ISO New England goes out on a precarious limb

Imagine if Janet Yellen were to declare, in her capacity as chairperson of the Federal Reserve Board, that the national economy is in a “precarious” state.  Such a comment would roil financial markets and significant amounts of wealth would disappear in an instant.

When it comes to our electricity here in New England, the equivalent of Janet Yellen is Gordon van Welie, chief executive officer of ISO New England.  As our federally regulated Regional Transmission Organization, ISO New England is tasked with running the six states’ bulk power transmission system, planning its future, and operating the region’s wholesale electricity markets in a manner that is fair and efficient.

So when Gordon van Welie talks – and, particularly, when he says the system he oversees is in a “precarious” state, as he did in a talk last week at St. Anselm College – people listen.

The Union Leader listened.  Indeed, the newspaper editorialized that New England’s electric grid “is starting to resemble California’s two decades ago,” when a disastrous deregulatory experiment led to rolling blackouts, rate shock and utility bankruptcies.  According to the editorial, though California’s troubles reached their zenith in the summertime, here in New Hampshire “there simply may not be enough electricity to meet demand in upcoming winter months.”

This is calculated to make people think there is a threat of rolling blackouts within a few weeks as the cold weather sets in, but van Welie said no such thing.  He’s been using the word “precarious” for some time now, always with reference to the region’s growing reliance on natural gas to produce electricity as nuclear and coal plants shut down and are replaced, mostly, by new units that burn methane extracted cheaply from beneath places like Pennsylvania via hydraulic fracturing.  The unregulated companies that own these units refuse to purchase “firm” natural gas capacity.  Thus, on the coldest days of the winter, there is risk these units will be left without fuel because gas companies that serve heating customers do buy firm capacity.

Here, according to the PowerPoint slides van Welie used, is what he actually said:  “Our operating situation is precarious during the winter time and we are concerned that beyond 2019 it may become unsustainable during extreme cold conditions.” He never referred to blackouts. His remarks can and should be understood as warning not of service interruptions but of adverse financial consequences on days when natural gas is in short supply and the grid must turn to backup sources like liquefied natural gas or oil.

This is consistent with the petition pending at the New Hampshire Public Utilities Commission of Eversource for permission to invest in firm capacity a pipeline planned by an affiliate – the Access Northeast project – and require electric customers to pay for this firm capacity even though Eversource itself will not use it (since the company formerly known as PSNH is divesting the last of its generation).  Eversource has touted this proposal on economic rather than reliability grounds and has refused to withdraw the petition even though the scheme has been declared illegal in Massachusetts and, as to preferential releases of this capacity to electric generators, inconsistent with the Natural Gas Act according to the Federal Energy Regulatory Commission.

Mr. van Welie is in a tough spot.  The “I” in ISO New England stands for “independent,” which means he and his organization are not supposed to throw their weight behind the profit-maximizing strategies of the legacy utilities that controlled the grid before it was turned over to the ISO in the interest of opening the grid to competition.  The growth of renewables (which are intermittent), the proliferation of natural gas (which creates an unwelcome brand of electricity monoculture), the increasing reliance on energy efficiency and demand response (resources that are real but hard to control from the ISO New England control room) all test the agnosticism van Welie and his ISO colleagues are supposed to adopt.

Unfortunately, this time he played right into the hands of a newspaper that is apparently eager to foment energy-related panic during the election season.  As someone who occupies a position of great trust – indeed, as arguably among the most important and powerful people in New England – Gordon van Welie owes the public a further and more straightforward explanation of what he meant when he said the grid is in a precarious state.  Absent that, he risks being accused of throwing the weight of his office behind the same old 1950s “big ticket” energy solutions – build big toys and send the bill to ratepayers – rather than the more localized and customer-empowering approaches that today’s technologies make possible.