A Bad Deal with Hydro-Québec

Vermont Yankee Might Close, and Vermont Was Desperate

In recent years, Vermont bought 10% of Hydro-Québec (HQ) power. In return, Vermont gave HQ 40% of its profits. Not good for Vermont.

New power agreements with HQ were announced this year. Are they better? No. They were deals struck by a desperate Vermont legislature, who saw both Vermont Yankee and HQ power in jeopardy. If the state couldn't do a deal with HQ, and Vermont Yankee closed, then Vermont would lose 2/3 of its power within about two years. The legislature had to do a deal with HQ. "Having to do a deal" is not the best negotiating position, and the negotiation results were exactly what you would expect in that context.

Here's the mess they made.

1. We Hereby Anoint Your Power "Renewable"

In a previous post I explained how HQ sold 10% of its power to Vermont, but made 40% of its profits on that sale. I also quoted a Canadian friend: Don't you guys realize that we only want your money?

Actually, the Canadians wanted more than our money. They wanted acknowledgment that their dams provide "renewable power." Renewable power will find buyers in many states, because many utilities must fill a "renewable energy portfolio." Large hydro projects have rarely been labeled renewable though small hydro has been.

To be able to purchase Hydro-Québec power, the Vermont legislature passed a special bill labeling HQ power renewable. This has not made environmental groups within Vermont happy. As Boston.com reports: Jake Brown with the Vermont Natural Resources Council calls the legislation "a dangerous precedent." Brown says it'll undercut any efforts to grow small renewable projects in state. As one environmentalist blog noted: Ginny Lyons (D-Chittenden) went so far as to say the contract would be “in jeopardy” without the change (that is, the contract with HQ would be jeopardy if we didn't call their power renewable).

In other words, HQ didn't just want our money. They also wanted our honor. They got it, too. I believe little "green" Vermont is the only state in the Union that labels big hydro renewable.

2. This Deal Has to Stay Secret

Vermonters will never know much about the deals with HQ. Transparency is not part of the package.

HQ is selling power to Green Mountain Power (GMP), Central Vermont Public Service, and Burlington Electric. VPR reported that Burlington Electric was faced with a problem with the HQ deal. Burlington Electric is supposed to have all major power purchases put to public vote. However, HQ has been adamant that price information not be disclosed. It is not clear how Burlington Electric is going to get around its own transparency requirements. I am sure Burlington Electric will think of a way to please HQ by not revealing what it is required to reveal. After all, Burlington needs the power.

Green Mountain Power hasn't been happy with this secrecy either. VPR also reported that Robert Dostis of GMP said public disclosure of the contract terms has been an issue. However, HQ is standing firm on keeping the terms of the deal quiet. Hydro-Quebec spokeswoman Ariane Connor said the company would not disclose certain competitive price information..... "From our point of view it's not an issue. Commercially sensitive information will not be made public."

In other words, don't bother to ask. HQ won't tell.

3. It Isn't Really A Deal. It's Electricity Bought at the Market. It's An Adjustable Rate Mortgage.

But maybe it's a good deal, right? I mean, the Vermont legislature had to vote HQ a special green label, and the deal is secret, but maybe we are getting really cheap power. Or maybe it's power at a guaranteed rate, at least. Not cheap, but steady.

Well, no. It's market-price power, with some smoothing. As the Montreal Gazette explains:

Although the details of the contract were not made public, Hydro-Quebec president and CEO Thierry Vandal said the initial price in 2012 will be 6 cents a kilowatt hour -the same price Vermont pays now.

A price-smoothing clause will keep the price in the middle of the going market rate for the duration of the deal. Vermont consumers, officials argued, get protection from price swings while Hydro gets a higher return when prices slide.

So, the deal with HQ is like an adjustable rate mortgage. The power prices go up and down with the grid prices, but move a little more slowly. Adjustable rate mortgages are often considered to be the mortgage of choice for buyers that don't quite qualify for a fixed rate mortgage.

Vermont couldn't qualify for a fixed rate contract with HQ. We couldn't qualify for a better deal. We had to take whatever they would give us, and they are giving us market price power. (By the way, HQ says they will give us more of the same, if we shut down Vermont Yankee and need more of their power. You can take the words "give us more of the same" any way you choose.)

The Legislature and the Prices

All last year, my local Vermont representative kept saying that he couldn't vote to relicense Vermont Yankee unless it was a really good deal for Vermonters, and he hadn't heard a really good deal yet. (He sometimes scowled at me at that point. He made it clear that he was protecting the pockets of the people of Vermont, and I was just a nuclear advocate.)

Yet I am sure this same man voted for the bill that calls HQ power "renewable" and agreed with the secret deal for HQ power at market prices.

Wow. If they would just give Vermont Yankee, with its local payroll, the deal they are giving HQ!

It won't happen, of course, because Vermont Yankee is our in-state provider, and its regulators can push it around. In summary, to quote my earlier post:

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

Addendum: Power Price Context

I thought I should give a little background here, to show the deal in perspective.

Current:

Vermont Yankee is currently selling power to Vermont at 4.2 cents per kWh. According to its original Memorandum of Understanding, after 2012 it could sell power at the market rate, but would share revenue with the utilities when the market price of power went above 6.1 cents. As I write this, the ISO -NE price for power is about 5.7 cents, but it will vary--the ISO-NE day ahead price map shows an average price of 7.4 cents. HQ sells power to Vermont at about 6 cents. Feed In Tariffs for renewable power range from 12 to 30 cents.

Looking ahead:

Vermont legislators objected to the market price of power/revenue share deal that they signed in 2002 (Memorandum of Understanding). They have pressured Entergy to give a better deal. The negotiations are on-going, and nothing has been formally announced. According to both plant proponents and plant foes, the word-on-the-street is that Entergy has offered 6.1 cents as a fixed price. In contrast, HQ has offered only market pricing, and of course, without revenue sharing.

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

Historical interest rates from Wikipedia.

Secrecy Yes and Secrecy No

In recent days, Entergy and the NRC (separately) have attempted to control information. In the first case, I believe Entergy was justified in its actions. In the second case, I believe the NRC should rethink their plans.

(I'm a blogger. I have opinions. I share them.)

The Legal Probe Report: Secrecy Yes

In February, Entergy hired a law firm (Morgan Lewis and Bockius LLP) to conduct an internal probe of the misstatements and miscommunications about the buried piping. On February 24, Entergy issued a press release stating that the law firm had found Entergy employees did not intentionally mislead people. The press release also stated that the entire report of the probe had been turned over to the Vermont Attorney General. The same report was also provided to the Public Service Board.

This month, Entergy asked that the Public Service Board seal (not release to the public) any parts of the report that did NOT have to do with underground piping. Information related to underground piping would be released.

This seems reasonable to me. There are some generally accepted reasons why certain types of information and deliberations are kept private by public groups such as selectboards, school boards, public service commissions and so forth. I am not a lawyer, but I have noticed how public boards behave:

• At the whiff that a lawsuit is pending, the board usually goes into closed session. If you have attended a town selectboard meeting (or school board or zoning board meeting), you know that closed sessions are sometimes held right after the public meeting. Visitors are asked to leave, lawyers show up, and the board holds a closed meeting. (In most cases, this occurs when the board itself is being sued, but can also happen when the board is party to a lawsuit in some other manner.)

• When personnel matters are involved, the meeting is closed. The board can get itself sued big time for making personnel issues public. School principals are fired in closed session. Policemen are reprimanded in closed session. And so forth.

In the case of the Entergy internal legal report, both factors come into play. Entergy is being sued, and personnel matters are almost certainly involved in the report. Entergy asked that information about the underground piping be revealed to the public, and other information be sealed. That is the appropriate thing to do. Hopefully, the Public Service Board will be aware of how it must treat confidential information, and it will honor Entergy's request.

Aside: Of course, Entergy's request led to predictable outcries from the Conservation Law Foundation (CLF), which would love to see everything, since CLF is suing Entergy. Basically, CLF wants VY shut down so their natural gas plant can make more money. End Aside.

NRC Excludes Press: Secrecy No

The NRC recently issued an invitation to a meeting for legislators to ask questions about Vermont Yankee. The meeting is to take place in New Hampshire. Neither the public nor the press is invited. According to the NRC, they hold meetings of this type for stakeholders regularly, and such meetings allow legislators to ask questions and receive answers without fear of being quoted or misquoted in the press.

As far as I can tell, an informational meeting is probably not in violation of sunshine laws, though the line between legislators-gathering-information and legislators-deliberating seems way too fuzzy to me. These meetings could be in violation of sunshine laws. Anti-nuclear activists definitely think the sunshine laws are being violated.

I can understand why the NRC would choose to hold a closed meeting. The public meetings are not just contentious, they can be dangerous. In spring 2009, local activist Sally Shaw attended an open meeting with NRC and Entergy. She walked up to the table and spread manure on papers and into water glasses. Letters-to-the-editor applauded her actions. In a separate incident about Vermont Yankee, the PSB building was attacked with deer-urine. Most of the open meetings turn into complete circuses, with people shouting, pretending to have loud intercourse, singing and drowning out the speakers. You get the picture.

Despite all of this, the NRC will hold a seven-hour-long open meeting on the same topics on April 12. This meeting is described in the article about the closed meeting.

What is my conclusion about this? The closed meeting may or may not violate the sunshine laws. A separate open meeting will be held. The open meetings often turn into circuses. All sorts of reasons to hold a closed meeting, I guess.

My conclusion: I object to the NRC holding a closed meeting.

It's simple. If you want people to trust the NRC and trust the plant, you have to be open. You answer questions for everyone, with the press in attendance. That's almost the definition of "open."

This does not mean you have to put up with disruptions, deer urine, manure, people shouting and singing and drowning out the speakers. Such actions violate laws (from disorderly conduct through assault). Security measures at the meeting are the correct answer to these problems. Secret meetings are the wrong answer.

This Just In

The Rutland Herald reports that the NRC is canceling the closed meeting.

The illustration shows the building at Westminster which was the home of the infamous British Star Chamber court. Its deliberations were secret and its judgments could not be appealed.