Two companies planning to build power plants under a controversial state incentive program will have to enter this month’s capacity auction under the terms of the original contracts they signed last year.
The Board of Public Utilities today unanimously denied requests by NRG Energy and Competitive Power Ventures to modify contracts they signed last year under the state’s new Long-Term Capacity Agreement pilot program. Under the program, called LCAPP, the two companies would receive price guarantees from the state in exchange for building the new plants. NRG plans to build a plant in Old Bridge, while CPV’s plant would be in Woodbridge.
In order to take advantage of the incentives, however, the companies would need to succeed in the regional power auction at which electricity generation capacity is sold each May. The LCAPP contracts last for 15 years and require NRG and CPV to bid into the annual auctions beginning this year. Generation sold at this year’s auction will be for delivery beginning in 2015, by which point the power plants are scheduled to be complete.
The request before the BPU was to amend those contracts because the two generators argued that an auction rule change approved by the Federal Energy Regulatory Commission last year in response to LCAPP substantially hurt their chances of clearing in the May auction.
Specifically, the companies asked the BPU to amend the contracts to allow for a sliding back of the 15-year payment schedule to account for the possibility that they don’t clear in this month’s option. They also asked for a suspension of the schedule, which would essentially place the LCAPP program on hold, according to Ken Sheehan, a BPU attorney.
At its meeting today, the BPU denied the contract changes, instead opting for a wait-and-see approach
“The deal was the deal, as far as I’m concerned,” said BPU President Robert M. Hanna.
Hanna said the board could revisit the issue after the auction results become public May 18, but he said he wants to see how the auction turns out before he entertains the idea of any changes.
The contracts — known as standard offer capacity agreements — were crafted after several weeks of back-and-forth last spring, during which interested generators and other parties haggled over the terms of the deal.
BPU Commissioner Jeanne Fox noted the possibility of FERC making such a ruling was contemplated at the time the contracts were originally devised, so she said it would be unfair to allow contract changes now, as the generators were aware of the possibility of FERC’s decision when they originally signed the contracts.
“It makes no sense — in equity, at least — to allow these petitioners to get what they want,” she said.