Gambling ratepayer dollars on Canadian government-owned hydropower is a bad bet for Massachusetts. Gov. Charlie Baker’s proposal to carve out a third of the Commonwealth’s electricity market for Canadian provincially-owned utilities, such as Hydro-Quebec, will increase energy costs, take away local jobs, and harm the growing clean energy sector.
All of this comes at a time when billions of dollars in new investments in clean energy production are being made in the Commonwealth – without any state contracts or subsidies. This trend had led to low wholesale power prices and is driving substantial reductions in carbon emissions.
Instead of lowering energy bills, long-term and large-scale hydro contracts will create major costs for consumers and businesses. A recent study by the Analysis Group, one of the most respected economics consulting firms in North America, shows that these contracts with Hydro-Quebec could cost Massachusetts ratepayers a massive $777 million in above market, or extra, costs each year – more than $20 billion over the life of the contract.
To put the cost in perspective, because of their sheer size, the contracts are likely to be six times more expensive than Cape Wind for Massachusetts households, businesses, and communities over the life of the contract. The Hydro Quebec legislation proposed by Gov. Baker would be for 33 percent of all electricity consumed in Massachusetts; the Cape Wind contracts were for roughly 3 percent. This new legislation is a bad idea taken to an extreme.
There are a variety of reasons for this. First, wholesale electric prices in the Commonwealth are at near record lows – and are less than half the cost of Hydro-Quebec. Why would government-owned Hydro-Quebec, which has its own interests to consider, sell power to Massachusetts at a below market price? It won’t.
Another reason for the very high cost is that Commonwealth ratepayers would be on the hook for the construction of expensive and controversial high voltage transmissions lines, currently proposed through places like the White Mountain National Forest. Right now, those transmission lines are still years away from construction.
Another cost is the potential loss of billions in new investments and hundreds of new jobs in Massachusetts. Tying up a third of the Commonwealth’s electricity market for 15 to 25 years would distort the competitive energy landscape and stifle billions of dollars in new investments to build facilities and hire workers in cities and towns throughout Massachusetts.
These market-based investments are currently being made without state contracts or ratepayer subsidies. It’s not fair for Massachusetts ratepayers to subsidize Hydro-Quebec – the eighth largest utility in the world – so that the utility can send its most expensive power here. Just as concerning is the impact on Massachusetts’s existing power plants, which provide more than 2,000 jobs and nearly $100 million in tax dollars.
Finally, Massachusetts does not need Hydro-Quebec in order to meet its carbon reduction goals.
Massachusetts’s power sector is among the cleanest and lowest carbon-producing in the nation. Carbon emissions from electricity production here have decreased 51 percent between 1990 and 2013, according to the US Energy Information Administration. The electric sector has significantly outpaced every other sector of the economy in reducing carbon emissions and is the primary reason Massachusetts is on pace to meet its economy-wide mandate to reduce emissions 25 percent by 2020.
Power generators help drive the Commonwealth to continued carbon reduction, power the economy and spur clean energy innovation. Unfortunately, relatively little has been done to curtail carbon emissions in transportation and other industries. At the same time that Massachusetts has cut emissions from electricity production in half, across New England the transportation industry has actually increased its carbon emissions and now emits more than double that from power plants. And yet, no comprehensive plan has addressed transportation as the main hurdle to meet long-term Global Warming Solutions Act mandates.
Massachusetts residents and businesses want reliable power, not to be second in line. It’s no secret that provincially-owned utilities like Hydro-Quebec will give first preference to Quebec’s energy needs – particularly in the event of an emergency. Nearly all the shortage events occurring in New England during the past 18 months have been caused by hydropower and transmission failures, which happen when delivering large amounts of electricity from hundreds of miles away through some of the country’s least hospitable terrain and weather.
Even more troubling, under Gov. Baker’s proposal, Hydro-Quebec would be exempt from the same rigorous delivery standards required of Massachusetts energy suppliers. The bill currently being considered would allow Hydro-Quebec to interrupt the energy supply in Massachusetts without penalty during periods of stressed conditions, unlike the strict standards for all New England-based plants.
The governor’s hydro bill is a bad bet for Massachusetts consumers, sending billions of their dollars from Massachusetts to a Canadian government-owned utility. The Legislature should reject the bill. Hydro-Quebec doesn’t deserve the subsidy.