MIT criticizes DPU decision charging $100,000 per month


MIT yesterday criticized the Massachusetts Department of Public Utilities (DPU) decision involving MIT's new cogeneration plant and the Cambridge Electric Light Company (CELCO).

The DPU established, for the first time in the nation, an unprecedented "customer transition charge" proposed by CELCO to recover what it claimed were "stranded costs" it had incurred in the past to purchase power to anticipate MIT's needs for the future.

The customer transition charge would apply to any of the seven largest power consumers in Cambridge if they were to leave the CELCO system. The decision states, "The record shows that the Company, however, is not aware of any present plans by other customers to self-generate or otherwise abandon full-service status."

The MIT statement said:

"This unprecedented order by the Massachusetts DPU to impose a huge fee on cogeneration plants will halt cogeneration of steam and electricity by small independent organizations. The September 29 order makes a mockery of the environmental benefits of cogeneration and the Public Utilities Regulatory Policies Act (PURPA), which the decision correctly notes was enacted by Congress in 1978 `to encourage the development of alternative power and cogeneration resources by non utility power generators.'

"The order is bad public policy. Consumers of electricity should not have to pay for electricity they don't consume, regardless of whether that customer is MIT, residents of Cambridge or the City of Cambridge.

"Consumers also should not have to pay for management shortcomings of a public utility's failure to adjust to foreseeable changes in the market. For 11 years, MIT has discussed with CELCO our cogeneration plans. In July 1994, MIT gave formal notice that we were leaving the CELCO system. MIT has invested $37 million in its cogeneration facility, which left the CELCO grid on September 16. CELCO will continue to supply power for about 25 per cent of the MIT campus that is not connected to the new cogeneration plant.

"The DPU order on the `customer transition charge' is designed to cost MIT, and only MIT, about $100,000 a month-a truly extraordinary charge. MIT is reviewing the 94-page DPU document, and will be considering our legal options," the statement said.

MIT's 20-megawatt plant is powered by a natural gas turbine engine to produce electricity. The resulting hot exhaust gases will be used to produce steam in a heat-recovery generator, an energy-efficient technology that is 18 percent more efficient than generating electricity and steam independently. 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 DPU order stated that, under the unique circumstances of this case, an interim customer transition charge (CTC) "of 75 per cent of the net stranded costs as calculated by [CELCO] (or $5.62 per kVa)" will apply during "a limited time period" pending a comprehensive electric rate restructuring proposal, which CELCO and its affiliate Commonwealth Electric must file by August 16, 1996. Both companies are subsidiaries of Com/Energy.

"The Department approves the reduced CTC without establishing a precedent regarding the appropriate method for calculating such costs in future proceedings," the DPU order said.

The DPU decision, in summarizing the positions presented to it, said, "The Attorney General contends that it is clear that [CELCO] has been on notice since at least 1985 that MIT was actively considering self-generation and the Company did not undertake any meaningful effort to mitigate the foreseeable consequences of losing MIT as a full requirements customer."

Similarly, the City of Cambridge "contends that the Company 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," the DPU summary said.

A version of this article appeared in MIT Tech Talk on October 4, 1995.


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