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Consultant: Northern Pass will produce $578M in annual savings for New England

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Consultant: Northern Pass will produce $578M in annual savings for New England

A cost-benefitanalysis of 's proposed NorthernPass transmission line found that ISONew England Inc. consumers will save roughly $578 million a year throughthe line's delivery of 1,090-MW of hydropower from Hydro-Québec. However, the New England Power Generators Associationmaintains that the project will result in $777 million in annual above-market costs.

Eversource'scost-benefit report, which was prepared for Eversource affiliate by consultantLondon Economics International LLC, was made publicly available on March 28 as theNew Hampshire Site Evaluation Committee considers the proposed , high-voltage, direct-currenttransmission line. The report, which analyzed the $1.6 billion project's benefitsfrom 2019 through 2029, expects retail electricity savings in the wholesale energyand capacity markets to peak in 2023 and subsequently decline.

AssumingHydro-Québec bids into the wholesale market at zero dollars, the report's authorsexpect the proposed transmission line will decrease wholesale energy prices by 60cents per MWh to 80 cents per MWh from 2019 through 2029. In total, wholesale marketbenefits from Northern Pass average between $851 million and $866 million annuallyfor New England, with energy market benefits ranging between $80 million and $100million annually and capacity market benefits ranging between $843 million and $848million annually. Estimated annual production cost savings average between $330million and $425 million.

"Ifdelivered natural gas prices or carbon allowance price were projected to be higherin the forecast time horizon, or if New England experiences higher demand withoutadditional supply coming to market, we would have much higher wholesale energy marketbenefits," the report said.

Citinga July 2013 heatwave and the January 2014 polar vortex, which resulted in day-aheadenergy prices as high as $218/MWh and $529/MWh, respectively, the report said hydropowertransmitted on Northern Pass can be "extremely valuable to New England's consumers"when load peaks during the summer or natural gas supply becomes constrained andexpensive. The transmission project "can serve as a form of physical insuranceagainst the impact of such events, protecting consumers from at least a portionof the higher market cost that are consequence of such events," the reportsaid.

The reportfurther stated that the "more efficient dispatch and flow of hydroelectric-basedimports from Québec" on the transmission line will also lead to reductionsin greenhouse gases and other pollutants, including 3.3 million to 3.4 million metrictons of avoided carbon dioxide emissions a year in New England.

Importinghydropower from Canada to cut emissions has been at the heart of proposed legislationby Massachusetts Gov. Charlie Baker seeking to force Massachusetts utilities tosolicit long-term contracts for large amounts of hydropower. Canadian hydropoweralso could come into play with the request for proposals issued in November 2015 by the Connecticut Departmentof Energy and Environmental Protection and local utility subsidiaries of EversourceEnergy, National Grid USAand Unitil Corp. thatserve Connecticut, Massachusetts and Rhode Island. Both efforts have been by the New England PowerGenerators Association for being unfair and uncompetitive.

NEPGAExecutive Director Dan Dolan said Eversource's cost-benefit report does not assumeany cost to consumers from the sought-after contracts under the request for proposalsor the Massachusetts legislation, S.B.1965. The redaction of some parts of Eversource's analysis make it "impossible"for a full review of the project's costs, Dolan said.

A report by the AnalysisGroup concluded Baker's legislation would burden consumers with $777 million inabove-market costs annually for 15 to 25 years, Dolan said. But Hydro-Québec describedthe Analysis Group report as flawed in its assumptions regarding energy prices andtransmission costs for importing hydropower from Québec.

"NorthernPass has consistently failed to show what the total costs of its project would bewhen the subsidies it seeks are incorporated," Dolan said. "The overalldelivered cost must be considered for a full and accurate accounting of the costsfor consumers, particularly as it appears that Northern Pass is trying to use economic'net benefits' as a key feature for approval by the New Hampshire Site EvaluationCommittee."

Dolansaid NEPGA is also concerned that New Hampshire rules aimed at preventing affiliatedutilities and energy companies from favoring each other are not strong enough asthe state Public Utilities Commission decides whether to approve the leasing ofright of ways by Eversource Energy to its affiliate, Northern Pass TransmissionLLC, for the project.

EversourceEnergy spokesman Martin Murray dismissed these criticisms and took issue with thesource. "NEPGA's criticism of the Northern Pass project is born of economicself-interest," Murray said. "Its members control about 80% of the existingpower generation in the region and they will rake in billions of dollars in 'capacity'payments over the next several years; that is revenue above and beyond what theywill earn from the sale of energy."

NorthernPass will provide "much-needed rate relief and energy supply stability,"which will hinder the ability of NEPGA's members "to continue to profit fromthe region's energy crisis and its effect on consumers," Murray said.