May 26, 2019
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No guarantee $1 billion CMP line will deliver new energy, Massachusetts AG warns

Steven Senne | AP
Steven Senne | AP
In this Jan. 31, 2017, file photo, Massachusetts Attorney General Maura Healey takes questions from reporters during a news conference in Boston.

While Maine continues to debate the potential environmental impacts of Central Maine Power Co.’s proposed 145-mile transmission line, the Massachusetts attorney general and environmental groups have warned the contracts that would govern power sold over a completed line could undermine the state’s attempt to bring new amounts of clean, renewable power into New England.

The 20-year contracts, which are currently being evaluated by Massachusetts regulators, cover the sale of hydroelectricity over the proposed line from Hydro-Quebec, which is owned by the Quebec government, to Massachusetts electric utilities. Those utilities would then in turn sell that electricity to their residential and commercial customers, who are footing the $1 billion cost of the proposed line.

CMP and Hydro-Quebec proposed the line through Maine in response to a call by Massachusetts lawmakers for projects that would bring large amounts of new renewable energy into the state. But the contracts negotiated between Hydro-Quebec and the Massachusetts utilities omit a key provision, the absence of which could undermine Massachusetts’ effort to reduce its carbon emissions, according to Maura Healey, the state’s Democratic attorney general. (The Massachusetts attorney general serves as the state’s consumer advocate before utility regulators, the same role the public advocate serves in Maine.)

Hydro-Quebec already sells significant amounts of electricity into New England through other existing lines. The proposed contracts don’t require the energy that Hydro-Quebec sells over the proposed transmission line to be in addition to that total. Instead, the language in the contracts would allow Hydro-Quebec to take the energy it already sells into the shared New England electricity market and redirect it to the proposed line for higher prices, critics said.

If that happens, Massachusetts ratepayers could pay $1 billion for a line through western Maine that doesn’t actually bring them any new energy, the attorney general and environmental groups said in legal filings. In response, a Hydro-Quebec spokesperson called the scenario “illogical,” explaining the Canadian utility would want to maximize its exports as much as possible to increase revenue.

At the end of March, the Massachusetts attorney general filed a brief arguing the contracts, called power purchase agreements, “undermine the original intent and purpose” of the state’s legislative effort to procure new renewable energy and should be amended.

Hydro-Quebec already sells 14.8 terawatt hours of energy into New England a year, the attorney general’s office wrote. Massachusetts asked for projects that would deliver 9.5 terawatt hours of renewable energy to the state annually. That means that, with the line in place, Hydro-Quebec should be contractually required to deliver 24.3 terawatt hours per year — the amount it currently sells plus the amount it would sell over a completed line — the attorney general’s office argued.

Image courtesy of Hydro-Quebec
Image courtesy of Hydro-Quebec
Water is released down a spillway at Hydro-Quebec's Peribonka generating facility, April 2018. Hydro-Quebec has said it has been forced to "spill" water in recent years as it has run up against transmission constraints.

The contracts Hydro-Quebec and the three utilities submitted for approval require Hydro-Quebec to deliver, at a minimum, between 11.8 and 19 terawatt hours per year, depending on the contract, well below the amount called for by the attorney general.

Massachusetts had provided draft contracts to indicate what it hoped to see in the final contracts negotiated between Hydro-Quebec and the utilities, the attorney general’s brief said. Those draft contracts contained language ensuring energy sold over the line would be in addition to what Hydro-Quebec already sells, but that language was omitted in from the contracts submitted to Massachusetts regulators.

The submitted contracts could “actually allow HQ to decrease its overall imports into New England … while receiving full payment,” the attorney general wrote in the filing.

[As Maine debates 145-mile electric line, energy giant with billions at stake is absent]

Both the Conservation Law Foundation and Acadia Center, two environmental groups that signed onto an agreement endorsing the construction of the line during Maine regulatory proceedings, also called for the contracts to be changed to ensure Hydro-Quebec would deliver more clean power to New England than it currently does. The Acadia Center wrote in a brief that the current contracts are “plainly inconsistent with the intent of the statute.” The Sierra Club, an environmental group that opposes the line, voiced similar concerns.

“For the contracts to ensure economic and environmental benefits, they must provide Massachusetts ratepayers with something they’re not already receiving,” the Sierra Club wrote in an April legal brief. “As proposed, this is not the case.” The Sierra Club went on to write that the Massachusetts utilities have “proposed contracts that protect the interests of Hydro-Quebec and the companies’ shareholders without meaningfully advancing clean energy.”

Deborah Donovan, senior policy advocate and Massachusetts director of the Acadia Center, said that the current contracts would allow Hydro-Quebec to decrease its total exports to New England without financial penalty.

“If they did decide to do that, and the total energy deliveries would be less than they’re delivering now, why would we build the line?” Donovan asked. She called the missing provision “essential” to the project.  

“We wouldn’t want to see a commitment made to these contracts, or to the line for that matter, without these safeguards,” Donovan said.

The Conservation Law Foundation’s senior attorney David Ismay emphasized that the contracts aren’t just part of the proposed line, they “really are the project.”

“The only reason the line would get built is because Massachusetts needs the power, and those contracts are for the money that will purchase the electricity and fund the construction of the transmission line,” Ismay said.

There is no timeline for when the Massachusetts Department of Public Utilities must approve the contracts, which were initially submitted last year. The department’s equivalent in Maine, the Maine Public Utilities Commission, issued a key permit for the line last month after several parties in the proceedings negotiated a 40-year $250 million benefits package for the state.

[What you need to know about the CMP transmission line proposed for Maine]

In the order explaining its decision to permit the line, the Maine PUC did not mention the Massachusetts attorney general’s arguments against the contracts, and instead noted that under the contracts Hydro-Quebec is “required to sell and deliver the specified amounts of energy,” without mentioning that those amounts could potentially be less than what the utility currently sells and delivers into New England.

When asked why the Maine PUC didn’t address the Massachusetts’ attorney general’s arguments in the order granting the line a permit, Maine PUC spokesperson Harry Lanphear said the PUC “can only consider the evidence and arguments presented in the Maine proceeding. The Commission cannot rely on documents from other jurisdictions that are not in the Maine proceeding record.”

Opponents of the line in Maine — which include an odd alliance of the Natural Resources Council of Maine and natural gas companies — have questioned whether Hydro-Quebec can deliver the kind of greenhouse gas emission reductions touted by project supporters.

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In response to those questions, Sen. Brownie Carson, D-Harpswell, sponsored a bill that would direct Gov. Janet Mills’ Maine Department of Environmental Protection to study how the line will impact carbon emissions. The Maine Senate voted to support the bill by overwhelming margins last week.

“Certainly, the concerns being expressed by the Massachusetts attorney general’s office are some of the very same reservations and questions that I and many others in Maine are raising,” Carson said.

‘Nice in theory’

Massachusetts Republican Gov. Charlie Baker’s Department of Energy Resources disagreed with the attorney general’s office, writing in a brief that the attorney general “misconstrued” the language in the state’s call for new energy projects. The language in question only required that Hydro-Quebec had the capability to increase its exports to meet the demands of the line, the department said.

It also noted Hydro-Quebec isn’t under contract for most of the energy it currently sells into New England. Instead it sells it on the New England energy market. It could stop selling energy into that market at anytime, whereas the contracts secure energy deliveries for 20 years.

Steven Senne | AP
Steven Senne | AP
Massachusetts Gov. Charlie Baker is pictured in Boston this Jan. 23, 2019, file photo.

Hydro-Quebec spokesperson Lynn St. Laurent said the contracts are only concerned with minimum deliveries and that Hydro-Quebec wants to sell as much electricity as possible into New England.

“It would be illogical for Hydro-Quebec not to maximize its exports,” St. Laurent said. “Through our strategic plans over the past 20 years, we have clearly demonstrated our objective of increasing our exports.”

The way the contracts are currently written would actually add protections for consumers they didn’t have before, the Massachusetts utilities wrote in a legal brief.

The utilities also wrote that “it would make little sense” for Hydro-Quebec “to spend large amounts of time and energy to bid for and negotiate the [power purchase agreements], only to offset profits from sales over [the line] by reducing profits from its baseline sales.”

“It would make even less sense for [Hydro-Quebec] to spend significant amounts of its own money building the Canada portion of the transmission line if it merely intended to offset its profits in this way,” the utilities wrote.

But the contracts are for 20 years, and while it might be illogical for Hydro-Quebec to divert energy from Massachusetts to other markets now, that doesn’t mean diverting energy to other markets wouldn’t become logical in the future, Donovan said.

“We’re talking about a 20-year timeframe,” Donovan said. “To say that based on the way our system is configured right now, and the current set of market conditions that exist within Quebec, within New England, within New York, within Ontario, within New Brunswick, that this is exactly what’s going to happen for the next 20 years, we know it’s going to deviate from that. So we should just be prepared.”

The Massachusetts Attorney General’s office agreed.

“If HQ found it more profitable to divert historical generation” meaning the energy it already sells into Massachusetts “to a different market, it would face no penalty under the Proposed [power purchase agreements],” the Attorney General’s office wrote.

But the likelihood that market conditions will change is also why it may be asking too much of Hydro-Quebec to continue to sell energy into New England at current levels, in addition to the sales it’s committed to the line, said Ismay of the Conservation Law Foundation.

“I think it’s nice in theory. It might be possible in practice. But in the real world very few businesses are willing to make absolute guarantees, particularly absolute 20-year guarantees,” Ismay said.

Maine Focus is a journalism and community engagement initiative at the Bangor Daily News. Questions? Write to mainefocus@bangordailynews.com. Do you have ideas or tips for stories relating to development, the economy or the environment in Maine? Write to jkeefe@bangordailynews.com.



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