Further Setback for Killingly Gas-Fired Plant

KEC rendering of the proposed Killingly gas-fired energy plant


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KILLINGLY – Federal regulators on Wednesday halted an attempt by Florida-based NTE Energy to revivie a contract that provided a key source of funding for the proposed Killingly Energy Center.

The Federal Energy Regulatory Commission rejected an argument from NTE – the owner of the proposed 650 megawatt natural gas-fired plant in Killingly that has become a lightning rod of criticism for environmental advocates – that ISO-New England’s decision to pull a crucial capacity contract wasn’t supported by evidence.

FERC said on Wednesday that NTE’s repeated delays and extensions of milestones to secure funding and construct the plant were sufficient evidence that the company would not be able to have the Killingly plant up and running by the June 1, 2024 deadline in its contract – so ISO-NE was justified in pulling that contract.

The decision to pull the contract from NTE was hailed by opponents as the death of the Killingly project, which to environmental advocates came to represent the contradictions of energy policy in New England – where goals for reduced carbon emissions and increased investment in renewable energy are met with a reality where natural gas dominates the regional grid.

The door appeared closed for the plant until the D.C. Circuit court ruled that, because NTE had an outstanding request for a rehearing with FERC, it would have to be included in a regional energy auction this year until that request was resolved – causing uncertainty in an auction that provides a key source of funding for power plants in the region. 

FERC’s decision on Wednesday has closed that door, though NTE can still appeal FERC’s decision in federal court.

Uncertain funding

As both ISO-New England and NTE agreed to release several public filings, FERC went into much more detail to describe the Killingly project’s alleged shortcomings on Wednesday than when it initially approved ISO’s plan to pull the capacity contract from NTE in January.

The decision outlines how NTE extended milestone dates for funding and construction 14 times – to the point that ISO-New England reached out to the company because it was concerned the Killingly project wouldn’t be online by the June 1, 2024, deadline set in its capacity contract.

A report from Lummus Consultants International concluded that with an aggressive construction schedule, it was possible for the project to be built in 29 months and be operational by the deadline if construction started on Jan. 1, 2022. 

But the consultant also said NTE would need a significant portion of its financing in hand before starting construction. While the company told ISO in October that it could tell its contractors to start working on the full project on Jan. 1, 2022, the company said it would secure financing in mid-January, after construction would have begun.

The consultant determined that even a short delay in securing financing would cause longer delays for construction. Realistically, they said NTE would miss the June 1, 2024, deadline by several months – a finding FERC said was based on assumptions favorable to NTE.

By the time the situation boiled over in October, NTE was already years behind when it was supposed to secure financing for the project, and ISO wasn’t convinced that it could avoid further delays, FERC said. 

Complicating NTE’s ability to secure financing was the fact that one of its main backers – South Korean electric utility Korea Western Power – was waiting for approval from the South Korean government and its board of directors to fund the project.

NTE said that Korea Western officials told them that they expected that approval in December, in time for NTE’s proposed construction start date of Jan. 1 – but FERC said a letter from Korea Western to NTE didn’t include any commitment to finance the project, or even indicate how much financing it was willing to offer.