On March 29, Exelon Generation announced an agreement with ENGIE North America to purchase the Everett liquefied natural gas (LNG) import terminal by the fourth quarter of 2018, pending regulatory approvals, to secure fuel for the Mystic Generating Stationin Everett, Massachusetts. ENGIE, a French multinational electric utility company, has divested many of its fossil fuel investments and its entire LNG portfolio as it plans to increase the share of renewables in its portfolio.
The Everett LNG terminal―the sole source of natural gas supply for the Mystic Generating Station―also has connections to both interstate pipeline systems that deliver natural gas to New England (Algonquin and Tennessee Gas Pipeline) as well as a direct connection to National Grid, the largest local distribution company (LDC) in the Northeast. The terminal has a baseload sendout capacity of 0.7 billion cubic feet per day (Bcf/d) and a peak send-out capacity of 1.0 Bcf/d. Exelon’s purchase of the terminal can therefore ensure a continuous natural gas supply for operations of the power plant.
Because it supplies the Mystic Generation Station, the Everett terminal is also the only LNG terminal in the United States that still imports regular shipments of LNG. Everett accounted for 83% of all U.S. LNG imports in 2016 and 87% in 2017. In both years, 100% of LNG supply to Everett came from Trinidad and Tobago, where ENGIE has a long-term contract with the Atlantic LNG production facility. However, this contract expires in March 2019, according to IHS Markit, and there have been concerns about shortages of upstream natural gas feedstock supply to maintain production at Atlantic LNG in the future. In periods of winter peak demand, Everett terminal also relies on supply procured in the global spot markets to supplement contractual volumes.
Mystic Generating Station is the largest electricity generating station in Massachusetts, consisting of eight units with a total nameplate summer capacity of 1,998 megawatts (MW). Only four of the units are currently operational. Unit 8 (703 MW) and Unit 9 (711 MW), which account for more than 95% of the plant’s electric power generation, are combined-cycle units which run exclusively on natural gas. Unit 7 (576 MW) is a dual-fuel combined-cycle plant that can run on either fuel oil or natural gas. The remaining unit is a small (8 MW) combustion turbine fueled by distillate fuel oil and run only during periods of peak demand.
Going forward, new suppliers and heavier reliance on spot market natural gas might be necessary to supply Mystic, which could affect Exelon’s operating fuel cost recovery. As a result of the lower cost of LNG from Trinidad imported into Everett terminal in winter months relative to the cost of domestic natural gas priced off Algonquin Citygate—which tends to have periods of significant daily price spikes because of pipeline constraints in New England—the combined-cycle generators at Mystic (Unit 8 and Unit 9) have been operating at high levels. The annual capacity factors of these generators has been averaging between 50%–58% in recent years, and Unit 8’s capacity factor reached as high as 63% in 2017, according to Form EIA-923. In a related action, Exelon Generation announced that it would retire all units at the station on June 1, 2022, unless the Independent System Operator for New England (ISO-NE) implements new market rules that will allow these units to recover future operating costs, including the cost of securing natural gas fuel. Exelon’s announcement puts Mystic on a growing list of generators whose owners have indicated that without explicit valuation of their contributions to regional reliability/resilience, their plants will close due to difficult market conditions, including, most recently, FirstEnergy’s three nuclear plants in PJM.
In response to Exelon’s concerns, ISO-NE has begun analyzing the impacts of the potential closure of Mystic, concluding that its operation is a fuel-security and reliability need for the region’s electric power grid. According to a recent memo to stakeholders, ISO-NE plans to file a request with the Federal Energy Regulatory Commission (FERC) to waive its tariff requirements while they prepare new tariff language that addresses the region’s reliability criteria and costs necessary to ensure fuel security.
