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Competition changes the power picture; Electric deregulation sends two towns in opposite directions

THE BALTIMORE SUN

DIGHTON, Mass. -- This rural stop to nowhere, with its abandoned industrial yards and ramshackle Colonials, seems blighted. Yet prospects here are actually bright for the first time in years.

Thirty miles east, the historic community of Plymouth, with its steady stream of tourists and quaint shops on Main Street, appears to be thriving. Yet some townspeople are restless and worried.

Electric deregulation, an issue looming in Maryland, is changing the futures of these two Massachusetts towns.

Plymouth's aptly named Pilgrim nuclear plant has become almost worthless in the world of deregulated power. New natural gas-burning plants have begun rising in depressed towns like Dighton, generating windfalls of tax revenue and hopes for a cleaner environment.

The arcane issue of electricity competition is often viewed with disinterest by consumers, unless it means their power bills will go up. But the early experience of Massachusetts illustrates how deregulation could chart a new course for Maryland communities from Calvert County to Cumberland -- for better and worse.

The story of Dighton and Plymouth is more than a tale of two old towns heading in opposite directions, one emboldened by deregulation, the other embittered. It is, some argue, an object lesson in how to deregulate in a way that could help the environment and, possibly, save people money.

Electricity competition has its critics in Massachusetts, which last March became the first state to deregulate the power industry, but Dighton's town officials aren't among them.

"It's a godsend," says David J. Long, Dighton's town assessor.

Long is sitting in his office a few blocks north of a nearly finished 170-megawatt natural gas plant, which will soon bring the town $500,000 a year in property tax revenue, a welcome 10 percent boost. For years, Dighton has raised property taxes just to keep up -- more than 50 percent in the past decade -- while putting off needs.

"We've always been scrambling from year to year to make ends meet," Long says. Now, he says, the town can "give something back to the taxpayers who have been taking it on the chin for years." Town leaders are talking for the first time about buying new things, like a police and fire building to replace their dilapidated headquarters.

Dighton residents, like customers throughout the state, also are saving more than 10 percent on their electric bills under temporary rate cuts provided by the deregulation law, though its effect on rates over time remains to be seen.

Dighton officials recognize that a power generator doesn't come without potential drawbacks. Some neighbors, for instance, worry that property values will go down. But at least, Long says, natural gas-burning plants are pretty clean: "We're not going back to coal plants."

New England is heading full-steam away from coal power, the bane of environmentalists for spewing pollutants into the atmosphere, contributing to smog, global warming and acid rain.

In addition to the Dighton plant, as many as a half-dozen power generators are expected to be built in Massachusetts in the next few years. All would be fueled by natural gas, which is cheap and, environmentalists say, burns far cleaner than coal and oil. It emits less carbon dioxide and relatively negligible amounts of sulfur dioxide and nitrogen dioxide, three of the most ubiquitous smokestack pollutants.

"It's a bigger hit than the Clean Air Act produced in 30 years," boasts Douglas I. Foy, president of the Conservation Law Foundation, a nonprofit advocacy group. Like many environmental organizations, the foundation once opposed electricity competition, sounding familiar concerns that it would lead to more pollution from the overproduction and overuse of power.

Foy's group did an about-face a few years ago and supported deregulation in Massachusetts on the condition that utilities be encouraged to sell their generators and help create a free market of competing power plants. Now the foundation is a consultant for a company building a 720-megawatt natural gas-burning plant in New Hampshire, a convergence of environmental and economic self-interest.

"Those clean gas plants are one of the linchpins to our goal of cleaning up the electric power system," says Robert H. "Rusty" Russell, a foundation attorney.

Sitting in a darkened Boston office, the lights switched off in a display of energy efficiency, Russell and Foy sound confident about their deregulation gamble.

Cheap and clean

They and the entrepreneurs behind the boom in what they call "cheap, super-clean" power are betting the new generators will put some coal, oil and nuclear plants out of business. After years of protection under the monopoly system of regulated power companies, fossil fuel and nuclear plants are finally facing competition.

"We're talking about the big gorilla of air pollution," Foy says. "The monopoly world had effectively stymied any efforts to clean it up."

In fact, some of the fossil fuel plants are expected to survive -- and may thrive -- in a deregulated marketplace. Many of the oldest, dirtiest ones are cheap to run and are likely to stay in business until regulators force them to adhere to cleaner standards, industry experts and environmentalists agree.

Nuclear plants like the one in Plymouth are a different story. Without the guaranteed customers and guaranteed profits of the monopoly utility system, many believe the future of nuclear power is dim. Four of New England's nine nuclear plants have been retired in this decade, three of them in the past few years.

"We think we're going to see a couple more go," Russell says optimistically. "These are white elephants that cannot compete."

The decline of Pilgrim is not a happy story for Plymouth, and it's a cautionary tale for Calvert County, home to Baltimore Gas and Electric Co.'s Calvert Cliffs nuclear plant.

For nearly three decades, Boston Edison's nuclear plant has fueled the Plymouth economy. At one time, Pilgrim was half of the town's property tax base, and last year it still accounted for a quarter, providing $15 million in revenue.

Then came deregulation, and quickly Pilgrim became a risky investment. Boston Edison has tentatively agreed to sell it for $121 million, less than one-sixth of last year's assessed value. Plymouth could lose up to $13 million a year -- the equivalent of its police and fire budgets combined -- at a time when a growing population is putting a strain on services.

The impact won't be immediate, since under the state's deregulation law Boston Edison must keep its tax payments at the same level until 2001. But after that, the flow of money will slow to a trickle.

"It clearly is looming," says Eleanor S. Beth, Plymouth town manager. "That's what happens when you're very reliant on a major industry in your community."

Some in Plymouth worry that budget cuts aren't the worst of deregulation. They're afraid the nuclear plant's owner-to-be, Louisiana-based Entergy, will cut corners on safety to survive in the newly cutthroat market for electricity.

"I'm afraid we're kind of the guinea pigs," said William Abbott, a town official and attorney who helped kill plans for a second nuclear reactor in Plymouth two decades ago.

It's an experiment people should be watching in Calvert County, where the Calvert Cliffs nuclear plant is the largest private employer and accounts for one-third of the property tax base. Terry Shannon, the county's finance director, sounded almost disbelieving when told that Pilgrim is selling for a bargain-basement price.

"That's disheartening," she said.

With Calvert Cliffs' $21 million annual tax bill on the line, Shannon and others in Calvert have been keeping a close eye on electricity competition proposals in Annapolis.

Two approaches

There are essentially two camps on deregulation in Maryland.

One somewhat resembles the Massachusetts model, breaking the monopoly system by urging utilities to auction off their power plants, while leaving utilities the profitable job of delivering electricity over their power lines.

The other proposal, which has the backing of House Speaker Casper R. Taylor Jr. and Senate President Thomas V. Mike Miller, envisions a fundamentally different marketplace: Utilities would hold on to both their generators and their power lines. Customers could choose to buy their electricity elsewhere, but the utilities could fight to keep them.

Some environmentalists, energy brokers and independent power companies say this model could stifle competition and forestall any hoped-for public benefits of deregulation. Instead of a rush by new power suppliers to build natural gas plants, Maryland might see only a slow crawl.

Calvert officials might prefer this scenario, though. The Calvert Cliffs nuclear plant would still diminish greatly in value, but it might stay in use longer if BGE stays in the generation business.

Foy and some others are adamant that deregulation won't produce good results if utilities continue to own their power plants.

If utilities have no incentive to find cheaper power elsewhere, Foy says, they'll keep running their older, dirtier plants, few clean generators will be built and the public won't see lower rates.

And, he and others argue, established utilities may have an unfair advantage that would make it difficult for new competitors to get a foothold in the market.

"You're talking about a nightmare scenario in my view," Foy said. "That sounds like a bill not worth having."

Pub Date: 2/22/99

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