The new plants, two of which are expected to be operational by 2010, will together generate nearly 700 megawatts, enough electricity to power between 525,000 and 700,000 typical homes. Peaking plants, usually fueled by natural gas, are designed to start up quickly when demand for electricity spikes, such as on hot summer days when air conditioners are in heavy use.
Electricity customers have been paying a premium rate, set by the Federal Energy Regulatory Commission, for power at peak times because the state doesn't have adequate power reserves to use when demand for electricity is at its highest. The new plants should save customers more than $30 million a year on their electric bills by bringing the state the peak power necessary.
The companies, selected by the state Department of Public Utility and Control in a draft decision Wednesday, will be reimbursed through electric rates for the cost of building and operating the plants, plus an amount for a return on their investments. The General Assembly set up the arrangement last spring as a way to control electric rates.
"This is very important. We're lacking in peaking power, and the feds are charging us because we don't have enough," DPUC spokeswoman Beryl Lyons said. "Now, the state will finally have the peaking generation it needs."
Attorney General Richard Blumenthal praised the selection, saying it is "a step in the right direction promising to provide 681 megawatts of power when it is most needed and most expensive."
The DPUC spent months reviewing applications from seven companies proposing to build nearly a dozen peaking plants around the state. The companies that competed included the state's two largest electric utilities, Connecticut Light & Power and United Illuminating.
UI won its bid to build a plant in the Devon section of Milford through its GenConn LLC partnership with New Jersey-based NRG Energy. Both Connecticut Light & Power and UI got out of electricity generation nearly a decade ago when the state deregulated the industry, but UI officials said they are excited to get back into the business.
"This is a great statement," said UI spokesman Al Carbone, who estimated that the project would cost about $200 million. "The legislature last year recognized that there is a serious need in the state for power. Our partnership with NRG is the best of both worlds. We're in the delivery business, and they're in the generation business. What better way to fill the need?"
The Devon plant, which will generate 194 megawatts, is expected to be completed in June 2010.
PSEG Power LLC, which was chosen to build the 134-megawatt plant at its facility in New Haven, expects to finish construction in June 2012.
Bridgeport Energy II plans to build a 360-megawatt plant at its Bridgeport location by December 2010. The project is expected to cost $400 million, according to company filings with DPUC.