In the deregulated electricity environment, anyone can propose a new transmission line for any reason. Northern Pass is being proposed to provide Hydro-Quebec with a new “connector” to sell its excess electricity generated in Canada into the New England grid to serve pockets of demand in southern New England. Northern Pass is all about the profit potential for Hydro-Quebec and the other corporate sponsors.
By using 100% of the capacity of Northern Pass, Hydro-Quebec stands to make additional export sales (i.e., in addition to today’s levels) of up to $39 billion to $59 billion over the 40-year proposed life of the lines. The revenue and profit potential for HQ are so large that HQ is willing to pay an above-market 12.56% return on equity to Northeast Utilities and NStar, the technical owners of the Northern Pass project vehicle. This is roughly $70 million per year in a project structure that involves, in REAL‘s view, no material risks to the equity owners.
Northern Pass is being proposed because of its exceptional revenue and profit potential to the corporate sponsors, not because of any regulatory need or public benefit.