Energy: New England Power Generators Association calling potential deal that would see Hydro-Québec buy NB Power ‘uncompetitive’
A group of New England’s power utilities is calling a potential deal that would see Hydro-Québec buy NB Power “uncompetitive.”
The New England Power Generators Association argues Hydro-Québec will then have a monopoly over transmitting power into the region through its acquisition of NB Power’s transmission lines.
Angela O’Connor, president of the group, said the northeastern United States also cannot compete on supplying power with the Crown utility, the largest hydroelectric generator in the world.
“It kills our competitive market,” O’Connor said in an interview Friday.
“You have policymakers here in New England that are looking to support and promote their own local renewable resources and use the competitive market to do that.”
More than a decade ago, new regulation in New England meant most utilities were not allowed to act as both generators and transmission and distribution companies; firms are now much smaller as a result.
An agreement between New Brunswick and Quebec announced last week in Fredericton, if approved, would see Hydro-Québec buy NB Power for nearly $4.8 billion and offer a five-year power rate freeze to New Brunswick residential ratepayers, as well as discounted industrial power rates.
The deal would mean Hydro-Québec has control of New Brunswick’s transmission lines into Maine and most of the 1,000 megawatts of booked up capacity.
Hydro-Québec has publicly stated its desire to export power to New England and the company is building both new energy projects and transmission to that end.
Frank Sabatino, a Connecticut-based independent consultant in the utilities and power generation industry, said the NB Power takeover would reduce market competition, in turn pushing up power rates.
“I think what it will do is make it a little more difficult to negotiate to get good power deals from the Canadians,” said Sabatino, who previously served as senior vice-president of power marketing at Northeast Utilities.
“You used to be able to buy power from Hydro-Québec or try to buy power from New Brunswick but now it will be one company,” he said. “I think it will be bad from that perspective.”
Steven Stoft, a California-based consultant who has worked for ISO New England in designing its energy market, said in emergency situations where U.S. buyers have needed power in a pinch, Canadian companies with market sway have hiked rates to up to $10,000 per megawatt-hour, as opposed to the average $50 to $60 per megawatt hour.
“It’s like you went to the gas station and instead of being $4 it was $400 a gallon,” said Stoft, who previously worked as an economist at the U.S. Federal Energy Regulatory Commission and wrote the book Power System Economics: Designing Markets for Electricity.
If utilities in New England are upset enough at Hydro-Québec’s market participation, they can complain to the Federal Energy Regulatory Commission.
Gordon Weil, a Maine-based power industry consultant and author of several research papers for the Atlantic Institute for Market Studies (AIMS), believes this is exactly what would happen.
“I think if the acquisition of NB Power takes place and it does in line with the MOU (memorandum of understanding) as it now stands, I would think it would be likely that the matter would be raised at FERC,” Weil said.
The regulatory commission investigates utilities and grants them licences to either earn market-based rates for the power they sell, or cost-based rates if they are deemed a player large enough to influence the market.
“The easy way to say it is, if you have market power, you are denied market pricing,” Weil said. “A player like Hydro-Québec wants to have market pricing. Everybody wants to have that.”
Barbara Connors, a spokeswoman for the commission, said her agency has no opinion of the planned utility takeover.
“At this time the transaction between Hydro-Québec and NB Power is a Canadian issue, it’s not a FERC issue,” she said, adding that any investigation into the Quebec utility’s market share would be done later, if the deal goes through.
ISO New England, which oversees the wholesale and bulk power markets in the region, does not yet have a position on whether the buyout will affect local competition, said spokeswoman Erin O’Brien.
“From a markets standpoint, this announcement and the change in ownership is still in its very early stages so it would be premature to predict the possible outcome it could have on New England’s power market.”
A spokesman for Hydro-Québec could not be reached for comment.