Northeast Utilities - Using the CT Legislature to Subsidize the Northern Pass

Here at Energy Tariff Experts (ETE), we are generally very supportive of energy deregulation. It allows for innovators, entrepreneurs, and non-utility companies to compete to build infrastructure and it shifts the economic risk for new generating and high voltage transmission infrastructure onto investors, where it belongs, and away from consumers.  When the Northern Pass was first proposed, we were very excited as it represented a major merchant transmission project in the ISO-NE grid.

Northern Pass Route Map posted on project website www.northernpass.us

Northern Pass Route Map posted on project website www.northernpass.us

First, a little background on transmission development. After deregulation took hold, a unique group of developers focused on privately funded transmission infrastructure evolved. These developers build what are known as merchant transmission projects. At a high level, there are two types of high voltage transmission projects: those that are reliability based; and those that are developed speculatively as merchant projects to alleviate inefficiencies in the grid. Reliability based projects can use eminent domain to secure a Right of Way (RoW) since they are needed for the public good (e.g., reliable power supply) whereas merchant projects do not have the option to use eminent domain and must come to commercial terms with each property owner in the RoW in order to secure easements to build or traverse.  The Northeast has seen numerous successful merchant transmission projects in the last decade including the following: The Cross Sound Cable; The Neptune Cable; the Linden VFT; and the Hudson Project. Note that all of these are mostly built underwater.

At ETE, we are supportive of merchant projects and do not have a position on any of the controversies around the siting issues associated with the Northern Pass.  What ETE does care about is that the rules of free and fair competition crucial to the functioning of a competitive deregulated market be adhered to. Currently, Northeast Utilities (NU) is attempting to use the Connecticut Legislature to mandate, via legislation (CT Senate Bill 1138), that CT consumers purchase the power from the Northern Pass under a long term contract. This is blatantly unfair to consumers and the investors and asset operators in ISO-NE who have played by the rules. NU is using its lobbying power and immense size to ensure that captive ratepayers in CT are used to subsidize this project via a long term contract at above market rates since the proposed legislation will re-classify conventional large hydro as "renewable" in the CT Renewable Portfolio Standard.

ETE firmly believes that if the Northern Pass is currently uneconomic, then it shouldn't get built until the economics of the power market justify it. In addition, it most certainly shouldn't get a subsidy as renewable energy since Hydro-Quebec does not need a subsidy for power they'd be delighted to sell us without a subsidy. In addition, claiming that Hydro-Quebec's conventional large hydro facilities should be given the same renewable energy subsidies offered to small scale wind, solar, etc. is absurd. While Hydro-Quebec's infrastructure represents major engineering accomplishments, many of their dams obliterated preexisting ecosystems and required the removal and resettlement of First Nations peoples.

Currently, the latest amendments to CT Senate Bill 1138 redefine large hydroelectric projects as Class I - eligible renewable resources. The specific language in the bill regarding large hydro is focused in Section 7 and Section 9d for those who care to read it. After a thorough read, its obvious that this language was written by NU lobbyists to enable the construction of the Northern Pass despite challenging economics. Lets hope that CT Legislators stand up for consumers and for the integrity of the ISO-NE power market and prevent this bill from becoming law. If NU wants to build the Northern Pass, they can do it with their own money.