Electric Grid Operator’s Move Could Fetch $4 Million From State in Questionable Deal

by Categorized: Energy, Public finance, Utilities Date:

ISO New England, the nonprofit business that runs the region’s electricity grid, is in line for $4 million in state assistance for a $39 million back-up control center that’s under construction in Windsor.

The control center would replace a smaller back-up facility in Newington, which ISO-NE — the Independent System Operator, based in Holyoke, Mass. — said will soon be outmoded and can’t be expanded.  It will have 25 employees at first, with room for as many as 145 people in a state-of-the building off Day Hill Road, and it will act as a simulator for the Holyoke control room.

ISO New England’s local expansion is good for the Connecticut economy and it performs a crucial function. But it raises serious concerns.

The state assistance deal, a forgivable loan that could be approved by the Bond Commission as soon as Jan. 25, was uncovered by my colleague Brian Dowling, who also learned from federal documents that ISO will use Connecticut’s borrowing power to finance as much as $36 million at phenomenally low interest rates.

ISO, one of seven regional electric grid operators in the United States, is established and regulated by the Federal Energy Regulatory Commission, which must approve the ISO budgets.  The money comes from fees levied on generators such as Dominion Resources, owner of the Millstone nuclear station, and transmission companies such as Connecticut Light & Power.

Since we pay for all of this through electric rates that are regulated by the state, and since ISO is a regulated, sole-source provider, the company is, in essence, performing a government function.  That’s partly why it’s able to borrow through a quasi-government agency, Connecticut Innovations.  It’s similar to the shadow government that includes such agencies as the Metropolitan District Commission and the Port Authority of New York and New Jersey, although unlike those groups, ISO has an independent board, not publicly appointed.

Using public borrowing power makes sense, since that saves us money. But why should the taxpayers hand over $4 million for an outfit that walks and quacks like a quasi-public agency? The agency should locate its offices where it makes the best sense for us, the region’s ratepayers, without considering greenmail from one or more states.

ISO, in fact, didn’t wait for the $4 million loan through the state Department of Economic and Community Development. It went ahead and bought the land and started the work because Windsor made the most sense under ISO-NE’s own criteria, including distance from Holyoke and highway accessibility.

This is especially nettlesome since Connecticut  state officials — the Public Utilities Regulatory Authority under Chairman Arthur H. House; Attorney General George Jepsen; and state Consumer Counsel Elin Swanson Katz — formally opposed ISO New England’s $165 million budget for 2013, and persuaded FERC to hold a hearing on it.  The budget is up by nearly 10 percent from last year and the payroll has ballooned from 180 in 1997 to a proposed 563 today.  More than half of all staffers earn at least $100,ooo a year, and, the Connecticut officials said, received bonuses averaging 9 percent in 2012.

All of this might be fully justifiable and the Jan. 24 hearing could show that. ISO-NE has the vast role of creating and managing a daily and long-term market for power, a job that became much more complex after 1998 when utilities were forced to sell generation plants. And ISO must plan for and coordinate the region’s electricity needs, all of which it appears to do smoothly.

Still, this business is financially accountable to the public and probably ought to be more so — perhaps with a publicly appointed board, for example, or, as the Connecticut officials suggest, with annual, public budget hearings. And part of that means it does not participate in the sort of corporate relocation greenmail that is unavoidable in the true private sector — and which costs the taxpayers dearly, for better or for worse.

Jim Watson, spokesman for the state Department of Economic and Community Development, said Connecticut was in a competition with Vermont and Massachusetts, and acted wisely by offering the money.

“Our primary focus is making sure that this investment and those jobs stay in this state and not a neighboring state,” Watson said.

The loan forgiveness terms are easy for ISO to meet: It must reach 25 jobs within three years and keep them here for at least a year.  At $160,000 per job, $4 million is a steep price to pay, but Watson and ISO expect the number of employees to rise higher. So, why not set a higher target for the money?

The broader question is whether the ratepayers of New England need a facility that costs $465 per square foot on top of the $6 million in computer equipment that will live there.

“This new facility is needed to ensure we can continue to provide these essential services without interruption and meet federal power system reliability requirements,”  ISO spokeswoman Marcia Blomberg said in an email.

As with ISO-NE’s staffing and budget, that may well be true.  The Newington location is smaller and inferior to all six other ISO back-up sites across the country, ISO-NE  documents show.  ISO-NE is not guilty of hiding its plans, as this has all been filed publicly and has been the subject of open meetings.

Still, it ought to be a more public process, akin to CL&P rate cases.  And it ought to deploy site location methods that exclude greenmail pitting taxpayers against ratepayers.


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3 thoughts on “Electric Grid Operator’s Move Could Fetch $4 Million From State in Questionable Deal

  1. Shoreline Resident

    It also doesn’t seem fair that those that are not CL&P customers should have to subsidize this. Unless UI and municiple energy companies also use ISO NE? In any case, let’s stop this corporate welfare.

  2. cmvazquez103

    Harty Harr Harr to you too! In reply to Shroeline resident, UI and teh Municipal companies are members of ISO-NE too. Thus the savings from this so call “deal” benefit all electric ratepayers in the state through lower electric rates by using the lower borrowing costs of the state of Connecticut. ISO-NE is not a quasi public agency of the state or the federal government. Get your facts straight. This will not buys you readers to this blog. It is not truthful reporting. Maybe that’s why you blog.

    1. Dan Haar

      Vazquez103, feel free to go back and read what I wrote. I said ISO-NE “walks and quacks” like a quasi-public because it’s a single-source service provider with a government-approved budget, paid for through regulated rates. I said it’s “similar” to true quasi-publics except that it has an independent board. I said the lower borrowing costs helped the ratepayer, which you repeated by way of saying I was wrong, strangely. And I said the deal costs taxpayers money, which is the whole point.

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