A new report cautions that Public Service Enterprise Group’s (NYSE: PEG) Bridgeport Harbor Unit 3 – the last coal-fired power facility in Connecticut and one of the few remaining such facilities in New England – has been in deep financial trouble since 2009, and is unlikely to be financially viable for the long-term.
The report, released Jan. 23, is from the independent and nonprofit Institute for Energy Economics and Financial Analysis (IEEFA). The institute said the report is intended to help policymakers and residents near Bridgeport Harbor Unit 3 understand the need to start planning now for the retirement of this facility.
The IEEFA report said that Bridgeport Harbor Unit 3 has been buffeted for years by the same economic pressures – low natural gas prices, low market prices, and flat or declining electricity demands – that have led to the retirement of more than 13,000 MW of the country’s coal-fired power plant fleet from 2009-2012.
IEEFA released an earlier report reaching similar conclusions about the prospects for the largely coal-fired Brayton Point power plant in Massachusetts. Soon after making investments of more than $1bn in pollution control equipment, Dominion Resources (NYSE: D) sold the 1,580 MW Brayton Point Station for an estimated $55m, reflecting a substantial financial loss, the institute said. Within a month of closing on that transaction, the new owner gave notice of its intent to retire Brayton Point in 2017. There is an argument ongoing between various players in the regional power market whether ISO New England should help the plant get a short reprieve on retirement for grid support purposes.
Sandy Buchanan, the executive director of IEEFA, said: “Community leaders and others would be well-advised to start planning now for the shuttering of Bridgeport Harbor 3. The financial handwriting is already on wall for this power plant that is so old that it was launched when LBJ was President of the U.S. There is no reason to believe that Bridgeport Harbor can somehow survive the negative financial pressures that already have taken down scores of other coal-fired power plants.”
David Schlissel, report author and director of resource planning analysis for IEEFA, said: “The future of the Bridgeport Harbor Unit 3 coal plant looks bleak. The bottom line here is that PSEG Power’s pre-tax earnings from Bridgeport Harbor Unit 3 dropped off a cliff in 2009. Based on currently expected future circumstances, there is no credible reason to expect that these pre-tax earnings will again reach the high levels achieved in 2007 and 2008. PSEG’s after-tax profits from the plant will be even lower because it has to pay taxes, interests and depreciation from these pre-tax earnings.”
Highlights of the claims in the report include:
- Bridgeport Harbor Unit 3’s capacity factor for 2012 was only 3% and for the first 10 months of 2013 was only 15.9%. PSEG has said its coal plants ran lightly in 2012 due to abnormally low natural gas prices. The IEEFA report states that the coal-fired power plant is unlikely to reach the 71%-87% capacity factors achieved before the collapse of natural gas prices in 2009.
- New England’s current energy and peak load forecasts are relatively flat through 2022. Consequently, instead of serving higher energy loads, Bridgeport Harbor Unit 3 will have to continue to compete with low cost natural gas-fired units and new renewable resources to serve existing energy demands.
- Circumstances that are anticipated to drive continued low pre-tax earnings from Bridgeport Harbor are: low market pricing for natural gas; the addition of increased gas pipeline supply into the Northeast, starting sometime in 2016-2018; relatively high operating costs and low energy market prices in turn necessitating very little power generation from the plant except for in peak winter months; relatively flat demand for energy in the New England market; and possible federal action on climate change resulting in higher costs for greenhouse gas (GHG) emissions by the end of this decade.
The report said that Bridgeport Harbor Unit 3 is a 387.5-MW coal-fired facility, with some potential to burn residual fuel oil as a secondary fuel. It is currently 45 years old. Bridgeport Harbor Unit 3 is owned by PSEG Power Connecticut, a merchant subsidiary of the Public Service Enterprise Group.
The Institute for Energy Economics and Financial Analysis conducts research and analyses on financial and economic issues related to energy and the environment.