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Mass. utilities seek approval of Hydro-Québec power supply deals

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Mass. utilities seek approval of Hydro-Québec power supply deals

Three Massachusetts electric utilities have asked state regulators to approve recovery of the costs of power to be supplied by Canadian utility Hydro-Québec pursuant to 20-year contracts to be delivered over a proposed Maine power line.

In separate July 23 filings, Eversource Energy subsidiary NSTAR Electric Co., Unitil Corp. subsidiary Fitchburg Gas and Electric Light Co. and National Grid USA asked the Massachusetts Department of Public Utilities to allow them to recover the costs of proposed power purchase agreements and transmission service agreements. The utilities also asked to recover an additional 2.75% of both the PPA and TSA amounts to reflect the utilities' "financial obligation" burdens.

Under the contracts, negotiated on behalf of the state of Massachusetts to meet a mandated clean energy procurement, Hydro-Québec subsidiary H Q Energy Services Inc. will deliver 9.45 TWh of firm hydropower over Central Maine Power Co.'s proposed 1,200-MW New England Clean Energy Connect transmission project. The $950 million high-voltage, direct-current project by the Avangrid Inc. subsidiary is slated to run 145 miles from the Canadian border in western Somerset County, Maine, to a new converter station in Lewiston, Maine.

In a separate filing the same day in support of the utilities' petitions, the Massachusetts Department of Energy Resources, or DOER, told the DPU that levelized cost of the contracts for power and associated transmission is 5.9 cents/kWh in 2017 dollars over their 20-year term. The levelized price includes 4.8 cents/kWh for energy and environmental attributes and 1.1 cents/kWh for transmission, said the state agency. The contracts reveal that during the first year consumers would pay 5.15 cents/kWh the hydroelectricity before gradually rising to about 8.24 cents/kWh in the contract's final, 20th year.

DOER said the total price is significantly below the projected cost of buying the same amount of energy in the wholesale market and projected state Clean Energy Standard compliance costs, expected to total 7.5 cents/kWh over the 20-year term of the contracts.

On Twitter and in a recent press release, however, the New England Power Generators Association slammed the "carved-out contract" for seeking to "smother competition" by forcing consumers to purchase power at prices higher than ISO New England's wholesale prices, which averaged $3.39 cents/kWh in 2017.

The DOER said additional benefits of the contracts include ratepayer price certainty and a commitment of $50 million to low-income customers over 40 years. Overall, the total direct and indirect benefits to Massachusetts ratepayers from the long-term contracts are expected to be 4 cents/kWh, with total net benefits of approximately $4 billion, said the DOER.

In addition, the DOER noted that importing 9.45 TWh of emissions-free hydropower will result in 47% of electricity consumed within Massachusetts being generated by clean energy resources and emissions reduction of about 37 million metric tons of carbon dioxide equivalents from 2019 to 2040.

Finally, the DOER said the hydro-backed transmission project will mitigate ISO-NE's growing dependency on natural gas-fired generation and relieve the region of pipeline constraints that hike energy prices and threaten blackouts during extreme winter weather. "Winter delivery is guaranteed in the contracts, and the developer will face damages if delivery is inconsistent with the terms of the contracts," the DOER said.