Decision," could impose between $12 billion and $15 billion in additional electricity rates on New England over just the next five years according to estimates by ISO New England. Our region and our ratepayers cannot afford these extraordinary increases on top of already rising electric bills due to higher fuel charges, transmission upgrades, and other system costs, with virtually no assurance that the additional generating capacity they are intended to incentivize will actually be built. It is imperative that FERC consider alternative proposals that will allow our region to meet its electricity needs in a more cost-effective and responsible way. In making this request, we join with all six of New England's Governors, Utility Commissions, and Attorneys General, as well as Maine''s Public Advocate, business owners and trade associations in opposition to the pending LICAP proposal.
The purported intention of LICAP is to provide incentives for power plant owners and utilities to add power plants and implement system improvements so as to promote electric reliability. Yet, these payments go to existing generators with no requirement that those generators invest in new capacity. While we understand that it is FERC's intention that these payments serve as a "market signal" to encourage new investment, there is no assurance that such investments will be made and, in fact, existing generators may have a disincentive to make such investments because their LICAP payments will decrease if new capacity is built. And, while we also understand that part of the purpose of this proceeding was to ensure that existing generation units needed for system reliability during periods of high demand would receive sufficient funds, the initial decision rejected that portion of the ISO's proposal that would have helped ensure that these units actually fulfilled this role.
Throughout this proceeding numerous alternatives have been proposed by New England representatives that would help ensure that New England meets its electrical needs with less cost and uncertainty than embodied in the LICAP proposal. These alternatives have been summarily rejected by FERC and by the ALJ. For example, the "Summary and Conclusion" of the June 15, 2005 Initial Decision begins with rejection of ten separate alternatives, including delaying LICAP until needed transmission upgrades are in place, as ‘impermissible collateral attacks on the Commission's previous orders in this case.'
We therefore appeal directly to you and your fellow commissioners to reevaluate the LICAP concept, and allow New England to propose alternatives that will keep our region economically viable and ensure that additional capacity is truly available, when and where it is needed.
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