Maryland energy regulators Thursday ordered the construction of the state's first new natural gas power plant since the state's electric power market was deregulated more than a decade ago.
In a decision questioned by other power producers, the Maryland Public Service Commission said it awarded a contract to CPV Maryland LLC to build the new $500 million facility in the Charles County town of Waldorf.
The order calls for three of the state's largest publicly regulated power companies, including Baltimore Gas and Electric Co., to buy electricity from the plant. The move could be the first step toward partially re-regulating the market.
Deregulation was supposed to spur new power development, but instead had the opposite affect.
The guaranteed business from BGE, Potomac Electric Power Co. and Delmarva Power & Light Co. allows CPV to construct the plant without depending on financing from independent investors and banks during a time when lending standards are strict.
In 2009, the commission began looking at ways to increase the state's power capacity, prevent potential blackouts and reduce Maryland's reliance on out-of-state electricity. The regulatory commission expects to need 650 to 700 more megawatts of power by 2015 to keep up with growing demand.
Construction on the new plant will begin later this year and is expected to be finished in June 2015, said Don Atwood, CPV's construction manager for the project. It will employee 350 to 400 workers.
The new plant, which CPV has been trying to build for several years, would drive down rates by creating a more efficient system and easing current congestion on the power grid, Atwood said. The more modernized facility will offset older coal-burning plants in other parts of the state, he said.
CPV's proposal to the PSC projected that the new natural gas plant, cheaper and more efficient to operate than coal plants, give ratepayers an average 49 cents credit per month because of the cost savings.
"We fully expect that the construction of this facility will result in capacity savings as well as congestion benefits to Maryland rate payers," Atwood said. "We believe that it will lower electricity prices."
Coal-powered plants are expected to become costlier to run because of environmental regulations. CPV projected the new plant will reduce emissions of sulphur, nitrogen oxide and carbon dioxide by 65 to 99 percent compared to oil and coal plants.
BGE opposed the plant in comments to the commission, saying it would burden ratepayers with additional costs for unneeded generation. BGE spokesman Rob Gould said the company was not yet ready to comment on the PSC decision.
"We are in the process of reviewing the Public Service Commission's order in detail," he said.
Some critics have noted that a new power plant is not needed because demand for electricity has fallen during the recession and energy efficiency programs have been effective in reducing usage.
Glenn Thomas, president of PJM Power Providers Group, an association of PJM's electricity suppliers, said that the fact that CPV couldn't get bank financing is proof that the market conditions don't justify the plant.
"You're locking consumers into a 20-year contract," Thomas said. "Babies that haven't even been born in Maryland yet are going to be paying for this power plant that is not needed."
The new plant comes as other ideas for generating new sources of power have stalled.
Last year, a proposal to build a $2 billion high-voltage transmission line from West Virginia to Frederick County was suspended while the region's electricity grid operator, PJM Interconnection, conducts an additional analysis on when the project is needed. Prospects for a third nuclear unit at Calvert Cliffs in southern Maryland have dimmed because of low natural gas prices and as owner French utility EDF looks for a U.S. partner.
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