Street station, monitors the system.
Deal in works for Providence, Somerset stations
The Manchester Street power plant in Providence and the massive Brayton Point power station in Somerset, Mass., are closer to being sold, according to a spokeswoman for PG&E National Energy Group, which owns both plants.
PG&E last summer began soliciting bids for the plants, which it acquired four years ago from National Grid (formerly New England Electric System), parent of Narragansett Electric. Lisa Franklin, a spokeswoman for PG&E in Boston, said the debt-heavy company has received multiple bids on each facility.
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“We’ve certainly moved along far enough in the process to where we now have serious discussions going,” Franklin said. She declined to name prospective buyers or the asking prices for the plants.
PG&E last year put up for sale all of its New England power plants, which include three fossil fuel-powered generators and two hydroelectric systems (composed of 15 hydroelectric dams), mostly in Massachusetts, New Hampshire and Vermont. Last month, The Boston Globe reported that two Canadian firms are interested in buying the Massachusetts facilities.
Brayton Point, at the confluence of the Taunton and Lee rivers on Mount Hope Bay, is New England’s largest power plant, with generation capacity of about 1,500 megawatts – enough to supply electricity to about 1.5 million homes. The plant, which employs more than 200 workers, has been at the center of environmental controversy in recent years.
In March 2002, the U.S. Environmental Protection Agency reported that an increase in the plant’s water intake from Mount Hope Bay caused an 86 percent decline in the number of fish in the bay over a 10-year period. Last July, federal and state regulators ordered PG&E to make extensive changes to the plant – at an estimated cost of $68 million – to cut its water intake by about 95 percent. The company told the Boston Globe that the renovations could cost three to four times that much.
The Manchester Street plant, with its three combustion turbines and three distinctive exhaust stacks towering over South Providence, is powered by clean-burning natural gas and has roughly 30 employees, Franklin said. It has a generation capacity of about 450 megawatts – enough to supply about half of Rhode Island.
Maryland-based PG&E paid $1.6 billion in 1998 for all of the New England plants – about $500 million more than the book value, analysts said. Now, PG&E is struggling financially, having defaulted on a $431 million loan payment in November. The company is negotiating with lenders in an effort to avert a bankruptcy filing.
At the time PG&E bought the power plants, energy companies were banking on competition flowering in the retail electricity market amid deregulation in Massachusetts, Rhode Island and other states, according to James Grasso, principal of SilentSherpa, an energy consulting firm in Lincoln.
But retail competition – even for large energy users – has been slow to develop. Instead of selling lucrative power contracts to private brokers, generators like PG&E continue to sell power back to utility companies – not exactly the windfall they were expecting, Grasso said.
“(Energy companies) owe a lot of money on these assets, which they bought based on the expectation of certain profit margins,” said Grasso, who said one of his clients has an interest in PG&E’s plants. “That hasn’t happened.”
Another problem is a glut of electricity supply in the region.
Since 1999, 4,500 megawatts of power generation has been built in New England, including a new $400 million plant in Johnston that came online last summer, according to ISO New England, the region’s grid operator.
“There is an oversupply…of electric generation in New England, and as a result, wholesale electricity prices in 2002 were about half of what they were two years ago,” Franklin said. “It’s changed the whole economic outlook for generation.”
Grasso said tangible effects of a future sale of the Brayton Point and Manchester Street plants likely wouldn’t trickle down to retail businesses and consumers – as long as those plants continue to operate.
“But if a plant closes down, that’s when you’ll have a net impact on the cost of power at the retail level,” Grasso said.
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