MIT has appealed to the Massachusetts Supreme Judicial Court to set aside the Department of Public Utilities' unprecedented order that MIT pay a penalty of up to $1.3 million a year for building a cogeneration power plant.
The DPU approval of a first-in-the-nation stranded cost charge "on a federally qualified cogeneration facility would have a chilling effect on, and interfere with, the development of federally encouraged cogeneration," the appeal said.
MIT's appeal said that the September 29 DPU approval of a stranded-cost or "customer transition charge" by Cambridge Electric Light Co. (CELCo) violates federal law, which encourages cogeneration. The appeal also said the order exceeds the DPU's statutory authority. It said the DPU was arbitrary and capricious in stating that MIT should pay 75 percent of the unsubstantiated CELCo costs of acquiring generating capacity that will now supposedly be excess capacity.
The appeal also made these points:
- The DPU "established a de facto class of one customer, MIT, under the guise of a tariff applicable to a class nominally containing seven customers, none of whom are considering cogeneration."
- The DPU order constitutes retroactive ratemaking, which is beyond the DPU's authority. MIT invested $37 million over the past 11 years in establishing the cogeneration plant that went on line September 16, about two weeks before the DPU order was handed down.
- The imposition of a customer transition charge "constitutes approval of a charge for `non-service.'" In other words, it requires MIT to pay for electricity it doesn't consume.
- The DPU rate, contrary to federal regulation, is based on an unsubstantiated assumption that MIT's power plant will need backup or maintenance power at the same time that CELCo has its peak demand for electricity.
The appeal said the case should be remanded to the DPU to establish "just and reasonable standby, maintenance and supplemental rates for services from CELCo."
In a separate statement, MIT noted that the natural gas-burning plant, 18 percent more efficient in fuel because it generates both electricity and steam, will benefit Commonwealth Gas customers through reduced costs and improved peak load supplies. Both CELCo and Commonwealth Gas are subsidiaries of ComEnergy.
Over the years, MIT expects it will save CELCo and the rate payers of Cambridge more than $100 million as a result of the capacity and efficiency of the cogeneration plant.
The gas-fired cogeneration plant will reduce MIT's pollutant emissions by 45 percent, to a level equivalent to reducing auto traffic in Cambridge by 13,000 round trips per day. The plant will also reduce the region's dependence on imported oil by approximately 9 million gallons a year.
The original DPU order, in summarizing the City of Cambridge position, said that the City "contends that the Company (CELCo) had a duty to mitigate the costs which would be stranded by MIT and that the Company did not take any measures to mitigate the financial consequences of MIT's cogeneration facility."
A version of this article appeared in MIT Tech Talk on October 25, 1995.