Is Mass. shortchanged on clean energy procurement?

Bay State ratepayers foot the bill, but many of the benefits flow elsewhere

Bruce Mohl Mar 1, 2018

IT FELT LIKE CHRISTMAS on Wednesday in New Hampshire.

The weather was delightful outside in Manchester, but inside the folks at Eversource Energy were acting like Santa Claus. They weren’t dressed in red or shouting ho ho ho, but they were handing out lots of goodies as they made the case for why their Northern Pass transmission project – which would deliver hydro-electricity from Quebec – should win the support of New Hampshire regulators.

Eversource officials said Northern Pass would generate $3 billion in benefits for New Hampshire, including $40 to $60 million a year in new tax revenues, thousands of jobs, and lower electricity prices. The officials were also trumpeting a $200 million Forward New Hampshire Fund, a portion of which would be used to promote economic development, bolster tourism, and offset any loss in property value for transmission line abutters.

It sounded wonderful, but then I realized that nearly all of these promised benefits for New Hampshire would flow either directly or indirectly from the wallets and pocketbooks of ratepayers in Massachusetts. Massachusetts ratepayers would foot the bill for bringing clean energy into the New England market, but most of the tangible economic benefits would go elsewhere in the region.

What Massachusetts will get for its multi-billion-dollar clean energy investment is the ability to take credit for reducing greenhouse gas emissions in the state even though electrons traveling across transmission wires could end up anywhere in the region. Being able to take credit for reducing greenhouse gases is important because laws on the books in Massachusetts require the state to meet emission reduction targets stretching out to 2050.

All of this Grinch-like grumbling about the Massachusetts clean energy procurement is not a knock specifically on the Northern Pass project. Most of the other bidders in the procurement (including the other remaining contestant, Central Maine Power) probably followed a similar playbook. Their projects included the cost of a transmission line, the cost of mitigating the impact of the transmission line, and the cost of sweeteners to make abutters feel better about the transmission line.


Ed Krapels, the president and CEO of Anbaric Development Partners, believes these sweeteners are getting out of hand. He thinks it may make more sense to focus on offshore wind – which would yield tangible economic benefits in Massachusetts.

“I think this whole question of how much is paid to ‘transit states’ should be open for discussion,” he said in an email. “Conceptually, there’s a dollar amount where a payment to mitigate the transit state for inconvenience and property value losses is reasonable; and then there’s a level where it becomes a bribe. Where that line is, I think, ought to be in the minds of the buyer, in this case that’s Governor Baker. At some point, he should say ‘enough.’ I just don’t know where that point is.”

Greg Cunningham, a vice president at the Conservation Law Foundation, said many of the benefits of the clean energy procurement will flow to the entire New England region, as well as the state that bears the burden of hosting the transmission line. But he also pointed out that Massachusetts accounts for half of the region’s electricity consumption and a corresponding amount of the region’s greenhouse gas emissions. By procuring clean energy, he said, the state will comply with legally mandated emission reduction targets and create a hedge against the demands of an increasingly carbon-constrained world.

“The point I am  trying to make is that the benefits and burdens are shared to a certain extent, that there are certain ‘free-riders’ who receive benefits without paying anything, but that Massachusetts particularly benefits and more so than any other state,” he said in an email.

Ideally, the region as a whole would make these procurements, and each state would share in the costs and the benefits. But Massachusetts officials say a six-state procurement process would be too unwieldy and, with emission reduction targets looming, the state had to forge ahead on its own.

 

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Once a clean energy contract is signed and the transmission line is built, the three Massachusetts utilities will begin buying hydroelectricity from Quebec on behalf of their customers. What will they do with that electricity?

Priscilla Ress, an Eversource spokeswoman, said the utilities could use the power for their basic service customers or sell it into the New England energy market. She said utilities in these type of situations typically “sell the power into the energy market and are then required to credit the difference between what is paid for the power and what it is sold for back to all customers.”

So if the price the utilities pay for the hydroelectricity is less than the market price, utility customers will receive a credit on their bills. But the opposite is also true. If the price the utilities pay for the hydroelectricity is higher than the market price, ratepayers will see an added charge on their bill.