Regulators signs off on Hydro-Quebec deal

MONTPELIER — State regulators approved a long-term power deal between 20 Vermont electric utilities and Hydro-Quebec, and on Monday Gov. Peter Shumlin and the utilities touted the agreement as a win for the state.

“It’s a great development for Vermonters,” said Shumlin. “Hydro-Quebec is clean, green power.”

For decades Vermont has relied heavily on Hydro-Quebec for electricity, and the approval by regulators of the 26-year contract means that will continue. The deal means Vermont will rely less on Hydro-Quebec than it currently does, though utilities could seek additional contracts.

Starting in November 2012, Vermont utilities will buy up to 225 megawatts of power from Hydro-Quebec, which equals roughly one-fourth of the state’s current electricity use.

Vermont now gets about one-third of its power from Hydro-Quebec. The price for electricity under the contract starts at 5.8 cents per kilowatt-hour. Utilities now pay more than 6 cents per kilowatt-hour for Hydro-Quebec electricity but were able to get a favorable starting rate because current prices are relatively low, said Robert Dostis, a spokesman for Green Mountain Power, the state’s second-largest utility. 

The Public Service Board approved the deal Friday, culminating a process that began when Vermont utilities and Hydro-Quebec singed a memorandum of understanding in March 2010. The two sides signed a contract last August, and the Public Service Board has been reviewing the deal since then.

The board’s approval was not a surprise, said Steve Costello, a spokesman for Central Vermont Public Service, the state’s largest utility. But it’s a crucial step that solidifies the contract.

“Until it’s a done deal, it’s not a done deal,” Costello said.

The approval by regulators comes as Vermont tries to map out its energy future. Hydro-Quebec and the Vermont Yankee nuclear plant provide roughly two-thirds of the state’s electricity, according to the Public Service Board.

Vermont Yankee is scheduled to go offline in March 2012, though the company that owns the plant has filed a lawsuit in federal court to try to keep the plant running. The bulk of the existing contract with Hydro-Quebec is scheduled to end in 2015. The prospect of Vermont’s two largest electricity contracts expiring played a role in the Public Service Board’s decision to approve the Hydro-Quebec deal.

The Public Service Board listed a number of other reasons the contract was in the interest of Vermont. They include competitive, stable prices; a “price-smoothing” mechanism that buffers the state from price swings; and the utilities will get “environmental attributes,” because the Legislature declared large-scale hydro-electricity a renewable source of power last year, the board said. The utilities could potentially sell the environmental attributes to utilities in other states.

“Given these benefits and the utilities’ clear need to replace the power from expiring contracts, the Board has concluded that the HQ (power purchase agreement) will promote the general good of the State,” the board wrote.

Dostis said Green Mountain Power was seeking less power from Hydro-Quebec in an effort to diversify its portfolio. “Part of it is, you don’t want to put too many eggs in one basket,” Dostis said. Dostis and Costello both said the deal with Hydro-Quebec fills a list of criteria.

“It’s baseload power, it’s virtually there every minute you need it, it’s what we call ‘system power,’ meaning it’s not from one or two sources but from a broad system of generation sources, and it’s clean and renewable,” said Costello.