The IBEW recently sent a letter to New Hampshire legislators touting the value of the Northern Pass transmission project and warning of the dire consequences of any legislative action involving state energy policy.
|IBEW Letter to Legislators|
Northern Pass Transmission Project Question and Answer
The letter included an enclosure titled “Northern Pass Transmission Project Question and Answer” – containing ten questions with ready-made answers directly from the IBEW.
We provide REAL answers below to the same 10 questions that the IBEW used in its mailing, and we are also adding three new questions up front that may be of interest.
REAL Question 1: Why does the New Hampshire IBEW support Northern Pass when IBEW officials in New York strongly oppose a similar transmission project as a job-killer?
New York’s IBEW Local 97 and the state’s IBEW Utility Council have come out strongly against New York’s Champlain-Hudson transmission project because these kinds of exclusive import lines would cost jobs on a net basis, not create them.
According to the New York unions, accepting new transmission lines designed solely to import Hydro-Quebec power would be tantamount to “throwing upstate generators under the bus for a buck, potentially destroying hundreds of jobs and devastating the tax base of local communities. This exclusive cable from Canada will not allow any New York State power generation to compete, which will also set back renewable energy development in the state. Bad news for our battered economy.” The New York IBEW article can be found here.
Northern Pass would be exactly the same bad trade-off for New Hampshire. Northern Pass is a fixed extension cord hooking Hydro-Quebec into the New England grid. Northern Pass will have no “on ramps” for New Hampshire power producers to get their electricity to the market. New Hampshire energy producers are shut out.
Northern Pass does nothing to address the issues of transmission capacity inside New Hampshire that are hamstringing our own renewables development. As the recent tax dispute between Coos County and the 99 MW Granite Reliable wind farm shows, constraints on the state’s own internal transmission capacity are forcing new wind farms to operate at well below their rated capacity. This puts existing projects at risk and chills future developments.
Northern Pass favors Hydro-Quebec but disadvantages our home-grown renewable energy efforts. Any minor, temporary job creation from building the lines would be more than offset by the loss of the job opportunities that would flow from a more vibrant, competitive, home-grown New Hampshire renewables sector.
And we haven’t even talked about the loss of jobs Northern Pass would cause in tourism, hospitality, home-building and related businesses. Doesn’t the IBEW have electricians who work in these sectors?
We won’t speculate as to what may motivate New Hampshire’s IBEW to support Northern Pass. In our view, the IBEW’s position does not seem to be based on logic, analysis, review of the impacts of similar proposals in other states, a true concern about jobs, or any understanding of New Hampshire values.
REAL Question 2: Who stands to benefit from Northern Pass?
Not the people of New Hampshire! Just follow the money … to Hydro-Quebec, Northeast Utilities and PSNH (a wholly-owned subsidiary of Northeast Utilities).
Northern Pass is an elective, private, non-needed transmission proposal. No regulator at the federal, regional or state level asked for Northern Pass. It is all about making money for the project sponsors. The project sponsors’ claims of jobs, tax revenues, energy price savings, greenhouse gas reductions, fuel diversity and other supposed benefits merely disguise the embarrassingly large sums of money that Northern Pass stands to make at New Hampshire’s expense.
As an arm of the Quebec government, Hydro-Quebec will have the exclusive right to use 100% of the capacity of the Northern Pass lines to export HQ’s electricity to demand load centers in southern New England. Increased exports are a critical part of HQ’s long-term business plan, because unregulated exports make more money than regulated domestic sales. At recent New England wholesale prices, the 1200 MW line will produce more than $20 billion (yes, $20 billion!) of electricity export sales for HQ over the life of the project.
As the owner of Northern Pass, Northeast Utilities will receive guaranteed profits paid by Hydro-Quebec. NU has won approval from federal regulators to charge Hydro-Quebec the now-infamous 12.56% profit margin on the investment in the project. This means NU will reap annual payments exceeding $68 million each year. These profits will go to NU and its investors, with nothing for New Hampshire ratepayers.
PSNH proposes to lease roughly 100 miles of existing transmission lines rights of way (ROWs) to Northern Pass. The lease payments have not been disclosed, but we estimate they will be up to $50 million each year. This would represent a huge subsidy to this financially troubled utility and would help Northeast Utilities keep PSNH afloat.
Add up the numbers and we see that the project sponsors – HQ, NU and PSNH – stand to collect more than $700 million each year from Northern Pass. Even if Northern Pass’s claims of public benefits were accurate, and they’re not, any public benefits are absolutely dwarfed by the money that will flow to the private sponsors of this project.
REAL Question 3: Why is new legislation needed to update the state’s energy framework to account for private, for-profit, non-need transmission lines?
Private, for-profit, non-need transmission lines are a new phenomenon. They present a wide range of new issues that are not addressed by the state’s current legislative framework.
The state’s approach to transmission lines was developed many years ago when all new transmission lines were subject to an extensive planning and review process and a “need” determination that included allocation of the costs to ratepayers. Regulators made certain that new projects served a clear, identified public need (for example, rural electrification), because the public would be on the hook to pay project costs.
Private, for-profit, non-need transmission lines are entirely different. There is no limit to the number of individual projects that may be proposed or built because the projects are not part of any unified plan or process and are not subject to the disciplined scrutiny that accompanies ratepayer funding. There is no regulatory determination of need and no regulator even asks for the projects. The lines are proposed solely to make money for the transmission developers.
As a result, there is no process whatsoever – at the federal, regional or state level — for careful identification and balancing of all public benefits and all public costs. At the state level, the New Hampshire Site Evaluation Committee considers only a sharply limited set of approval criteria that are widely understood to tilt the playing field toward project approval. That may have been all that was required for old-school transmission lines that were already deemed necessary after a detailed, rigorous regulatory examination, but it’s not enough in the new world of private, for-profit, non-need lines that can meet NH SEC criteria while at the same time imposing massive “externalities” or costs on the state.
The new energy legislation under consideration this session would address what is missing in the evaluation of these new private, merchant projects that arrive unexamined on our doorstep. Should private, for-profit transmission lines be required to be placed underground, so that private sponsors cannot reap excess profits by imposing visual blight and other externalities on New Hampshire communities? Should state ROWs – highways and rail beds – be made available for siting underground transmission lines? Should the NH SEC approval criteria be updated and revised so they better fit the new world of private, for-profit, non-need lines? How should new generation and transmission development dovetail with the state’s renewable energy goals and other energy policies? Should a temporary moratorium be placed on new transmission line projects until these basic issues are resolved by the legislature, or to give the state time to adopt an energy policy?
These are important, serious energy policy issues that belong squarely in front of the legislature. It is disheartening to see the IBEW’s efforts to derail these legislative and policy discussions by mischaracterizing them as an attack on an individual project.
The questions posed by the IBEW are answered below. Click on each image to read the answer provided in the IBEW Question and Answer document.
The REAL Answer
We start with four points to correct the IBEW’s misleading impression of “1200 jobs”.
First, the jobs study prepared by Northern Pass’s hired economist left out half the equation. The economist estimated new job creation from construction of the lines, but did not include any offset for job losses caused by the Northern Pass’s massive negative impacts. The project will adversely affect the state’s tourism, recreation, hospitality and new home construction sectors, among others. As just one example, literally thousands and thousands of acres of residential development land will be reduced to no-build or low-value build status because of the damaging visual impact of the lines. Every home that does not get built because of Northern Pass represents a dead-weight loss of several jobs a year during the construction period. Also, the declines in real estate values will cause a negative “wealth effect” among affected property owners, reducing their spending and causing a ripple effect through the state’s economy.
Second, with only a handful of exceptions, any new jobs from Northern Pass will be temporary, lasting only during the three-year construction period. Northern Pass’s best case does not involve any significant permanent job creation.
Third, much of the temporary job creation is calculated by a black-box model that purports to run spending through the economy and estimate new job creation. It works like this. The model assumes a construction worker in Coos County will spend, say, $10 on lunch. Put this together across all the construction work and, voila, the model spits out, say, 25 new jobs in burger joints. These are counted as Northern Pass jobs. After the recent financial-engineering-based market meltdowns, does anyone really believe these black box models anymore?
Fourth, Northern Pass’s claims of temporary job creation are vastly overstated. A competing jobs analysis conducted by PolEcon Research (January 2012) knocked Northern Pass’s jobs estimates down by more than 50%. Two REAL members who manage forest land and conduct regular clearing operations tested Northern Pass’s analysis of new logging and land clearing jobs against their own detailed numbers and concluded that Northern Pass’s estimates were overstated by at least 300%.
And finally, let’s look at the actual question – will any new jobs be for New Hampshire workers? As we understand it, the construction of high-voltage, direct current transmission lines is a highly specialized business requiring extensive worker expertise. We simply don’t believe the high-quality temporary construction jobs will stay in New Hampshire. We expect they’ll be filled by experienced out-of-state crews.
In sum, the claimed job figures do not allow for the likely job losses in other sectors and are based on a discredited model, the work itself would be temporary and the best of the jobs would go to trained out-of-state crews.
IBEW Question 2: Will this project lower electricity costs for New Hampshire homeowners and businesses?
The REAL Answer
Northern Pass’s claims of lower electricity prices are just plain wrong. One need look no further than PSNH’s most recent rate increase on January 1, 2013, a whopping 34% increase in the default energy service rate from 7.11 cents/kWh to 9.54 cents/kWh. PSNH is the largest electricity supplier in the state, accounting for the majority of statewide customer sales. The average residential family will see its PSNH bill go up somewhere in the range of $6-$8 per month, just from this single increase.
Looking forward, PSNH’s rates are going in only one direction, up, because of the company’s strategic mistakes and mismanagement. Even using Northern Pass’s best case claims of price savings (roughly $1.00 per month for the average family), the claimed savings would be simply overwhelmed by PSNH price increases of this magnitude.
And Northern Pass’s claimed wholesale price savings of $20-$35 million annually in New Hampshire – equating to roughly $1.00 per month for the average residential family — don’t add up. This claim is based on a 2010 study of wholesale price effects by Northern Pass’s own consultant. The study’s methodology and findings have been challenged by a newer review (PA Consulting Group, June 2012) that finds much lower wholesale price changes than claimed by Northern Pass.
Even if we assume some wholesale price effect from the additional supply of power via Northern Pass, it is uncertain how much, if any, of the savings may flow through to retail customers. For example, PSNH has a substantial portion of its energy supply provided via long-term, fixed price contracts. This means PSNH, and its customers, have only partial exposure to any wholesale price changes. PSNH customers will pay the supply contract’s fixed price plus PSNH’s expenses and profit margin, not reduced wholesale prices.
The IBEW claims that customers may see savings because of future power purchase agreements between Hydro-Quebec and New Hampshire utilities. If these arrangements made any sense for New Hampshire, why aren’t they in place right now, as they are in Vermont? And why would Hydro-Quebec sell power on a long-term basis at a discount to wholesale prices? That would be financially irrational.
IBEW Question 3: Will this project provide additional taxes to the state and local communities?
The REAL Answer
Northern Pass and the IBEW claim Northern Pass will generate $22-$27 million in increased tax payments to our communities. This is demonstrably false.
First, the claimed additional tax revenues are based, once again, on only half the equation. Northern Pass and the IBEW omit the offsets that will come from lower tax receipts due to property devaluations. With literally thousands of properties set to be impacted by Northern Pass, towns can expect a large wave of tax abatement requests if the line is built. The net tax impact may be negative for some towns and for the state as a whole.
Second, the IBEW fails to disclose that the claimed tax revenues are written with disappearing ink. The transmission lines will be depreciated for tax purposes starting immediately, and the tax assessment will go down in tandem. Depending on the depreciation rate and other factors, the tax assessment of the line could drop by 50% (or more) during the initial phases of the project.
Third, there is no mention by the IBEW of the common practice of “utility tax terrorism” in New Hampshire. Once utility projects are up and running, it is standard practice for the project owners to go town-by-town seeking tax abatements and threatening litigation if their demands are not met. Small towns with limited resources for legal counsel and valuation experts find themselves almost powerless. An example of this can be found here.
Northern Pass has given no assurances of which we are aware that it will refrain from similar attempts.
IBEW Question 4: Will the power from this project stay in New Hampshire?
The REAL Answer
No! The IBEW can try to blind legislators with some faux physics, but they can’t change the facts.
According to ISO-New England, New Hampshire generates roughly 70% more electricity than it consumes. New Hampshire is a net exporter of electricity. All else held equal, additional supplies of energy to the New England market obviously will not be coming to New Hampshire. If Northern Pass is built, additional supplies will go to demand load centers in southern New England, particularly Massachusetts and Connecticut.
The IBEW’s attempt at glossing over the facts with a discourse on electrons is ridiculous. Think of it this way. With New Hampshire already a net exporter of electricity, if a new wind farm is built and the wind developer sells 100% of the production to a utility buyer in Vermont, does anyone commonsensically think that the power is somehow staying in New Hampshire and providing New Hampshire benefits because electrons are fungible? Of course not. And Northern Pass is no different. The power would go to areas that are net importers.
IBEW Question 5: Will Northern Pass use eminent domain to build this project?
The REAL Answer
No, but not for the reasons stated by the IBEW.
Northern Pass will not use eminent domain because the New Hampshire legislature adopted HB 648 to prohibit private, for-profit, non-need projects from seeking eminent domain. But for HB 648, we believe it is 100% certain that Northern Pass would have sought to abuse private property rights by applying for eminent domain authority. Northern Pass’s own filings with the federal government disclosed the intention to use eminent domain.
The IBEW claims Northern Pass has all the necessary property rights to build the transmission lines along the existing PSNH transmission corridors from Groveton south to Deerfield. This is untrue.
Northern Pass does not have any rights to cross the White Mountain National Forest. Any WMNF crossing on the proposed route will require a new, discretionary special use permit from the US Forest Service. The permit may not be issued unless the Forest Service finds, among other things, that there is an “overriding public need” for the transmission lines and there are no practical alternatives that don’t involve a WMNF crossing or involve less impact. We believe that Northern Pass, as a private, for-profit, non-need project, and one that could be sited elsewhere with less impact, clearly does not meet the high hurdles for a WMNF crossing.
There are also substantial issues with the existing PSNH rights of way elsewhere along the proposed route. Specific deed language limits tower heights in certain areas to no more than 60 feet. In other areas the existing ROW is too narrow to safely accommodate multiple lines. Some parts of the existing ROW were acquired by eminent domain and their use is limited to the electrification projects covered by the eminent domain petitions. Across the entire ROWs we expect to see disputes and litigation regarding the “overburdening” of the corridor by placing Northern Pass’s massive towers and lines on rights of way that were not intended for this use. Similarly, the existing ROWs were not intended to be used by private, for-profit, non-need lines, raising questions as to any future use by Northern Pass or similar projects.
Any purported transfer of land use rights to Northern Pass for the existing PSNH corridor would require a specific approval by the NH Public Utilities Commission. We would expect any such proceeding to be sharply contested by stakeholders and the public.
IBEW Question 6: Can the line be built underground?
The REAL Answer
Yes. The SB 361 Commission specifically found that it is technically and economically feasible to bury transmission lines such as Northern Pass along state-owned rights of way. Two other major projects in the region – Northeast Energy Link and Champlain-Hudson Power Express – have proposed buried lines. There is no longer any credible argument that line burial somehow doesn’t work or is too expensive.
The IBEW makes the wholly unsupported claim that using buried lines could cause “thousands of local jobs” to be lost to specialized out-of-state companies. Seeing as the IBEW and Northern Pass claim only 1200 total construction jobs, and much of the work would involve land clearing (local and unspecialized), it is difficult to make any sense of the IBEW’s position.
Follow the money. The main reason Northern Pass opposes buried lines, which would be most sensibly sited on already graded and softened state highway or rail rights of way, is to keep the project sited largely on PSNH’s existing transmission corridor. This way PSNH can collect rental fees (ultimately financed by Hydro-Quebec) to shore up PSNH’s weak financial position. If the lines are buried along state ROWs, the state will collect the rental payments from Northern Pass.
IBEW Question 7: Can the Northern Pass project be constructed in existing state-owned rights of way, such as Interstate 93?
The REAL Answer
Yes. This was an explicit finding of the SB 361 Commission.
IBEW Question 8: Will this imported renewable energy displace local green energy projects?
The REAL Answer
This is a real risk.
New Hampshire renewables generators sell substantial portions of their output to out-of-state utility buyers. If other New England states act on current proposals to expand “renewables” definitions to include large Canadian hydro, New Hampshire renewables producers may lose these markets. There are active discussions in Connecticut and Massachusetts on expanding the definition.
Depending on the pricing terms, any long-term power purchase agreements between Hydro-Quebec and buyers in the New England region could also displace local green projects.
We emphasize that unlike a traditional “reliability” upgrade to the transmission grid, Northern Pass does not make any improvements to the grid that can help New Hampshire renewables producers. Northern Pass gives Hydro-Quebec an advantaged route into the market while offering nothing but more challenges to our local renewable industry.
IBEW Question 9: Do large-scale hydroelectric reservoirs produce large amounts of methane (a greenhouse gas)?
The REAL Answer
Yes. Large-scale hydro projects, including Hydro-Quebec’s own developments, emit large amounts of greenhouse gases during the initial phases of operation. This has been confirmed by recent research at Hydro-Quebec’s Romaine facilities. See the research paper here, particularly chart and discussion at p.15. A summary is here.
The bottom line is that large-scale Canadian hydro is not “green”. With greenhouse gas emissions during initial periods exceeding those of natural gas-fired power plants, large Canadian hydro is no solution to global warming concerns.
Equally important, the massive environmental destruction that accompanies the construction of the reservoirs and dams, including re-routing rivers, flooding vast areas and destroying natural and wildlife habitat, is a powerful negative in any objective evaluation of these projects.
In REAL’s view, it is clear that the new Quebec hydro projects that would feed electricity to Northern Pass would not be permitted to be built in the United States because of the environmental damage. To accept Northern Pass is to accept the environmental injustice of “outplacing” environmental destruction from our own communities to the First Nation homelands in Quebec.
IBEW Question 10: What is the impact on the wood-fired (biomass) plants? Will this project force them to close?
The REAL Answer
Northern Pass won’t necessarily force the biomass generators to close, but it will present new challenges for them. See the discussion above regarding displacement of local green energy projects.