Regulators OK incentives to build power plants

Federal energy regulators yesterday approved a sweeping overhaul of the New England electric market creating new incentives -- worth over $5 billion in the next four years -- for energy conservation programs and construction of sorely needed power plants .

But NStar, the utility company serving Boston and 80 other Eastern Massachusetts cities and towns, blasted the Federal Energy Regulatory Commission move, saying it will increase typical homeowners' monthly bills by 6 percent with no assurance it will lead to real electric upgrades rather than fatter profits for energy companies.

``The plan is nothing but unwarranted welfare for electric generators, with no assurance that anything will ever get built anywhere," NStar spokeswoman Caroline Allen said. ``This flawed plan will saddle consumers with unnecessary price hikes."

However, the state's other main utility, National Grid USA , which serves 1.3 million customers in 169 cities and towns, said it was satisfied the plan is ultimately in the best interests of consumers. ``We have to do something in this region to keep the lights on," said National Grid spokeswoman Jackie Barry , adding that the current federal plan will wind up costing far less than earlier proposals.

For months, regional power-grid officials have been warning that New England faces Third World-style rolling blackouts as soon as 2008 because demand for electricity keeps growing while proposals to build new power plants have shriveled up or, like the 130-tower offshore Cape Wind project, face intense opposition.

Last year peak electric demand grew eight times faster than new supply came on line, said Gordon van Welie , chief executive of Independent System Operator New England , the Holyoke organization that runs the region's power grid and wholesale markets.

The new electric market plan will offer generating companies about $5 billion in extra revenues over the next four years, van Welie said. The plan is known as a ``forward capacity market" system.

``Reliable and affordable electricity supplies require infrastructure, and this approach should provide the right signals to investors to develop that," energy commission chairman Joseph T. Kelliher said in a prepared statement.

Seth Kaplan , a senior attorney with the Conservation Law Foundation , a Boston environmental group that participated in months of negotiations that led to the plan the commission approved, said that ``one silver lining in a dark cloud" is that the forward capacity system can promote energy conservation. Instead of just giving cash incentives for construction of new electric supply, Kaplan said, ``This settlement opens the door for demand-side measures like energy efficiency and demand reduction."

Scores of New England businesses and institutions now participate in programs under which they get cash bounties for curbing their electric use at periods of peak demand -- such as hot summer afternoons -- which helps balance supply and demand without building new power plants that aggravate air pollution. The federal plan could encourage far more participants in these demand-reduction moves.

But Angela M. O'Connor , president of the New England Power Generators Association trade group, said the region can't escape the need to build more power plants, which some think may need to include controversial coal- and nuclear-powered units because the region relies too heavily on natural gas for electricity.

O'Connor said the federal plan will provide the right incentives for investors to fund new plants. ``We have the ways and the means to provide New England with more energy," O'Connor said. ``Now we just need the political will to get the job done."

Peter J. Howe can be reached at howe@globe.com.