New England Energy: What Were They Thinking? George Coppenrath Guest Post

What were they thinking?

Observers of the New England energy scene can be forgiven for asking “what were they thinking” when New England’s state energy planners backed building 25 cent/kilowatt-hour wind projects while opposing reliable, existing, low-cost generators like Vermont Yankee nuclear power plant.

They were thinking New England would have endless amounts of “fracked” natural gas; they were wrong. Contrary to “expert” predictions of just a few years ago, demand has outstripped deliverable supply causing prices to climb steadily and spike drastically when the weather is at its hottest and coldest.

 They were thinking New England could always buy more Canadian hydro power; they were wrong. As with natural gas, there’s not enough transmission capacity. Efforts to build new power lines have yielded controversy, spending, but no new cross-border transmission.

And finally, they were thinking that closing a big, base load nuclear power plant or two would push New England utilities into the waiting arms of intermittent solar and wind power; they were wrong. You cannot replace base load power sources with intermittent ones, so electric utilities were instead forced into the waiting arms of high carbon fossil fuel.

 In short, they thought their foresight and strongarm regulatory tactics would bend the region’s energy market to their will. The market is bent, but instead of the result they wanted, they got the worst case scenario: higher emissions and higher prices which damage New Englanders' quality of life and increase costs to businesses.

 ---------
This op-ed column was written by George Coppenrath of Barnet, Vermont.  He is a former Vermont Senator from the Caledonia Orange District.  Within the Vermont Senate, Coppenrath served on the Natural Resources and Energy Committee.  His column has appeared in several newspapers in Vermont.

His column is also quoted extensively in today's excellent post at NEI Nuclear Notes: In a Pit in Nuclear-Free Vermont.

You Better Be Good--to Your In-State Customers

Utility Truths

Among utilities, it is a truth universally acknowledged that the customers in your regulatory jurisdiction are always in need of a good deal. You had better give them a good deal. You had better be good--to your in-state customers.

Your in-state regulators are the ones that can impose new rules and fees. You want those regulators to think of you as wonderful people who are saving money for their ratepayers. You want to make your in-state regulators look good.

Out of State and Out of Mind: Heaven Help the Marks!

On the other hand, when a utility looks toward out-of-state or out-of-country customers: for these customers, the truth is different. The truth is more like "God Save the Mark!" Or in this case, "Heaven Help the Marks."

I was thinking of this when a Canadian friend emailed me recently. He said (slight paraphrase)

That VPIRG guy on the debate....he sure made a sales pitch for HydroQuebec (HQ) power. Don't you guys realize that we only want your money?

My friend was referring to James Moore of VPIRG's comments on our recent debate. Like many of those opposed to nuclear power in this state, Moore has great faith in future purchases from HydroQuebec.

But my Canadian friend said the Canadians only want our money. This is a truth acknowledged even by the HydroQuebec web site.

The Profits Flow North. The Profits Come from Vermont.

The HQ annual reports tell the story. The HQ 2009 annual report show this very telling graph (you can doubleclick on the graphics to enlarge them)

In 2009, HQ exported 10% of its power...and made 30% of its profits on the export. And that wasn't even a good year for HQ exports. In the 2009 report, HydroQuebec noted that the falling revenue was due to more difficult market conditions

In the HQ 2008 Annual Report, we see that in previous years, HQ made a far higher portion of its profits on exports. In 2007 and 2008, they made around 40% their profits on 10% or less of their sales. These profits came from the export sales. Basically, little Vermont is subsidizing the power prices of everyone in Quebec.

Bad Guys Up There in Canada? No, Not Bad Guys. Utilities.

I don't want to pick on HQ here. As I said in the first paragraph, if you are a power plant or an entire utility, you give the customers in your regulatory jurisdiction the good deal, and make profits from customers elsewhere. As far as I know, the same is true with Vermont Yankee. The Memorandum of Understanding calls for VY supplying 4.2 cent per kWh to Vermont utilities. That price is only for Vermont utilities. More than half of VY power is sold out of state. I believe that the out-of-state prices for VY power follow the market. I think most VY profits come from the out-of-state sales.

In short, as we get ready for the holidays, let's resolve to be good to our in-state power suppliers. Because the in-state suppliers are the ones who will be good to us! Opponents may talk about HydroQuebec power being available to Vermont. However, by the nature of utilities in general:

We will never get as good a deal from HydroQuebec as we get from Vermont Yankee. We're the Export Market for HydroQuebec and the In-State Market for Vermont Yankee.

Important Note: A few days ago, Dan Yurman had a very insightful blog post about Shumlin and Vermont Yankee. Why Peter Shumlin Will Save Vermont Yankee. I recommend it highly.

Image of Spillway of Robert-Bourassa Generating Station from Wikipedia.