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MIT Fined $4.5M For Cogen Plant

By Stacey E. Blau
News Editor

A $100,000 per month penalty may be charged to MIT under a Department of Public Utilities ruling involving the new cogeneration plant.

The DPU assessed MIT an unprecedented customer transition charge. A petition was filed last March by Cambridge Electric Light Company which is trying to recoup the stranded costs it accrued because of past purchases it made in anticipation of MIT's power needs.

MIT was Cambridge Electric's second largest customer before the cogeneration plant went on-line on Sept. 11. The new plant, which cost $37 million to build, is an effort by MIT to economize its power generation and transfer facilities.

DPU rules against MIT

DPU acknowledged "that Cambridge Electric and Light took on a lot of financial expense following state regulations on MIT's behalf," said Peter Diamond, a Cambridge Electric spokesman.

The ruling stipulates that MIT should be liable for 75 percent of the costs that Cambridge Electric accrued when it made advance purchases of power for MIT's future use.

The stranded cost Cambridge Electric incurred totals about $6,000,000. Under the ruling, MIT must pay $4,500,000.

"Cambridge Electric incurred a great many costs to serve MIT," Diamond said. On behalf of MIT, Cambridge Electric paid the "cost of all the equipment and the lines and substations and the power contracts and the decommission costs" associated with providing power to a large customer like MIT.

Cambridge Electric is required by state regulations to enter into long-term contracts to provide power based on MIT's needs.

Cambridge Electric filed a petition in March to recover the costs for the advance planning it made for MIT. The DPU had six months to render its decision, which came last Friday, the last possible day.

MIT was the company's second largest customer, behind Harvard. The City of Cambridge and manufacturing plants in Cambridge are also big customers.

Cambridge Electric is part of Commonwealth Electric, which is part of Commonwealth Energy Systems.

Decision hurts MIT, cogeneration

"It's unfortunate that what has happened is that a disincentive has been made against cogeneration," said Ronald P. Suduiko, assistant to the president for government and community relations.

The cogeneration plant provides an environmentally sound source of energy, and the fee may discourage others from making use of cogeneration, he said.

"I don't know why DPU ruled the way it did," Suduiko said. "The plans have been concrete for 10 years now. They had pretty sufficient notice."

MIT "has been considering cogeneration since 1985," said Victoria V. Sirianni, director of Physical Plant. The cogeneration plant has been under construction for two-and-a-half years, but MIT has been talking with Cambridge Electric for ten years, she said.

"We did know that MIT was considering it" since 1985, but "we were not notified that the project was a go until a couple of years ago," Diamond said.

"Until we get the official word that this is what they're doing, we have to assume that they will need that power," he said.

"If we based our planning projections on a thought that they might be doing something," we would run the risk of having a critical shortage, and people would ask, "Why didn't you plan ahead?,'" Diamond said. "We base our planning model on official notification."

Over the last few years, in anticipation of the drop, "we cut our labor force by 15 percent, closed a district office, and renegotiated power contracts for power we didn't need," Diamond said.

MIT is presently considering the option of taking the issue to court, Suduiko said. MIT also has the option of filing a petition within the next two weeks to contest the decision.

The issue is "very complex because we are still on the grid. There are some buildings at MIT which will continue to be supplied" by Cambridge Electric, Sirianni said. "The MIT plant doesn't meet all of MIT's needs."

About a quarter of MIT buildings remain on Cambridge Electric for regular power needs. MIT will also continue to rely on Cambridge Electric for standby and supplementary power.

"MIT is one of Cambridge's largest customers," on the order of millions of dollars, Sirianni said.

"When MIT has to take their unit offline, we can plan ahead and have the power to meet all of MIT's needs," Diamond said

This is "power we would supply to MIT in the event that the generator had a malfunction and the whole campus was without electricity," he said. "We would supply MIT with power at a moment's notice."

"That capacity is very expensive for any utility to have available but not use," Diamond said.

Daniel C. Stevenson contributed to the reporting in this story.