Northern Pass and Our Energy Future

• Impacts on regional energy mix and rates
• Impacts on New England renewable energy development

Impacts on regional energy mix and rates

• It remains unclear how the Northern Pass project would affect the electric system and the mix of energy sources on which New England electric customers rely. According to the proponents, most of the power transmitted will be sold on the wholesale market, which could have important and significant effects on the viability of other higher-cost generation. A 2010 analysis by the developer predicted that the power would largely displace power from relatively clean natural gas power plants. With this outcome, the project would fail to achieve the greater economic and environmental benefits associated with displacing dirtier power sources like coal and oil, including meaningful reductions in greenhouse gas emissions.
• Hydro-Québec and the project developer’s affiliate, Public Service Company of New Hampshire (PSNH), are negotiating a long-term power purchase agreement by which PSNH would purchase some portion of the power transmitted through the Northern Pass project to add to New Hampshire’s energy supply.  The terms of that agreement will likely determine whether New Hampshire ratepayers will realize any specific benefits from the project. According to testimony by the CFO of PSNH parent Northeast Utilities in late July 2011, there has been little or no progress toward reaching this agreement, and any agreement is likely to be very minor.
• Because the current proposal is designed to serve New England’s wholesale electric markets, any associated reductions in electric prices are likely to bypass PSNH customers.  In recent years, the declining price of natural gas and the addition of new, relatively clean natural gas power plants to the New England grid has reduced wholesale electric prices.  Yet many PSNH customers are forced to buy power from PSNH’s aging and costly fleet of coal and oil-fired power plants and have very little ability to buy power from the wholesale electric market. If wholesale electric prices go down as a result of Northern Pass, more business and industrial PSNH customers will buy power from other suppliers, driving up PSNH rates for the customers (mostly homeowners and small businesses) that do not have the purchasing power to leave PSNH and choose other suppliers. Thus, Northern Pass may result in higher rates for PSNH’s own customers.

Impacts on New England Renewable Energy Development

• The project may also have significant impacts on New Hampshire’s and northern New England’s ability to develop local renewable energy sources.  Those sources may not be able to compete with the cost of power from Hydro-Québec, and investments in those facilities and in new transmission lines to connect them to the grid may dry up.
• It’s possible that New England states may make changes to the definition of “renewable energy” to include hydropower under the states’ Renewable Portfolio Standard (RPS) laws, which dictate that utilities’ mix of energy sources include a certain percentage of renewable sources. If that happens, purchasing power from Hydro-Quebec through the Northern Pass project may satisfy utilities’ obligations under those laws. According to a report commissioned by CLF, imports from Northern Pass (or import projects of similar size) would swamp the market for renewable energy development if allowed to qualify as “renewable,” taking up 45% of the region’s mandate for new renewable power and discouraging new local projects. CLF is strongly opposed to such legislative changes because they greatly undermine one of the core purposes of RPS laws: the stimulation of investment in renewable energy technologies in New England, including in New Hampshire.