Corporate Energy Q&A
Talking About Our Generation
Connecticut Energy
By Russell Jones
David W. Bogan, partner, heads the Utilities Group of Robinson & Cole LLP."Determine that the thing can and shall be done and then we shall find the way." - Abraham Lincoln
Connecticut is home to a world of business connected to the global economy. Business runs on energy of people and relies on a spectrum of fuels to get work done.
David Bogan, a partner at Robinson & Cole LLP, heads the firm’s Utilities Group. The law firm is a major commercial practice that serves clients needs in regional, national and global arenas from offices in the Northeast and Florida. From Bogan's Stamford office, he shared insight on energy issues in Connecticut.
"The top concern is the same for Connecticut and throughout the Northeast," he says. "There is a constant need for more generation, upgraded transmission, and conservation. The Federal Energy Regulatory Commission (FERC) has identified pockets in the Northeast as being among the most congested in the country."
The three most congested areas? Boston; Fairfield County, Connecticut; and then the rest of Connecticut.
“We’re told that the use of electric consumption is at record levels. People want to build larger homes, use more computers and electronics. At the same time, we should be exercising more conservation. What happens? Something we saw happen a couple of years ago: The lights went out.”
That Stamford-area blackout was foreseeable, he notes, and it likely will happen again.
“People want lower prices, but on the other hand we have to make some of the investment that is necessary to get those low prices. We need more generation. We need more facilities.”
NOT IN OUR BACKYARD
Connecticut residents are notoriously opposed to construction of generation facilities, with Fairfield County more so than any other place.
Proposed projects in the region have met with contentious opposition in the past, from the installation of cell phone towers in Greenwich and Stamford to the upgraded transmission line going from Norwalk to Middletown, to the Broadwater terminal in Long Island Sound.
“I’m sensitive to people who say ‘I don’t want to corrupt Nantucket Island Sound by putting a bunch of windmills out there.’ And having lived Connecticut for more than half my life, I listen to people saying, ‘I don’t want a facility corrupting that beautiful view that we have.’ What is the solution to more capacity? People are not coming up with it.”
The Department of Public Utility Control (DPUC) has been approving small distributed generation projects, which is a partial solution, notes Bogan, and “it’s the right sort of philosophy in terms of investing in generation capacity to supplement the aging facilities, but to some extent it’s nothing more than a Band-aid. There remains a need for large-scale generation to meet increasing needs.
Electricity is differs from natural gas which can be created and stored.
"We can put natural gas somewhere if we have it. Electricity doesn’t work that way. You can’t manufacture and store it, so it has to be in a location to generate and then dispatch the power in a timely manner. That means a reasonable location to provide energy, so where is it going to be? The trouble lies in reconciling those two requirements. We have to come to grips with that; otherwise, as I said, the lights are going to go out again.”
Has deregulation hurt the cause, or sent us in the wrong direction?
“It’s a little too early to tell whether or not the benefits we’re projecting as a result of electric restructuring will occur,” he says. “Have they occurred yet? No. You’re trying to reverse a 100-year legacy, kind of like turning a large ship, that’s not easily accomplished.”
Bogan believes that renewables represent the most attractive long-term solution, given the opposition to things such as nuclear (which he thinks would be a viable option), upgrading transmission (which he thinks we have to do anyway), or large-scale facilities. The problem with renewables, he says, is cost.
He sums up other options: “Wind is largely not a significant option in Connecticut. No one has come up with a viable large-scale solar project. Hydro works, although in limited applications. Fuel cells represent the most attractive option, but are extremely costly. With economies of scale, however, the more they become implemented and applied, the cost will go down; but that’s a long haul," he says. "In the short-term, smaller distributed generation projects are meeting the legislature’s desire for supplemental projects, but he again cites concern about the cost. The only other option is construction of new facilities, but as we’ve talked about, people don’t seem to want them.”
They do, however, want the power that comes from them.
LOOKING FORWARD
So, where will Connection be in two or three years?
“The cynical side of me says 2010 is not going to look materially different than 2007, just as 2007 does not look materially different than 2003,” says Bogan, pointing out that when this experiment was started in 2000, the thought was that by 2004 it would have moved off of what was standard-offer services for residential customers, and everybody would be availing themselves of competitive suppliers.
“Unfortunately, there has been a series of unforeseen occurrences—increases in the cost of gas; certainly increases in consumption, and other market factors that have made competition not an attractive option for alternative suppliers.” The end result, he says, is that most people and most businesses have remained on standard offer, which has now been extended multiple times. In its December 2006 decision, however, the state DPUC has increased the standard service rate to better reflect existing market conditions, says Bogan, which appears to have created a window of opportunity for other competitive suppliers.
He acknowledges that the DPUC has a tough job. “They are trying to balance the need for capacity with the ultimate cost on rate payers and long-term opportunities, some of which are not even known today. So I think they throw that all into the pot and say, this is our best judgment as to what we should do at this point. There are going to be those who say you could have gone further; and those who say you went too far. I think on balance, they do a reasonable job.”
State and federal legislation contain provisions designed to promote conservation, global warming seems to be accelerating, and with election of a new President on tap, change may be in the wind.
“Are we making some progress? Yes. I think you’ll probably see a fair number of these smaller distributive generator facilities, you’ll see the advent of some attractive renewable projects, but large-scale applications? No."
“Do I see construction of a number of larger generating facilities that we really need? No. I think we’ll still be confronting opposition to projects such as Broadwater and other things that can provide a long-term solution.”
