trending Market Intelligence /marketintelligence/en/news-insights/trending/ngbujgqap09cpfmjx5ew8a2 content esgSubNav
In This List

Exelon asks FERC to accept agreement to keep Mystic units open

Blog

Insight Weekly: Fed's policy stance; overdrafts under scrutiny; energy stocks rally

Blog

Q1’21 U.S. Power Forecast

Blog

Metals & Mining Insights May 2021

Blog

European Energy Insights - May 2021


Exelon asks FERC to accept agreement to keep Mystic units open

Exelon Corp. subsidiary Constellation Mystic Power LLC on May 16 asked the Federal Energy Regulatory Commission to accept a cost-of-service compensation agreement with the ISO New England that would allow the company to continue operating the two natural gas-fired units of its Mystic generating station beyond their intended retirement date of May 31, 2022, for an additional two years.

The regional grid operator has determined that the two units are needed to ensure fuel security for the New England region. "Mystic 8 & 9 are uneconomic, and without the proposed cost-of-service agreement, will be retired," Constellation Mystic told the commission.

Exelon in late March announced its intention to retire Mystic River 8 and 9 units, which have a combined capacity of 1,700 MW, and a third jet-fueled unit at its Mystic power plant in Middlesex, Mass. However, the ISO-NE subsequently determined that units 8 and 9 are needed to ensure electric grid reliability, and on May 2 it sought FERC's permission (FERC docket ER18-1509) to pursue a reliability must-run agreement to keep the two units operational.

The loss of units 8 and 9 could result in rolling blackouts and also jeopardize the continued financial viability of the adjacent Everett Marine Terminal LNG import facility owned by ENGIE North America Inc. subsidiary Distrigas of Massachusetts by causing that facility to lose its biggest customer, the ISO-NE asserted. Should the Distrigas facility also retire, the grid operator warned that the region's "risk of reserve depletion and load shedding would increase, as would the length and severity of such events."

Constellation Mystic now has asked FERC to approve a related cost-of-service agreement (FERC docket ER18-1639).

"Unfortunately, the attribute that makes Mystic 8 & 9 attractive to ISO-NE for fuel security reasons is part of what makes the units uneconomic: their reliance on expensive imported liquefied natural gas," Constellation Mystic said.

The company further explained that the Mystic units have only one source of fuel — the Everett facility — but the supply contract has been in dispute. Instead of litigating the contract, Exelon has decided to buy Everett to ensure the continued reliable supply of fuel to Mystic 8 & 9 to meet their existing capacity supply obligations.

Nevertheless, Constellation Mystic said that even with ownership of Everett, the cost of the firm LNG supply itself is high. And it said expected revenues from the ISO-NE's capacity, energy and ancillary services markets would not be enough to support the continued operation of Mystic 8 & 9 beginning in 2021. The company therefore asked FERC to accept the cost-of-service agreement, which it said is based on the ISO-NE's pro forma cost-of-service agreement but updated "to address Mystic’s unique circumstances," including "the special value" ISO-NE places on continued sourcing of fuel from Everett, the limitations of the storage tanks at Everett, and third-party transactions.

In a related release, Exelon said the total cost of operating Mystic 8 and 9, once offset by revenues, cannot be calculated because energy prices and plant revenues depend upon future weather conditions starting in June 2022. However, the company said the impact of the total costs should be less than $1 per month for the average residential customer, with the actual amount after offsetting energy revenues expected to be considerably less.

The company said if FERC cannot accept the agreement as filed, it should issue an order within 60 days establishing a process for resolving any issues on an expedited basis so the agency can accept the agreement by Dec. 21.