The Maryland Public Service Commission (PSC) has approved plans for Competitive Power Ventures (CPV) to build a 661-MW combined-cycle, natural gas power plant in Charles County, Md.
The state and CPV expect to see the new plant enter commercial operation by June 1, 2015. CPV released an April 12 statement calling the St Charles power plant a “shovel-ready” project that should help Maryland upgrade its infrastructure for the 21st century.
The CPV project represents more than a $500m private infrastructure investment, said CPV CEO Doug Egan. Egan said the plant will have 65% to 99% less sulfur, NOx and CO2, compared to typical oil- and coal-fired plants.
Construction of the plant should employ from 350 to 400 people, CPV said.
The PSC announced April 12 that it has determined there is a need for new electric generation in the state. The PSC also said that it has directed Exelon (NYSE: EXC) subsidiary Baltimore Gas & Electric as well as two Pepco Holdings utilities, Potomac Electric Power and Delmarva Power & Light, to enter into a “contract for differences” with CPV Maryland for the plant.
Under the contract for differences, the difference between the supplier’s actual revenue from the PJM capacity and energy sales and the fixed contract price for capacity results in a payment or credit. If the actual revenues are below the fixed contract capacity price, the electric distribution company is obligated to pay the supplier the difference.
The move has been seen as a step toward re-regulation and Maryland has been criticized by some analysts for ordering a new plant to be built at a time when market factors don’t warrant it.
Nevertheless, the RFP went ahead with Boston Pacific acting as the PSC consultant. CPV submitted the winning bid among the three bidders that met the minimum threshold.
The PSC said there would be a projected average ratepayer credit of 49 cents per month for residential SOS ratepayers over the 20-year life of the contract.
This decision is an outgrowth of the PSC’s controversial September 2009 order “to investigate whether [the commission] should exercise its authority to order electric utilities to enter into long-term contracts to anchor new generation or to construct, acquire, or lease, and operate, new electric generating facilities in Maryland.”
Many weighed in; some opposed ‘subsidized generation’
The state cited a statute under the Public Utilities Article that requires the PSC to plan to meet “long-term, anticipated demand in the state for the standard offer service [SOS] and other electricity supply.”
The commission determined that long-term demand exists, which will require new generation in the amount of 650 MW to 700 MW by 2015. In September 2011, the PSC directed issuance of a request for proposals, which was amended and subsequently re-issued on Dec. 8, 2011.
According to the Maryland PSC order, about 30 parties filed comments on the Maryland RFP. The Sierra Club opposed the RFP, saying there was no demonstrated need for more generation.
The PJM took no position on whether the PSC should determine there is a need for new construction. PJM’s comment predicted slow electric demand growth around Maryland, but said, however, that more than 2,000 MW of coal generation serving the state was at “high risk” of retirement.
This evidently includes a couple of coal plants that Exelon will spin off as part of its merger with Constellation Energy, the PSC said in its order.
Free market advocates derided the RFP as a move toward “subsidized generation” and indicated it would undercut PJM capacity markets.
Boston Pacific, however, said that the PJM capacity market has failed to bring new generation to Maryland. Boston Pacific said new generation should be limited to the most constrained zone of Maryland with the highest prices. Testimony also indicated that 30% of Maryland’s energy is imported from other states and about 90% of its in-state generation is either coal or nuclear.
Testimony also indicated that 72% of Maryland’s generation is at least 30 years old. “We are also concerned about the extent of Maryland’s reliance on demand response to keep peak load demand in check,” the PSC said in its 30-page decision. The PSC also cited Maryland’s renewable portfolio standard that calls for 20% renewable sources by 2022. The larger share of renewable power will require more gas units that can be dispatched on short notice.
“Furthermore, and of critical importance, we cannot rely on PJM’s Reliability Pricing Model to deliver new generation to Maryland,” the PSC said. “Maryland has not seen any significant new generation constructed here since 2003. Since its inception in 2007, RPM has brought no new generation to Maryland, in spite of the fact that clearing prices for capacity in SWMAAC have averaged almost double those of the non-constrained portions of PJM.”
The PSC case on the need for new generating facilities is 9214.