A Fight for Transparency At New England's Powerful Energy Industry Group

Dec 26, 2018
Originally published on December 24, 2018 1:07 pm

Energy can be tough to understand. When we flip a light switch, we know the lights should come on. But we might not know where that power came from – or why it costs what it costs.

In New England, much of those costs are controlled by a select group of stakeholders – called the New England Power Pool, or NEPOOL.

NEPOOL is now facing criticism for a lack of transparency, and for decisions that could be raising the already high cost of energy in the region.

To understand why NEPOOL exists, and what it has to do with your electric bills, we need to go back in time to 1965.

It was a cold November evening. New York City's WABC radio was playing the hits during rush hour.  

The frequency started to wobble as high demand for electricity strained the power grid – made up of separate utilities with their own systems –from Toronto to New York to New England.

Finally, somewhere in Ontario, a failsafe tripped – sparking a chain reaction.

"The lights are dimming," said WABC disk jockey Dan Ingram on air, as the electricity began to fail. "You wouldn't believe what's going on in this studio, folks!"

Before Ingram or the region's utilities knew what was happening, the grid went down in a cascade of overloaded transmission lines and automatic shut-offs.

An estimated 30 million Northeast residents – along with traffic lights, airport runways, hospitals and more – were plunged into darkness.

NBC correspondent Robert Abernathy said in a televised report that roughly 800,000 New York subway riders were underground when the power went out and their trains slowed to a stop.

"The Northeastern United States tonight suffered its worst electric power failure in history," Abernathy said. "There were massive traffic jams and confusion, especially at train stations. Thousands of people were trapped in darkened elevators."

The blackout of 1965 happened largely because the grid was too disjointed to easily absorb a human error. So when the lights came back on in the morning, the region’s utilities decided things had to change.

"They built a facility in Holyoke, Massachusetts," says Don Kreis, New Hampshire's modern-day utility ratepayer advocate. "Each individual utility surrendered operational control of its transmission and generation facilities to this central dispatching facility –a big control room in Holyoke.

"And to facilitate that, they created an organization called the New England Power Pool," Kreis says.

NEPOOL ran the Northeast grid that way for a few decades. Then, federal regulators proposed taking the model a step further: They wanted to set up new, neutral nonprofits to manage each region’s grid and energy market, and to encourage more open competition with the big utilities.

This set up the Independent System Operator of New England – also known as the ISO. They’re the current tenant in that Holyoke control room, and their sole focus is keeping the lights on.

A POWERFUL FORUM

But NEPOOL didn't go away. It remained as a kind of trade group. And it kept a lot of power – it makes recommendations to the ISO on things like energy prices or the need for new transmission lines.

Don Kreis says this means major decisions about energy in New England can still be made by industry.  

"We rely on markets to assure that the electricity grid is operated in the public interest," Kreis says. "The markets are extremely complicated, the market rules are extremely complicated, and the market rules are debated at NEPOOL.”

Kreis is actually a member of NEPOOL. Electricity customers and public officials do have a seat at the table – but NEPOOL's voting structure is weighted to give them less of a voice than, say, big utilities and power plant owners.

Then, there’s what Kreis calls the "jump-ball provision." When NEPOOL members disagree with an ISO proposal, they can submit their own idea to the federal government – and regulators will basically pick between the two.

"And that makes NEPOOL more powerful than the other stakeholder advisory boards at other regional transmission organizations around the country," Kreis says. "That is a big deal."

He and other critics say several times in recent years, federal regulators have favored NEPOOL proposals that wound up costing customers – helping make electric rates in New England some of the highest in the country.

Kreis says a lot of these market changes could be seen as "gold-plating" – adding endless back-up measures and redundancies in the name of making the grid reliable.

But members of the electric industry tend to think the structure in New England works just fine.

Bill Quinlan is president of Eversource in New Hampshire. I talked to him at a recent industry conference, and he said they’re just trying to avoid a catastrophe like the blackout of 1965.

"We don’t believe we are overly conservative in the way we approach reliability," Quinlan says. "We never want to have an instance where the grid can’t deliver the energy needed to keep a resident’s lights on or a business going forward.”

OPENING THE DOORS

But there’s one other problem that critics point to: The people that use that service aren’t in the room when NEPOOL decides how much reliability is worth charging them for. Neither are news outlets. NEPOOL's meetings are closed to the public.

That doesn't sit well with Tyson Slocum, a lobbyist with the group Public Citizen.

"Under the current NEPOOL process, it is impossible for the public or for journalists to understand who originally came up with a market reform proposal," Slocum says.

On top of that, he says lobbyists for industry are allowed to sell the details they hear in those private meetings to outside parties.

Slocum has joined media outlets and other watchdogs to put two complaints before federal regulators about NEPOOL’s public access policies.

One is about whether an energy industry journalist with RTO Insider can join NEPOOL. (Click here and search docket number ER18-2208 to read related filings.)

The other, also from RTO Insider, alleges that the closed-door policy violates federal law. (Click here and search docket number EL18-196 to read related filings.)

In NEPOOL's 2018 annual report, chairman Thomas Kaslow –the policy director for a major New England hydropower company, FirstLight –writes that fighting those complaints has made this a challenging year for "maintaining NEPOOL's unique role." 

"Acting at the direction of its diverse set of stakeholders, NEPOOL is seeking to preserve the candid and transparent dialogue occurring in its business meetings," Kaslow writes. "Open discussion by members of the broad stakeholder constituency has been a key ingredient in reaching mutual understanding among stakeholders."

NEPOOL's secretary and lawyer David Doot declined to be interviewed on tape for this story while those federal complaints are still unresolved. But he told me in writing that NEPOOL posts many of their records online, and routinely talks to reporters about new market proposals.

I asked if NEPOOL's public access policies and weighted voting structure could allow utilities to prioritize profits over keeping costs down for customers.

Doot characterized this as a claim that NEPOOL members and federal regulators “collectively have all been ineffective in ensuring balanced consideration of customers’ interests.” He continued, “NEPOOL rejects that claim.”

"A BREACH OF TRUST"

But Tyson Slocum says NEPOOL's approach is unusual. Across the country, other regional grid operators and stakeholder groups let the public come to meetings and ask questions.

"This is a serious breach of public trust committed by NEPOOL here," Slocum says. "They are tasked by federal regulators to operate the only official electricity policy forum for the entire region.

"And they are saying members of the general public have no entitlement to attend or understand that process," Slocum says. "And that's just deeply upsetting to me."

The Federal Energy Regulatory Commission is still considering the transparency challenges against NEPOOL. The cases could decide whether the organization must open its doors.

And they could set a broader precedent – about how much control federal regulators have over the groups they’ve tasked with keeping the lights on.

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