AUGUSTA – The LePage administration is exploring a deal that could make Maine the conduit for Canadian energy companies to sell electricity in New England.
Gov. Paul LePage hopes an agreement will lead to lower rates for Mainers and businesses. Over the past couple of months, his administration has engaged in preliminary talks with electricity providers in New Brunswick and Quebec, where residential and industrial rates are significantly below Maine’s.
Augusta lawmakers applaud the governor for negotiating with Canadian providers, which include Hydro-Quebec, North America’s largest utility. However, they also caution against inking a deal that may not deliver the low rates the governor wants and that could undercut the state’s renewable energy industry.
“There’s never just cheap energy for the taking,” said Sen. Phil Bartlett, D-Gorham. “There’s always a price.”
Ken Fletcher, who heads the administration’s Office of Energy Independence and Security, said negotiations are in the early stages, but are part of LePage’s developing energy initiative.
“Our goal is to create options and give people access to those options,” Fletcher said.
LePage isn’t the first governor to seek a deal with Hydro-Quebec. Gov. John Baldacci also turned an eye north seeking to capitalize on the mega-provider’s eagerness to penetrate the New England market. But those efforts hit a series of roadblocks, including concern from Maine’s wind power lobby that Canada’s cheap, heavily subsidized electricity would halt a state initiative to become a regional provider of renewable energy.
That opposition likely will surface if the administration reaches terms with Hydro-Quebec, which has developed wind power to complement its ever-expanding development of hydroelectric facilities.
Rep. Stacey Fitts, R-Pittsfield, co-chairman of the Energy Committee, said it’s unlikely that a company like Hydro-Quebec could flood the New England market with cheap electricity. However, he said, it could ask to be included in Maine’s Renewable Portfolio Standard, which mandates that providers derive a certain amount of electricity from renewable resources.
The intent of RPS was twofold: first, to increase the use of renewable power by awarding providers credits paid for by ratepayers; second, to encourage in-state development of renewable power sources such as wind.
Fitts said that if Hydro-Quebec power can count toward the state’s RPS mandate, it could stymie Maine’s wind power development, which he said, is providing jobs while creating a homegrown source of power generation.
Said Fitts, “If we’re going to sacrifice our generators and export dollars out of the state, out of this country, how is that different than what we’re doing with oil?”
“To risk throwing (wind power development) away without seeing huge savings would be a real concern,” he said.
Hydro-Quebec has already sought to have its power count toward the Renewable Portfolio Standard in its expansion efforts in other states. The issue became a sticking point in negotiations with state officials in New Hampshire. However, the company was successful in reaching an RPS deal with Vermont, a state that derives a significant amount of its electricity from Hydro-Quebec.
Fletcher, with the state energy office, said RPS has already come up during talks with Hydro-Quebec.
LePage has no love for RPS. Earlier this year, he unsuccessfully attempted to freeze the program’s expanding renewable mandates, arguing that it was driving up electricity rates.
Rep. Jon Hinck, D-Portland, said the governor’s lack of emphasis on Maine-grown renewable power development might be a sign that RPS could be folded into a deal with Hydro-Quebec.
Fitts, meanwhile, said the governor will have to weigh other issues, including whether Canadian power would be low-cost enough to warrant continued dependence on power generation outside Maine.
Canadian providers would bid against other regional generators in ISO New England, which distributes electricity to all six New England states. Right now, Fitts said, ISO New England is dominated by natural gas providers who set the market rates.
The region’s reliance on natural gas is one reason New England electricity prices are high compared to the rest of the country.
Fitts said a company like Hydro-Quebec would have little incentive to significantly underbid its competitors because it would be competing against more expensive natural gas rates.
“Hydro-Quebec is interested in making profits,” he said.
Additionally, Fitts said, the company’s Canadian plants are paid for by the government, which is a big reason its electricity is so cheap. That means electricity would remain low-cost in Canada, while Maine rates could be significantly higher.
And that, Fitts said, could leave Maine more reliant on outside energy sources while remaining at a competitive disadvantage.
Such arguments are not lost on Fletcher. He acknowledged that a deal with Canadian providers might not dramatically lower electricity costs. However, he said, it could lower them enough to make a difference.
After all, he said, the state was poised to take advantage of several factors, including ISO New England region’s planned retirement of a significant portion of coal- and oil-fired plants. Additionally, the state has identified several energy corridors that would allow new transmission lines to accommodate additional Canadian power capacity.
The corridors run along existing infrastructure, such as pipelines, highways and railroads.
Expanding transmission capacity is expensive, and the cost is often borne by ratepayers. However, Fletcher said, if a provider like Hydro-Quebec could directly connect with a major user in southern New England, the company could build – and fund – a so-called merchant line.
“A merchant line is the best deal for ratepayers,” Fletcher said.
It remains to be seen whether the state can reach an agreement with Canadian providers and whether such a deal would be the answer to high electricity costs.
Fletcher was careful not to promise too much.
“(Reaching a deal with Canadian providers) won’t be a silver bullet, even if we’re successful,” Fletcher said. “But it will be part of the overall energy picture.”