Critics: Baker hydropower bill could harm energy market
On its surface, Gov. Charlie Baker's bill to encourage large-scale adoption of hydropower by Massachusetts utilities appears to take a reasonable crack at reducing carbon emissions, a requirement of legislation passed in 2008.
But while it may be aptly designed to achieve that by reducing dependence on fossil fuel-based power in favor of water-generated electricity, industry sources say it could work to deregulate the energy market in the Bay State at the expense of power suppliers and consumers.
The bill was filed with the state Senate on July 9. In a statement, Baker the bill is “critical to reducing our carbon footprint, meeting the goals of the … Global Warming Solutions Act and protecting ratepayers already stuck by sky-high energy prices.” The act requires a 25-percent reduction of carbon emissions from 1990 levels by 2020, and an 80-percent reduction by 2050. According to the Baker administration, the bill would achieve 5 percent of the needed reduction.
Baker's plan relies heavily on Canadian hydropower, a vast resource there. For its part, Canada is keenly interested in exporting it to utilities in the Northeast, especially New York and New England, so its interests are aligned with Baker's strategy.
The bill would require Massachusetts utilities and the Department of Energy Resources to issue requests for proposals for long-term contracts of 15 to 25 years with hydropower suppliers for about 1,200 megawatts, with up to 2,400 megawatts to be bought. The bill has language that adds wind suppliers to the process, with hydropower shoring up wind power since the latter's supply varies. But the primary focus is on contracting for hydropower.
The bill's language doesn't specify that suppliers must be Canadian firms, which are provincially-owned entities. But because there are pending proposals by utilities to build transmission projects that would tap into Canadian hydropower resources, industry insiders say it's clear that the goal is to harvest Canadian hydropower.
It's a goal many power industry leaders aren't comfortable with. James Bride, president of Boston-based Energy Tariff Experts, has cautioned his clients about the bill's potential costs for consumers.
An advisor to companies on managing energy costs, Bride predicted that the cost of buying new hydropower from Canada will be passed on to consumers. While wholesale prices to the utility may not differ much from current sources, the cost of new projects Canadian suppliers must complete to export to New England will show up on retail bills, he said.
Four times the power?
Bride estimated that Baker's bill effectively means that up to 40 percent of the power to be purchased could come from hydropower suppliers, more than four times the current nine percent, according to ISO New England, the region's grid operator. Bride said it's akin to “re-regulation” of the market, after it was deregulated in most of New England in the 1990s. Then, transmission, generation and distribution were broken up so that one large company was not controlling all three.
Bride is skeptical that large-scale hydropower adoption is required to meet the obligations of the 2008 legislation. He noted that the renewable energy market has seen healthy growth under legislation designed to foster its adoption, and that's already leading to a drop in carbon emissions.
“I don't think it's fair to say we have to do this to meet the obligations of the Global Warming Solutions Act,” Bride said.
Another skeptic is Dan Dolan, president of the New England Power Generators Association. “This has the potential to completely undermine the competitive marketplace in Massachusetts,” he said.
But Ned Bartlett, undersecretary with the Executive Office of Energy and Environmental Affairs, said Baker's plan has the potential to significantly alter the market and introduce new competition for power suppliers. Bartlett said that while renewable resources such as solar and wind aren't steady enough to compete with traditional, fossil-based fuels, hydropower is, and that may threaten suppliers.
Bartlett also addressed another claim: Industry insiders have speculated that the bill props up the largest utilities, particularly Eversource, New England's largest energy provider.
Eversource has publicly discussed its need to build new transmission infrastructure for its viability, and has proposed to do that with Hydro-Quebec, one of the major hydropower suppliers poised to benefit under Baker's bill.
Bartlett said the bill is designed to include both small and large suppliers of hydropower, making it possible for locally-based suppliers to participate in the RFP. But he added that Hydro-Quebec will likely bid for the project. He also noted that incorporating renewable sources like solar and on-shore wind into contracts is an important and sincere component of the bill.
Eversource spokesman Michael Durand, in an email response in support of Baker's plan, pointed to a joint action plan by all six New England governors that focuses on making energy more affordable, specifically recognizing hydropower's potential impact on customer costs.
“The transmission of competitively priced hydropower will lead to a reduction in the wholesale price of energy, so it's not surprising that those who today control the majority of existing power plants in the region might criticize the effort,” Durand wrote.
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