Energy firms fight over Boston's tight power supply Tuesday, May 22, 2001 04:28 PM ET

NEW YORK, May 22 (Reuters) - In another example of how tight power supplies are causing conflicts in North American energy markets, NSTAR (NST, news) went into battle against two generators in Boston in hopes of lowering electricity prices. Last week, Boston-based NSTAR, Massachusetts' largest electric and gas utility with 1.3 million customers, asked the Federal Energy Regulatory Commission (FERC) to prevent two generators from charging customers excessive rates.

Yesterday, one of those generators, Sithe Energies Inc., responded it was "surprised and disappointed" by NSTAR's complaint and called it "baseless."

NSTAR claimed in its filing that affiliates of Sithe Energies Inc. of New York City and PG&E (PCG, news) Corp. of San Francisco control almost 90 percent of the electricity production in the northeastern Massachusetts area, including the City of Boston.

According to NSTAR, a problem arises when transmission lines are fully loaded and customers are forced to buy more expensive power from local plants.

At those times, NSTAR said it "is impossible to import cheaper electricity from competing plants.

"With two local companies controlling almost 90 percent of that supply, they have the ability to corner the market and dictate excessive prices that we and our customers believe are unjust and unreasonable," NSTAR Vice President of Energy Supply Paul Vaitkus said in a statement.

The higher electric prices that utilities have to pay when outside power is not available are called transmission congestion charges. Last year, NSTAR said those charges amounted to more than $70 million in northeastern Massachusetts.

NSTAR asked FERC to limit the two local power generators to charging only their "out of pocket expense" for power sold during periods of transmission congestion.

SITHE RESPONDS

In a letter sent to NSTAR Chairman and Chief Executive Thomas J. May, Sithe Vice Chairman Barry Sullivan said NSTAR's complaints were "disingenuous and misleading to both regulators and New England's electricity consumers."

Sithe, which purchased NSTAR's -- then Boston Edison (NST, news)'s -- non-nuclear power plants in 1998 for $650 million, argued it was NSTAR's choice to sell all of the plants to one buyer.

Sithe Energies is an international power production company with 27 generation facilities in North America. Sithe North America is owned by Exelon Corp. of Chicago (49.9 percent), France's Vivendi Universal (34), Japan's Marubeni Corp. (15) and Sithe management (1).

"In a restructured market place, providing additional energy supply is now the responsibility of Sithe and other generation companies," Sullivan said.

"The problem of transmission constraints ... is an issue for which NSTAR, as a transmission company, has direct responsibility," Sullivan commented.

"To date, NSTAR's efforts have failed to add transmission capacity sufficient to alleviate the constraints of which NSTAR complains. In short, all of NSTAR's concerns are the result of its own actions," Sullivan said.

TRANSMISSION VERSUS GENERATION

The decision to build more generation or more transmission is not only a problem in New England.

President George Bush's National Energy Policy highlights the need for additional transmission improvements, in addition to the development of new generation, as the key to secure the nation's energy future.

The North American Electric Reliability Council (NERC) summer assessment released last week pointed to a severe shortage in generation supplies in California and tight supplies in New York City, New England and Texas.

New England and Texas, however, have ample power supplies, but lack the transmission needed to move that electricity to where it is needed most -- the cities.

The solution, according to energy experts at FERC and NERC, is a balanced approach of more power plant and transmission construction along with energy conservation.

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-- Martin Thompson (mthom1927@aol.com), May 22, 2001