January 20, 2013

Maine still pursuing Canadian electricity

The LePage administration wants Hydro-Quebec to sell power here, possibly at the expense of wind and biomass generators.

By Tux Turkel tturkel@pressherald.com
Staff Writer

More than 30 years ago, Gordon Weil and then-Gov. Joseph Brennan traveled to Montreal to meet with Quebec Premier Rene Levesque. They met at the headquarters of the provincial power company, Hydro-Quebec.

click image to enlarge

Aerial views show the powerhouses from Hydro-Quebec’s Eastmain-1-A and Eastmain-1 hydroelectric stations near James Bay.

Courtesy Hydro-Quebec

Weil, then Maine's energy office director, recalls a sense of optimism about tapping into cheap energy from a province flexing its economic and political muscle. Hydro-Quebec was hard at work on the La Grande complex at James Bay, then the world's largest hydroelectric system, and was looking for export opportunities. At home, rates were so low that the majority of Quebeckers were heating with electricity.

"Those discussions went nowhere," Weil said last week. "We talked, but nothing ever got firmed up."

Last June, a delegation of Maine lawmakers on the Maine-Canadian Legislative Advisory Commission drove to Quebec City to meet with provincial officials. They knew that three-quarters of Quebec homes still have electric heat. They knew that Hydro-Quebec is working on new, multibillion-dollar dam projects, and is having problems siting a transmission line to ship power through New Hampshire.

"From our perspective, there may be a way to capitalize on Maine's location," state Rep. Kenneth Fredette, R-Newport, the new House minority leader, said last week. "Is there a possible partnership to get power to southern New England that can benefit Maine people?"

Three decades later, Mainers are still making the northern pilgrimage for power. A shared border, and in some cases, a shared language and culture, seem to entice a succession of leaders into believing that this affinity will somehow translate into discount electricity for Maine.

So far, it has not. But why?

It's a timely question. The administration of Gov. Paul LePage is expected to reintroduce a controversial bill this winter meant to encourage Hydro-Quebec to sell power here, possibly at the expense of local wind and biomass generators.

The answer has three parts:

Hydro-Quebec's sole shareholder is the provincial government. It's required by law to sell electricity at a deep discount at home.

That discount doesn't extend to exports. Hydro-Quebec's export rates are on par with wholesale market prices, which in New England are pegged to natural gas.

No transmission lines link Maine and Quebec. Getting power from Quebec to Maine involves a detour through New Brunswick, which adds costs, or building a new line through western Maine, which would face steep hurdles.

"It's just a mistake to believe that it's possible to buy cheaper power from Hydro-Quebec," said Weil, who now works as a consultant to power companies in the Canadian Maritimes.

But it's easy to understand why the lure of cheap Canadian power is so tantalizing, especically to a state where high energy costs are a drag on the economy and a perennial source of political friction.

Hydro-Quebec owns 60 generating stations and 26 large reservoirs, as well as 579 dams and 97 control structures. These projects have a total installed capacity of more than 36,000 megawatts, as much as all of New England can generate.

Hydro-Quebec also offers a clean, renewable supply. Water is used to make more than 98 percent of its electricity.

"Hydro-Quebec has a long history of supporting the region's renewable energy needs," said Ariane Connor, a spokeswoman for the utility. "We do believe our energy has some very important advantages, including low levels of greenhouse gases and reliability."

Those benefits, Connor said, add value to Hydro-Quebec's export sales, which are concentrated in Ontario, New York and Vermont. Export rates, she said, reflect prices on the wholesale market. Asked if there's any reason Maine ratepayers could expect discounts below the market price, Connor said: "I have not heard that we have made any such representations. We're saying we're an economical, reliable and renewable source of energy."

A LOOK AT VERMONT

What Mainers really want is contained in Bill 116. This Quebec law establishes a "heritage electricity pool" for residents and fixes the average rate at 2.79 cents per kilowatt-hour for energy. That's less than half of what Maine homeowners now pay. Contracts for export, the bill says, must be submitted to the government "and are subject to such conditions as the government may then determine."

A good place to see how these conditions are applied is Vermont, the only state in New England where utilities still directly buy power. Hydro-Quebec supplies a third of Vermont's needs, and recently signed a 26-year contract that replaces one that was due to expire.

The starting price of the contract last fall was roughly 6 cents/kwh, roughly twice the wholesale market price in Maine. The Vermont contract rate changes each year through a confidential formula that contains a "buffering feature," to limit big swings due to volatile market conditions. The idea is to offer a stable supply of competitively priced power that's certified as being renewable in Vermont.

These features are especially important in Vermont. The state is fighting in court to shut the Vermont Yankee nuclear plant, a source of another third of its power.

Vermont's longstanding ties to Hydro-Quebec also are based on location. Burlington and Montreal are less than 100 miles away. The state has high-voltage interconnections on the border with Quebec.

By contrast, Maine's interconnections with Canada are in northern and eastern Maine, with New Brunswick. From time to time, Hydro-Quebec does wheel power across its sister province through Maine to the Boston area.

"When the price makes sense, we sell," Connor said.

LESSON FROM HISTORY

On paper, it might make sense to build a new line from Quebec across western Maine to connect with the New England grid. In practice, that approach would face tough obstacles.

History provides one lesson.

In 1987, Central Maine Power Co. reached an agreement with Hydro-Quebec to build a 140-mile line running from the border near Andover to Pownal. The $4 billion contract, for 300 megawatts, would have lasted until 2016.

But property owners and environmental groups fought the plan, and the Maine Public Utilities Commission killed it two years later. In a 2-to-1 ruling, regulators said CMP needed to look first at energy efficiency and buying power from small, instate producers.

As it turned out, falling oil prices made those small hydro, waste-to-energy and biomass contracts very expensive, and inflated Maine's electric rates for years to come. But the decision highlighted a policy that favors instate, renewable power production, a preference that continues to have wide support in Maine.

Events playing out now in New Hampshire hold another lesson.

For two years, Hydro-Quebec and two U.S. partners, Northeast Utilities and NSTAR, have been trying to build a 180-mile line through New Hampshire. The line would bring up to 1,200 megawatts of power onto the regional grid.

But landowners and conservation groups that oppose the $1 billion project's route through the White Mountain National Forest have wrestled the plan to a standstill. Last month, project developers announced they had come up with a new route, but it's unclear if that will break the logjam.

A COMPLICATED CALCULUS

In Maine, Hydro-Quebec would face a different process today.

The Legislature has created a review panel to consider transmission projects in three state-designated energy corridors. It's now looking at a Canadian proposal to lay underground power lines along interstate highways and the Maine Turnpike, from Orrington to Tewksbury, Mass. Power would be generated in northern Maine and the Canadian Maritimes.

One requirement is that new lines don't harm transmission opportunities for energy generators in Maine. It's a rule that again shows the influence of Maine's alternative power generators, now dominated by the wind power industry and papermakers that operate biomass plants.

This influence will be on display this winter, if, as expected, LePage reintroduces legislation aimed at courting Hydro-Quebec.

It's a complicated calculus, but in a nutshell: Renewable energy producers in Maine under 100 megawatts are rewarded with premium rates when they sell their energy.

Wind projects over 100 megawatts are also eligible for these rates; however, LePage wants to remove the 100-megawatt cap for all sources. He thinks that will open the door for larger generators -- namely Hydro-Quebec -- to offer low-cost supply here.

LePage and many Republicans also detest the taxpayer subsidies that help support wind power development, which they say drive up rates.

Wind developers and their allies in the construction field will fight any changes, of course. But LePage is also getting flak from one of Maine's largest employers -- the pulp and paper industry. Seven paper mills have invested more than $154 million in wood-fired generators that qualify for the premium rates, and they've made it clear that they don't want Hydro-Quebec competing in the market.

LITTLE CHANGE IN 30 YEARS

In the end, this fight may be over nothing. LePage was unable last year to get his 100-megawatt cap change through the Legislature, when Republicans were in charge. He's not likely to do better, with Democrats that favor local renewables. Beyond that, not much has changed since Gordon Weil and Joe Brennan went to Montreal, more than 30 years ago. Maine continues to enjoy a cultural closeness with its neighbor, but after all the happy talk, discount power is reserved for Quebec.

And as for the myth that Canadian hydroelectricty is "cheap," current development costs would argue otherwise.

Hydro-Quebec is phasing in a multi-year project near James Bay called Eastmain-1-A/Sarcelle/Rupert, 900 miles north of Quebec City. It will have a total capacity of 918 megwatts, comparable to the output of a nuclear power plant.

The project will cost more than $5 billion. Hydro-Quebec says the cost of producing power at the giant dams is roughly 5 cents/kwh, and it will be sold for more. That could put the retail price in the 7 cents/kwh range -- similar to what CMP home customers who buy electricity this spring from the standard offer will pay. 

Staff Writer Tux Turkel can be contacted at 791-6462 or at:

tturkel@pressherald.com

 

Were you interviewed for this story? If so, please fill out our accuracy form

Send question/comment to the editors




Further Discussion

Here at PressHerald.com we value our readers and are committed to growing our community by encouraging you to add to the discussion. To ensure conscientious dialogue we have implemented a strict no-bullying policy. To participate, you must follow our Terms of Use.

Questions about the article? Add them below and we’ll try to answer them or do a follow-up post as soon as we can. Technical problems? Email them to us with an exact description of the problem. Make sure to include:
  • Type of computer or mobile device your are using
  • Exact operating system and browser you are viewing the site on (TIP: You can easily determine your operating system here.)