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NEPGA: Canadian Hydro Contracts Could Cost Consumers $777M Annually

May 6, 2016 By Cheryl Kaften

While the Massachusetts Clean Electricity Partnership (MCEP) continues to support the value of importing “Clean, Affordable, Reliable” hydropower via a promotional effort for imports from Canada, the trade group, the New England Power Generators Association (NEPGA), says that the renewable energy companies are getting their numbers wrong.

NEPGA came out on May 4 with a statement claiming that MCEP “dramatically underestimates the cost of outsourcing a third of Massachusetts’ electricity market in the form of subsidized contracts to provincially owned utilities, such as Hydro-Quebec. These contracts would undermine the electricity markets today driving competitive pricing, [and] dramatically lower … reliability for consumers.”

NEPGA continues to stand by the study – Proposed Senate Bill No. 1965: An Act Relative to Energy Sector Compliance with the Global Warming Solutions Act  –conducted by Dr. Sue Tierney of the Analysis Group showing that the proposed out-of-market contracts could increase costs for consumers in Massachusetts by $777 million per year.

If enacted, the bill would require the state’s electric utility companies to solicit long-term contracts for large quantities of clean energy resources and proposals for transmission. However, Tierney alleges that, among other things, the MCEP report fails to state what the price of the contracted electricity would actually be – “undercutting any basis for being able to rely on the report for reasoned decision-making.”

Understanding the assumptions that drive the cost estimate is particularly important in light of the current prices in New England’s wholesale electricity market, she points out. In 2015, the average wholesale electricity price in the region was 5 cents per kilowatt-hour (kWh). .

“That is a price delivered to Massachusetts, unlike the power from provincially-owned hydro that must also add in hundreds of miles of transmission costs,” Tierney points out, stating, “It strains credulity to believe that building lines such as Northern Pass plus paying a long-term premium for contracts would provide any cost savings when compared to the highly competitive electricity market prices.

“The MCEP assumes that the full capacity of the transmission lines will participate and be selected in the New England Forward Capacity Market,” she notes, however, “The Federal Energy Regulatory Commission (FERC) … has put in place protections against out-of-market and above-market intrusions into the wholesale electricity market.”

Indeed, she states, “the importance of this protection of competitive outcomes was upheld in a U.S. Supreme Court decision just two days before the report’s release (Hughes v Talen). That decision confirms that state contract subsidies, like those proposed in Massachusetts for provincially-owned hydro, represent an intrusion into the wholesale electricity markets, violating the Federal Power Act.”

The association concludes, “NEPGA welcomes competition from all sources of electricity. That competition should occur to drive the best prices to meet increasing reliability standards and environmental requirements. Anything less means picking winners-and-losers and unnecessarily drives prices up. Massachusetts consumers deserve better.”

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