CEG deal for power won't aid BGE area

December 15, 2007|By Paul Adams | Paul Adams,Sun reporter

Constellation Energy Group said yesterday that it has contracted to buy all of the power from a new gas-fired generator being built in York County, Pa., to help alleviate a looming energy shortage in the Mid-Atlantic power grid.

The project being built by Conectiv Energy will improve overall reliability of the grid, but energy experts said it would do little to lower prices or solve a projected energy shortfall for Baltimore Gas and Electric customers in Central Maryland. A shortage of high-capacity power lines will prevent the area from tapping into the new power source for years to come.

The plant, about 50 miles southeast of Harrisburg, Pa., is expected to go online by June 2011. It will produce 545 megawatts or roughly enough to power half a million homes.

Financial terms were not disclosed, but a spokesman for Constellation said the six-year contract is worth more than half the $470 million project cost.

The Baltimore energy company billed the York project - and several others it has proposed - as proof that competitive wholesale suppliers are stepping up to build needed generation in areas where power is scarce and more expensive.

The company is at odds with Maryland utility regulators, who recently concluded in a report to lawmakers that unregulated suppliers were not doing enough to solve the region's energy crisis.

"We think it's very strong evidence that the market is working," said Lawrence McDonnell, a Constellation spokesman.

The state Public Service Commission said in a Dec. 3 report that regulatory action is needed to boost energy production and conservation in Maryland.

Barring new developments, the commission said it may force utilities to enter into long-term contracts with generators to spur construction of new power plants.

Constellation has said such a deal would subject BGE ratepayers to the risks of the wholesale market by locking them into a long-term price. If energy prices fall, consumers still would pay the higher contracted price.

But critics say ratepayers will fare better under a more regulated system, in which some of the benefits of owning generation accrue to ratepayers instead of Constellation and others.

More generation in stressed areas of the grid - particularly Central Maryland - would help lower wholesale electricity prices, which are the basis for rates charged to residential customers by BGE and others.

Wholesale market rules pay power generators in Central Maryland more for their output because of shortfalls in supplies and power lines. The system is designed to spur market competitors to build new plants where they are needed most.

But the PSC says that hasn't happened.

Energy experts forecast that Maryland could see rolling blackouts as early as 2011 unless significant new generation and transmission lines are brought into service.

Constellation says it has several projects on the books that will address regulators' concerns, including a proposal to add a third reactor to its Calvert Cliffs nuclear station. Elsewhere, the company is studying the possibility of adding 650 megawatts of gas-fired capacity to its Perryman facility in Harford County. One megawatt is roughly enough to power 1,000 average homes.

The company also is working on bringing its Riverside 5 plant back online in Baltimore County. The unit, which was retired in 1993, would provide an additional 85 megawatts. Last, it has filed a request to bring back its retired Gould Street No. 3 steam plant in Baltimore. The 103-megawatt generator was shut down in 2003.

Steven B. Larsen, PSC chairman, said the York County plant doesn't match what the commission contemplated in its report.

paul.adams@baltsun.com

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