The truth about electric rates and Northern Pass

In her May 12-25 NH Business Review opinion column, “Northern Pass just isn’t worth it,” Judy Reardon repeated a fundamental misunderstanding of the potential benefits that a transmission project like Northern Pass can deliver to families and businesses in New Hampshire and the region.

Energy analysts don’t have crystal balls, so there is no way of knowing for certain exactly how much Northern Pass will save New Hampshire’s ratepayers — economic models vary from $10 to $60 million in annual ratepayer’s savings.

According to Reardon, she would only save $13 a year on her electric bill after Northern Pass is in operation and that isn’t enough savings to justify the project. But what she ignores is the reality that there is no single silver bullet solution or project that will dramatically cut your electricity bill in one fell swoop.

If we employed her logic for each and every proposed project, no improvements would ever be made. Any incremental reduction in electricity rates is good for consumers and the economy — especially manufacturers whose savings from Northern Pass would be tens, if not hundreds of thousands of dollars every year.

Reardon further argues that consumers can save more per kilowatt-hours by switching to competitive suppliers instead of purchasing default energy service. What she fails to mention is that those competitive supply rates to New Hampshire customers will also be lower because of Northern Pass’s impact on wholesale energy market prices.

Recently, Marcellus and Utica shale developments have blessed energy markets with low-cost natural gas and corresponding low wholesale electricity rates for much of the year; and Mother Nature has temporarily rescued New England from its natural gas pipeline capacity constraints with a couple of mild winters. However, capacity payments are going to double this year (and increase by an additional 30 percent in 2018-19), offsetting some of the savings in wholesale electricity rates, which is why families and businesses haven’t seen substantial retail savings despite all the chatter about record-low wholesale energy prices. 

Reardon cites a recent report by UNH’s Carsey School of Public Policy which concluded that large-scale transmission projects like Northern Pass aren’t needed to bring down energy costs. The study is seemingly based on the premise that it was perfectly fine for New England to have 60 percent less GDP growth than the rest of the country and somehow surmised that “New Hampshire businesses and residents actually pay the same or less for electricity than in other parts of the country,” despite the data showing that New Hampshire’s industrial electricity rates are more than twice those of states like Georgia, Arkansas and North Carolina.

Those states have seen manufacturers like Foss, Sig Sauer, HK and Sturm, Ruger & Co. expand operations there rather than in their home state of New Hampshire. 

The one thing Reardon got right was the fact that the price we pay for transmission has increased substantially over the past decade, but that only tells half of the story. Many transmission investments have been made to address reliability concerns caused by retiring power plants throughout the region. Additionally, those investments have resulted in $500 million in energy market savings each year by reducing line losses and congestion — which will more than pay for the transmission investments over time.

Mild winters won’t last forever and our Balkanized electricity “market,” subject to the whims of elected officials trying to override market forces, will continue to drive out valuable baseload power plants in favor of heavily subsidized, inefficient and intermittent renewable resources.

The real economic reality is that New Hampshire has lost 15 percent of its manufacturing jobs in the past decade, median income has declined during the same period and more people are working two jobs than ever before. So, when the business community — especially large manufacturers like BAE Systems and Whelen Engineering — speak out about the need for projects that can lower electricity rates so that they can keep jobs here instead of moving them to Texas or Arkansas perhaps we should listen to them, and not Judy Reardon. 

Marc Brown is the executive director of the New England Ratepayers Association.

Categories: Opinion