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Northern Pass power line to profit on incentives  

Credit:  Staff Report | New Hampshire Union Leader | January 12, 2013 | www.unionleader.com ~~

Federal regulators are allowing Northeast Utilities’ shareholders to get a higher rate of return on their investment in the proposed $1.1 billion Northern Pass project than they receive from the generation and distribution of electricity through NU’s subsidiary, Public Service of New Hampshire.

“Northern Pass is a strategy both to secure a long-term revenue stream for Northeast Utilities and … to shore up PSNH’s financial prospects,” said Christophe Courchesne, a staff attorney at the Conservation Law Foundation, which opposes the project.

Northern Pass spokesman Mike Skelton said Northern Pass – which would carry electricity from Canada to southern New England over 180 miles of high-voltage transmission line – provides “a unique opportunity for New Hampshire and the region.

“Customers will benefit from a new source of low-cost renewable energy, millions of dollars in new taxes, and hundreds of new local jobs without the need to pay any costs or subsidize the project,” Skelton said.

The state Public Utilities Commission gave approval for PSNH to make a 9.81 percent return on its equity investment on its power-generating business and a 9.67 percent return regarding its power distribution operations.

For the Northern Pass project, federal regulators approved a 12.56 percent rate of return.

The Federal Energy Regulatory Commission agreed to allow profit incentives for the Northern Pass project. The incentives gave a 2.16 percent bump-up prior to the project beginning commercial operation and 1.42 percent once operations get under way.

The FERC agreed that Northern Pass featured more financial risks, including the fact that it had an agreement with only a sole customer, Hydro-Quebec, to use the transmission line.

Last year, the Public Utilities Commission called those incentives too high and challenged the figures. The federal regulators denied the request for a rehearing.

“It’s a generous profit,” Courchesne said.

Courchesne, who follows the regulatory filings closely, said utilities “have a strong incentive to pursue these projects,” sometimes instead of lower-cost alternatives,” such as looking at possible routes in other states.

“We shouldn’t be investing and guaranteeing significant profits for transmission projects that would not be needed or for which there are superior and lower-cost alternatives,” Courchesne said.

Skelton explained the Northern Pass profits will be paid by Hydro-Quebec, a partner in the project. “The rate of return for Northern Pass is 100 percent paid by Hydro-Quebec,” he said in an email.

“HQ is paying the costs of this project for the opportunity to sell their power into the regional market and compete,” Skelton said. “Customers assume no risk and pay no costs and only stand to gain from a new large source of low-cost, clean energy being introduced in the market.”

Courchesne said electric customers will pay for those added incentives in the cost of the hydropower.

“Hydro-Quebec keeps paying that back over time, and the way they intend to get that back is to sell that power in New England and making a profit off those sales,” Courchesne said. “They can cover the fee to Northern Utilities, and they can make additional profits.”

PSNH also will earn some type of financial compensation for allowing the Northern Pass project to install a high-voltage transmission line on 140 miles of existing right-of-way. Skelton said that deal “will be finalized later in the process.”

“The key issue here for PSNH is the reason they’re committed to this so heavily, and they’re committed to the proposal on the table so heavily, is it utilizes a transmission corridor they already own,” Courchesne said. “There’s a line item for PSNH to receive a rental payment or some other arrangement by which they compensate for Northern Pass’ use of that corridor.”

Skelton, who said he had no update on when project officials will announce the new route assembled for Northern Pass, said Northern Pass will benefit electric customers.

“Northern Pass will reduce New Hampshire’s energy costs by $20 (million) to $35 million annually by displacing more expensive energy currently being consumed in the market with low-cost, renewable hydropower,” Skelton said. “How these reduced energy costs impact rates depends on a customer’s energy supplier. Different suppliers offer different rates based on the purchases they make in the energy market. The fact of the matter is Northern Pass will reduce energy costs and bring lower-cost power into the regional market, which every customer will benefit from.”

If Northern Pass wasn’t built, where would Northeast Utilities turn to increase revenues?

“We don’t discuss our future business strategy publicly,” Skelton said.

Source:  Staff Report | New Hampshire Union Leader | January 12, 2013 | www.unionleader.com

This article is the work of the source indicated. Any opinions expressed in it are not necessarily those of National Wind Watch.

The copyright of this article resides with the author or publisher indicated. As part of its noncommercial effort to present the environmental, social, scientific, and economic issues of large-scale wind power development to a global audience seeking such information, National Wind Watch endeavors to observe “fair use” as provided for in section 107 of U.S. Copyright Law and similar “fair dealing” provisions of the copyright laws of other nations. Send requests to excerpt, general inquiries, and comments via e-mail.

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