Harvard May Buy NSTAR Energy Generation Plant

Harvard is currently in discussions with NSTAR corporation, the electric and gas distribution company serving Cambridge, to purchase the Blackstone energy plant located on the south corner of the intersection of Memorial Drive and Western Ave.

Kathy A. Spiegelman, Harvard’s associate vice president for planning and real estate, discussed the possible acquisition at a meeting Wednesday night of the Riverside Neighborhood Study Committee.

The plant, which generates steam through burning oil, is of great importance to the University because it currently produces the bulk of the steam that is used on Harvard’s Cambridge and Allston campuses. Harvard would continue to use the plant to produce the campus’ steam after any acquisition.

The steam is primarily used for wintertime heating of Harvard’s buildings and is distributed through the campus by a series of underground walk-through tunnels and pipes.

Harvard has the opportunity to purchase the plant because NSTAR is required to sell the plant under the state’s 1997 electricity deregulation act. Under the act, the state’s electric distribution companies—the companies which deliver power to consumers—are no longer allowed to own generation facilities—the plants that actually produce the power.

While the Blackstone plant presently does not produce electrical power, Thomas E. Vautin, Harvard’s associate vice president for facilities and environmental services, said in an interview yesterday that the plant is covered by the electricity deregulation law because it has produced electricity in the past and still has the potential capacity to do so.

He noted that the machinery in the plant that produces electricity is currently in very poor shape and that the University would have no interest in using the plant to produce electricity.

While Harvard is still investigating the plant’s equipment, Vautin said that he believed that the steam production equipment in the plant was in adequate condition and would not require any major expenditure upon acquisition.

Harvard has had ongoing conversations with the plant’s owners about purchasing it since the deregulation law was passed, Vautin said. However he added that “serious discussions” have begun only recently.

Adding urgency to the negotiations is the fact that the plant is the only generation plant in the state covered by the law that has not yet been sold.

Mike Monahan, a spokesperson for NSTAR, said the Department of Telecommunications and Energy, has indicated that it desires the plant be sold as quickly as possible, a desire that he said is also shared by the company.

However, Monahan added that NSTAR is committed to selling the plant for the highest possible price. He said that the company has a responsibility to its customers and shareholders to obtain the highest value for the plant.

Neither Harvard nor NSTAR officials could provide the value of the plant or the asking price. Vautin said that the University currently pays approximately $9 million per year purchasing steam from the plant.

While Harvard’s past contracts with NSTAR for steam give the University a right to buy the plant before it is offered to other companies, Vautin said the potential exists if Harvard cannot come to agreement with NSTAR that the plant could be sold to another party.

“We are concerned [about the Blackstone plant] because this is our only source of heat,” Vautin said.

This would not be the first time the University has become directly involved in the steam generation business. The University operated the Medical Area Total Energy Plant (MATEP) from 1985 to 1998, which supplied steam, along with electricity and chilled water, to the buildings on Harvard’s Longwood campus and to the surrounding hospital complexes.

The University’s ownership of MATEP was controversial at the time, particularly because the University severely overspent the project’s budget in paying $350 million to build the plant. The University only received $147 million when it sold the plant to the corporate predecessor of NSTAR.

At the time administrators questioned the appropriateness of the University owning an energy plant.

“Whatever our capacities are as a University, they do not really extend to great sophistication to running energy plants in a highly deregulated environment,” said then-University President Neil L. Rudenstine in a 1998 interview.

However, Vautin said that the University is not simply repeating a past mistake in buying the plant.

“There is a very big difference between this [Blackstone] facility and the MATEP plant,” Vautin said. He noted that the Blackstone plant almost solely serves the University and not a multitude of customers, like MATEP. He also noted that most institutions the size of Harvard own their own steam plants.

He said that if the University acquires the plant, it will not be directly operated by Harvard, but a company familiar with steam generation. The plant currently employs approximately 25 employees according to NSTAR.

The site may also offer some opportunity for redevelopment according to Spiegelman, particularly the portion of the facility that were used in the past for electrical generation. She indicated at Wednesday night’s meeting that any such redevelopment would likely involve building more housing units for Harvard affiliates.

—Staff writer Daniel P. Mosteller can be reached at dmostell@fas.harvard.edu.