On 8 May 2007, the Delaware Public Service Commission (PSC) voted unanimously to adopt its staff recommendation of a wind/natural gas hybrid electricity generation plant. The PSC decision directs Delmarva to open negotiations with Bluewater Wind to build an offshore wind farm in the 200-300 MW range, and with Conectiv Energy to build a 150-200 MW natural gas plant as a backup. The door is still open for negotiations with NRG Energy for an integrated gasification combined cycle (IGCC) plant that would employ coal as a fuel instead of a natural gas, however, because three other Delaware agencies must approve the plan. Governor Minner appears to prefer the latter plan (see Legalectric’s 11 May 2007 blog entry). Here is Carolyn Elefant’s take on the decision.
Delaware deregulated its electric utilities in 1999. In other words, the PSC allows retail customers access to the wholesale power market and allows the wholesale power market to set the price for energy. Prices were capped until 2006. When the price caps were lifted, the utility provided standard offer service (SOS) to its customers at market rates. The utility in question is Delmarva Power & Light, a subsidiary of Pepco Holdings Inc. When Delmarva customers began paying market rates, their bills increased substantially (a 59% increase for residential customers and up to 100% for commercial and industrial customers). In response, the legislature passed the Electric Utility Retail Customer Supply Act of 2006 (EURCSA). The statute required Delmarva to conduct integrated resource planning (IRP) in order to stabilize electricity prices, create more local electricity generation, and to lessen environmental impacts. It was this IRP plan that the PSC voted on.
The PSC’s plan fits the bill. It calls for renewable energy (a wind farm) to be produced in Delaware with a natural gas plant for times of peak load or if wind is not available. Taken together, wind and natural gas can fulfill Delaware’s electricity needs instead of a coal-fired baseload generation plant. If these generation facilities are built, Delmarva customers will also have a source of electricity that is independent of PJM prices. PJM is a regional transmission organization (RTO) that operates a wholesale electricity market in all or part of 13 states and the District of Columbia. In the words of the Delaware PSC staff: “Staff recommend a course of action that gives back to Delaware more control of its energy future through a supply portfolio that satisfies the EURSCA’s intent.”
The PSC noted that any added expense caused by the wind farm would be outweighed by the positive environmental impact, the use of existing transmission infrastructure, the promotion of fuel diversity, and by enhanced reliability. One of the environmental benefits explicitly cited was a reduction in GHG emissions. The use of wind generation “will help to mitigate global warming and reduce dependence on fossil fuels.” “If Bluewater and/or Conectiv do not support Staff’s recommendations…a renewable-only RFP is appropriate.”
The PSC’s decision has broader implications than just a one-off promotion of renewable energy. The PSC is advocating an energy portfolio approach to planning. Beyond building additional generation assets in Delaware, the PSC calls for development of demand response programs, energy efficiency programs, renewable distributed generation, short- and long-term bilateral contracts, and market purchases. Delmarva will be given the option to manage its energy portfolio, but a portfolio planning approach is important enough that “…should Delmarva decline its responsibility, the state should issue an RFP for energy management services, at Delmarva’s cost, to mange the supply options sough in Delaware’s portfolio.”
The Delaware PSC’s decision relates to carbon capture and storage (CCS) in that one of the bids it ruled out was for an IGCC plant with CCS capability. As a member of the Regional Greenhouse Gas Initiative (RGGI), with limits on CO2 emissions, the PSC determined that it would be better for Delaware to go with the wind/gas hybrid in this case. One of the reasons cited was that IGCC and CCS are still new technologies. Another concern was that the IGCC generation unit would pass on environmental compliance costs to customers. Delaware’s obligation to reduce GHG emissions as a member of RGGI was also cited as a reason for rejecting Delmarva’s suggestion that it rely on a proposed 500 kV transmission line running from West Virginia to the Delmarva Peninsula. The PSC staff pointed out that the electrons running through this line would be generated by coal-fired plants in Virginia and West Virginia.
The decision of the Delaware PSC is one that will be made in other public utility commissions in the future. Let’s hope they are all as well-reasoned and forward-looking. States with a greater amount of coal in their electricity generation portfolios and with large potential carbon sequestration reservoirs may be more receptive to CCS, but the Delaware PSC seems to have made the right choice for Delaware.
