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A surprise 11th-hour ruling opened the door for the Killingly Energy Center to regain a key source of funding that it lost late last year – creating uncertainty in an annual auction meant to ensure New England has enough power plants to meet electricity demand.
The D.C. Circuit Court of Appeals issued a stay on the Federal Energy Regulatory Commission’s decision to allow grid operator ISO-New England to end a contract funding the Killingly Energy Center – Florida-based NTE Energy’s proposed 650 megawatt, gas-fired plant that became a lightning rod of criticism from environmental advocates opposed to building new fossil fuel-based power plants.
The court instructed the grid operator to abide by the contract, while federal regulators decide whether to hold a hearing on the matter.
At least one industry official said it appears unlikely NTE will overcome the federal regulator’s unanimous support for ending the contract, a move that was hailed by opponents as the death of the project.
But the stay – issued just 65 hours before the annual capacity auction was scheduled to begin on Monday morning – created uncertainty around the auction that provides a key source of funding for power plants in the region, and is meant to ensure there will be enough power plants to meet demand three years in advance.
ISO has announced that it will keep the results of that auction secret until the Killingly question is resolved, and then adjust the results to either include or exclude the Killingly plant accordingly.
Dan Dolan, president of the New England Power Generators Association, said it appears unlikely that FERC will change its decision on Killingly, considering it ruled to end the contract with unanimous support from the panel of regulators.
But if FERC does reverse its decision, it would significantly alter the results of the auction, he said. For one, the auction funds a set amount of megawatts worth of projects each year, and the inclusion of Killingly’s 650 MW would displace other projects that would otherwise be funded.
And while other projects will bid at the lowest price they need to operate, Killingly enters with a price of zero, which Dolan said he expects would lower the clearing price.
But the biggest question for power generators is how long the uncertainty will last, Dolan said.
FERC is scheduled to rule on NTE’s request for a rehearing on Thursday, but the circuit court’s order allows the federal regulator up to 30 days to resolve NTE’s petition – a timeline that could complicate other projects racing to meet deadlines.
“If you’re a new project developer, you need to start getting going, and finalizing financing, and beginning the development process to bring that facility online and be able to deliver it,” Dolan said.
A delay also complicates preparations for next year’s auction, which starts in earnest in March. If existing plant operators review this year’s auction results and decide that they won’t be able to survive in the coming market, they need to announce plans to retire the plant in mid-March to allow ISO to begin planning to replace the capacity in the next auction.
“It’s hard to make that final retirement decision until and unless you see the results of this auction,” Dolan said. “So it creates some uncertainty there, and there’s still a lot up in the air that is hard to say with any finality on Monday morning after a very unexpected court decision on Friday night.”
While others were working to figure out what the stay means, NTE was taking it as a win for their troubled project – which NTE said it believes is important for reliability and as a bridge to a carbon-free future in New England.
“We appreciate the decision from the D.C. Circuit Court,” NTE Managing Partner Tim Eves said. “Granting the stay we requested enables us to participate as planned in today’s forward capacity auction.”
This story has been edited to clarify the identity of the developer of the Killingly Energy Center, NTE Energy