Column: Northern Pass Will Benefit New Hampshire
The Northern Pass transmission project has engendered much controversy over the past few years — most of it centered on the location of transmission lines through New Hampshire’s North Country. One thing that can’t be debated is the low-cost electricity and reliability that the 1,200 megawatt hydro-generated project will bring to New England’s electricity grid.
Opponents of the project argue that New Hampshire won’t benefit from Northern Pass because we won’t get the electricity, but that premise couldn’t be further from the truth. The grid essentially works like a large swimming pool with hoses bringing water in (generators), while other hoses take water out (suppliers). Generators provide energy to the grid (the swimming pool), and suppliers purchase the electricity for our homes and businesses at the “marginal rate,” which represents the highest price paid to generators to secure the energy needed to meet demand. Generators with bids below the marginal rate still get paid the higher price and get to pocket the difference. If demand is high and the grid, which is managed by New England’s Independent System Operator, needs to pay higher prices to meet it, the higher marginal rate will be passed on to ratepayers. Conversely, new generation into the grid expands the supply and lowers the marginal rate. The Northern Pass project will do just that.
Any power from Northern Pass that isn’t bid into the grid will be sold directly to electricity suppliers via power purchase agreements. Critics of these arrangements argue that long-term contracts potentially shift costs from generators to ratepayers. This may be true with expensive power sources such as wind and biomass, but hydroelectric power has historically been a source of low-cost electricity. In fact, states with high percentages of hydroelectric power such as Washington, Idaho and Oregon have some of the lowest electricity rates in the country. Vermont utilities currently enjoy a power purchase agreement with Hydro-Quebec at 6 cents per kilowatt-hour, providing Vermonters with price stability from a reliable, base-load power source.
Roughly half of the electricity generated in New England is derived from natural gas. Recently, the ISO-NE has voiced concerns about the region being too dependent on natural gas for electricity generation. Two problems face power generators that depend on natural gas in times of peak demand: (1) a lack of pipeline infrastructure that restricts supply and (2) a lack of firm contracts from natural gas suppliers, who give priority to home-heating companies through contractual arrangements.
Northern Pass will offer price stability and reliability to the region’s grid as well as furnish ratepayers with a valuable hedge against future volatility in natural gas prices — especially against temporary price shocks like the one that hit natural gas generators and suppliers in New England this past winter and caused a spike that quadrupled prices.
The new route proposed by Northern Pass officials has addressed many concerns about the impact of the transmission lines, in particular eliminating the possibility of eminent domain takings as well as agreeing to bury power lines in some areas that are of particular concern to property owners and conservationists.
A number of special interest groups oppose Northern Pass, making fatuous statements about high electricity prices and environmental impacts. Not surprisingly, some of these same groups instead support projects like Cape Wind, which, like Northern Pass, will provide carbon-free power to the region. (Northern Pass is expected to reduce greenhouse-gas emissions by 5 million tons annually.)
However, Northern Pass is entirely privately funded and will provide base-load power at competitive rates. Cape Wind will provide intermittent power at three to five times market rates, costing ratepayers billions of dollars in higher energy costs, and require up to $1 billion in taxpayer support. Which of these projects makes sense for the New England region?
ISO-NE has identified the region’s growing dependence on natural gas for power generation as the highest priority strategic risk for the New England power grid. With over 8,000 MW of generation to be retired by 2020, the region will need to cover a shortfall of 6,000 MW of electricity generation. Northern Pass will provide 1,200 MW of that shortfall and will do so in a way that provides clean, reliable, base-load power to our region’s grid and will lower the cost of electricity to ratepayers in the process.
Marc Brown is the executive director of the New England Ratepayers Association, a Concord-based nonprofit that describes itself as dedicated to protecting ratepayers in New England. The association says it is supported by families and businesses served by regulated utilities, but declines to identify its supporters.