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Cogen Lawsuit Referred To DPU

By Frank Dabek
Associate News Editor

A lengthy court battle over the legal intricacies involved in operating MIT's electric cogeneration facility came to a head Friday as the Massachusetts Supreme Judicial Court upheld the legality of levying fees against the Institute while passing the buck on the calculation of those fees to the Department of Public Utilities.

Both MIT and the Cambridge Electric Light Company have claimed victory following the decision.

"I am very pleased that the Massachusetts Supreme Judicial Court has ruled in our favor," said President Charles M.Vest, who refused to comment further because of the legal nature of the case.

"We are very pleased by the decision," said Peter Dimond, director of communications for Cambridge Electric.

The decision upheld the legality of assigning customer transition charges while voiding the earlier customer transition charges (CTCs) levied against MIT.

"The SJC now gives the [Department of Public Utilities] the opportunity to increase our cost recovery from 75 percent to the 100 percent to which we are entitled. We firmly applaud their decision," said Russel D. Wright, president of Cambridge Electric, in a statement released by the company.

Legality of charges upheld

In the decision, the court affirmed the legality of CTCs, also called exit fees, which are levied against large customers who cause "stranded costs" to the electric company when they reduce their service.

Under state law, power companies are required to make advance purchases of power to meet their future needs.

The CTC levied against MIT, which amounts to $110,000 a month, was the first to be issued against a cogeneration facility in the country. MIThas been paying the fine since 1995 while the lawsuits were underway.

MIThad argued that this charge was in violation of Public Utility Regulatory Policy Act of 1978 which "seeks to encourage the development of cogeneration and small power production facilities" in order to reduce demand for fossil fuels.

The court said that "contrary to the claim of MIT, the imposition of a customer transition charge, as such, does not violate state PURPA regulations."

The court also voided the earlier CTC issued by the Department of Utilities. "We are concerned that there is inadequate explanation in the department's decision for us to determine whether the stranded costs for which the company now seeks relief were prudently incurred," the court said in its brief.

Specifically, the court questioned why the DPU accepted Cambridge Electric's calculation of stranded costs over MIT's conflicting calculations, and whether the decision to fine MIT75 percent of these costs was arbitrary.

Further decision referred to DPU

As a result of this court ruling, the decision on what fee MITshould pay to Cambridge Electric has been remanded to the DPU.

We "still have to go back to the DPUand be successful," said Peter L. Cooper, assistant director of utilities for physical plant. "We didn't hit a home run, but we did get a triple," Cooper said.

Cooper said that "we're willing to pay our fair share" but cited alternative calculations which show that MIT's cogeneration plant will cause Cambridge Electric a loss of only $275,000 per year instead of the more than seven million dollars claimed by Cambridge Electric.

"If we have a chance to show an alternative calculation, we will do well," he said.

Dimond, however, said that "this [decision] allows the DPU to revisit their calculations[We are] confident that they will come back with 100 percent."

The previous DPUdecision required MITto pay Cambridge Electric 75 percent of their claimed stranded costs. "We believe that all of our costs were approved prudently and thatthe DPUwill agree," Dimond said. "If you believe in stranded costs, then we must get 100 percent."

Dimond said that unless MIT is assessed a fee, the burden of stranded costs will be shifted to other Cambridge Electric consumers.

Cogen plant has long legal history

This decision is the most recent in a series of court cases and petitions surrounding the cogeneration plant. In 1996 MIT petitioned the Federal Energy Regulatory Commission to overturn the CTC decision. That petition was denied.

MIT filed an action in United States District Court but that case was dismissed in august of last year when the judge determined that the court did not have jurisdiction.

A petition filed with the DPU in February of 1996 concerning the supplemental service rate was also denied.

The cogeneration plant, which became operational in 1995, uses natural gas to produce both electricity and steam and is up to 18 percent more efficient than traditional systems. The plant also reduces the emission of pollutants by MIT by up to 45 percent.

Before the cogeneration plant was built MIT was Cambridge Electric's second largest customer, behind Harvard University.