In what the company called a “difficult day,” and one that could have dire ramifications for the electrical needs of the entire Greater Boston region, Exelon Generation on Lower Broadway filed with ISO New England on Thursday morning, March 29, to retire all of its Mystic Station generation equipment by 2022.
The company cited problems with the reliability of fuel supplies and lack of predictability with regards to property values – alluding to a fight that has been going on for the last year with the City of Everett over a longtime tax break that is due to expire soon. That said, they also left the door open a crack saying the closure was contingent on “regulatory reforms.”
It would effectively close down a fairly new power plant that generates 2,000 megaWatts of power, is the second largest provider of power to Greater Boston and accounts for about 40 percent of the region’s power needs. The plan would retire Mystic Station’s Generating Units 7, 8, 9 and the Jet unit by June 1, 2022.
Absent any regulatory reforms to properly value reliability and regional fuel security, the company said, these units will not participate in the Forward Capacity Auction scheduled for February 2019, the company said.
Also, in a curveball move, Exelon announced it would purchase the ENGIE (Distrigas) LNG terminal next door, a company that supplies most of the fuel used by Exelon to create electricity and a long-time supplier to them.
“Mystic has a strong track record as a source of reliable, around-the-clock electric supply to over two million homes in New England,” said Ron DeGregorio, president of Exelon Power. “However, the ISO-NE market fails to properly reflect the reliability and fuel security benefits that these power plants provide to the region.
“Today is a difficult day, not only for the talented men and women who have dedicated themselves to operating Mystic safely and reliably every day, but also for their families, their communities, and all of their colleagues here at Exelon,” continued DeGregorio. “We will continue to engage in supportive, open and honest dialogue with employees in the coming months.”
ISO New England said it would immediately commence a study to see what the ramifications of closing such a major power plant might be without such a major provider.
“I can confirm that Exelon Generation submitted a formal request to ISO New England to retire its four Mystic generating units in Everett in 2022,” said Marcia Blomberg of ISO New England. “Together, the four units at the Mystic Station are capable of producing about 2,000 megawatts (MW) of electricity, making it one of the two largest generating stations on the regional power system. The ISO will conduct a study to ascertain how these retirements could affect power system reliability and will release the results as soon as possible.”
ISO New England is an independent organization charged with ensuring the reliability of current and future electrical and utility needs of the New England region.
Gov. Charlie Baker’s administration – who recently announced a plan to obtain hydro power from Canada via a line going through Maine – said the announcement is one reason they have tried to diversify the region’s power supply – not making it just of natural gas-fired power plants like Exelon.
“The announcement reinforces why the Baker-Polito administration is pursuing a strategy to bring more renewable sources online, such as hydroelectric and wind, and to expand natural gas capacity along existing right of ways so the Commonwealth can provide Massachusetts residents and business with reliable, cost-effective clean energy while reducing carbon emissions,” said Peter Lorenz, communications director for the Energy and Environmental Affairs cabinet office.
Mayor Carlo DeMaria said he was disappointed upon hearing the news, especially since it is a critical resource to the region. He also said he was confident the power plant would not close.
“I was disappointed to be informed by Exelon Generation that they have submitted a formal request to ISO New England to retire four Mystic generator units. Mystic Station is critical to the reliability of our regional power system, particularly with the planned retirement of other power stations in New England,” said the mayor. “I strongly encourage ISO New England to examine those reliability factors closely. I am confident that after a careful review by regulators, Mystic station will operate for many years to come.”
Most of the trouble, according to Exelon, revolves around the reliability of fuel to power the plant. They cite a study done by ISO New England in January regarding fuel security. That report, Exelon said, indicated that fuel costs have risen and critical power facilities, like Mystic Generators 8 and 9, cannot fully recover operating costs – including the cost of getting fuel, which has become more expensive and, in some cases, not available due to a lack of pipelines coming into New England.
This past January, during a brutal cold snap, the Greater Boston region experienced a tremendous problem with getting power to the region. With most of the natural gas pipeline supply being used for home heating, many natural gas-fired power plants were not able to get enough natural gas to generate electricity. Many voiced concerns about that, and it seems Exelon has tagged onto it as well.
In the January report, ISO New England indicated that it may propose interim and long-term changes to address the problems experienced by power providers like Exelon.
All of that said, many felt that the move was simple posturing by a company that has leverage because of its critical importance to the regional power grid, especially since the company gave so open doors to reconsidering, such as, “To the extent that changes are timely filed and approved by the Federal Energy Regulatory Commission, Exelon Generation may reconsider the retirement of the Mystic units.”
In addition to the seemingly leveraged move to try flex its muscle as a critical power infrastructure player and to be able to recover more costs due to that status, the company also cited property value unreliability – which has everything to do with the ongoing spat between Exelon and the City.
City officials said they would not comment on the statement by Exelon about its property values being a reason for closure, saying that it was a matter that is part of ongoing litigation.
The same was true for City Councilors Michael McLaughlin and Fred Capone, who bother represent the Lower Broadway area.
The City and Exelon have been involved in a dispute over the property values of the facility due to a long-term Tax Increment Financing (TIF) agreement that is about to expire. The matter has gone to a state board, who ruled in favor of Exelon. Since then, the City has appealed in Superior Court, and hired legal counsel that includes former Gov. Bill Weld.
An executive session partially related to that matter took place at last Monday’s (March 26) City Council meeting.
Mystic Generating Station is a 2,000-megawatt natural gas- and oil-fueled power plant. Mystic Units 7, 8 and 9 are the operating units at the plant; Units 1-6 are decommissioned. Mystic employs 110 full-time workers, more than 200 local union craftsmen for seasonal readiness outages, and pays $15 million per year in local taxes that support municipal government, schools, libraries, parks and other services. Exelon is committed to holding informational meetings with employees over the next several months to ensure transparency throughout the process.
Exelon Generation, a subsidiary of Exelon Corporation, is one of the largest, most efficient clean energy producers in the U.S., with a generating capacity of around 35,000 megawatts. Exelon Generation operates the largest U.S. fleet of carbon-free nuclear plants with 20,300 megawatts of capacity from 23 reactors at 14 facilities in Illinois, Maryland, New Jersey, New York and Pennsylvania. Exelon Generation also operates a diverse mix of wind, solar, landfill gas, hydroelectric, natural gas and oil facilities in 18 states with around 15,000 megawatts.
Exelon purchases LNG Terminal, ENGIE exits to renewables
In between the lines of the surprising news last week regarding Exelon was the company’s purchase of its longtime energy provider, Distrigas/ENGIE.
Within the same press release about the company filing to retire the Mystic Station generator by 2022, they also announced they have bought their primary fuel supplier, an agreement that is still subject to federal regulatory review before it can become finalized.
Exelon Generation announced an agreement to purchase ENGIE North America’s LNG import terminal to ensure the continued reliable supply of fuel to Mystic Units 8 and 9 while they remain operating. Exelon also said it looks forward to continuing to provide LNG to gas utilities, marketers, and other market participants throughout New England.
The deal is supposed to close in the fourth quarter of 2018. It is subject to review by the Department of Energy for LNG import authorization and, as necessary, authorization from the U.S. Department of Justice.
Carol Churchill, a long-time community liaison for ENGIE/Distrigas, said the company wishes to enter more into the renewable energy markets. In a statement, ENGIE indicated as such.
“Exelon has been an important customer of Distrigas since the late 1980s, and both of our businesses have been serving the New England marketplace since the 1970s,” read the statement. “This agreement reflects ENGIE’s transition both in North America and globally. Today, in North America we are focusing increasingly on renewable energy both utility and small-scale, and a range of services to optimize energy and reduce its use and expense.”
She said many of the current Distrigas employees will join Exelon after the deal has closed later this year.
“We wish them and the expanded group of employees who have operated the terminal and provided valuable support services much success in the years ahead,” read the statement. “We extend heartfelt thanks for their unwavering commitment to excellence and for their focus on safe, reliable, and efficient operations since 1971.”
The Everett Marine Terminal is the longest-operating LNG import facility of its kind in the United States. The facility has connections with two interstate pipeline systems, as well as a local gas utility’s distribution system. It employs 50 people and pays $7 million in state and local taxes.
Late breaking memo from ISO New England says risk of closing Mystic Station unacceptable risk
In late-breaking news on Tuesday afternoon, ISO New England issued a memo detailing some initial analysis they did regarding the potential closure of the Mystic Station power plant, owned by Exelon.
Vamsi Chadalavada, chief operating officer, said changes to tariffs via waivers will be requested from the Federal Energy Regulation Commission (FERC).
“These retirements pose an unacceptable fuel security risk to the region during the winter months,” read the memo. “Our recent operational experiences during the cold spell, the projected state of the power system in 2022 through 2024, and the future trends identified in our Operational Fuel Security Analysis, highlight the critical importance of this facility to the region’s fuel security.”
The memo made clear that the waivers currently aren’t available, but could be if approved by FERC.
“Since the ISO received Exelon’s retirement bids, it has been analyzing the potential impacts of losing the Mystic and Distrigas facilities from a fuel security perspective,” read the memo. “Given the reliability impacts identified in this analysis and the limited time to address this issue, the ISO will ask FERC to waive the requirements of the ISO’s Tariff to allow the ISO to retain Mystic 8 and 9 to maintain fuel security on the system – an option not currently contained in the ISO Tariff.”
The memo indicated that it would start discussing long-term solutions at a meeting on April 10, and later this month as well.