Plugging In/ Energy/ Environment

Pricing hints on Hydro-Quebec power

Leaked Ontario contract indicates cost could be high

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A LEAKED POWER CONTRACT between Hydro-Quebec and the province of Ontario may offer some insight into what kind of deal the utility is currently offering Massachusetts for hydro-electricity.

The proposed contract, obtained by the French language publication La Presse, indicated Hydro-Quebec was offering Ontario a 20-year contract for 8 terawatt hours a year of electricity at a price of 6.12 cents per kilowatt hour. After the contract terms were reported, Ontario officials confirmed they were negotiating with Hydro-Quebec but had rejected the proposed contract terms because the price was too high.

In Massachusetts, Hydro-Quebec has submitted six different bids with three different transmission partners on a clean energy contract totaling 9.45 terawatt hours of electricity a year. Hydro-Quebec has not disclosed its pricing terms in Massachusetts, but the provincial utility would provide the electricity and its partners would deliver it from the Canadian border into New England. Most insiders view Hydro-Quebec as a lock to win at least a portion of the contract.

Dan Dolan, president of the New England Power Generators Association, said the pricing in the Ontario proposal supports his contention that the Massachusetts clean energy contract, combined with another ongoing bid process for offshore wind, will result in the highest rate increase for electricity in state history.

Dolan, a critic of the state’s decision to contract for clean energy without going through the region’s existing wholesale power market, said Hydro-Quebec is offering Ontario a high price for electricity even though no new transmission lines would be needed to deliver the power and Ontario is close to where the power will be generated.

“To me, it has to be seen as the floor price of what Hydro Quebec would offer to Massachusetts,” Dolan said. “It just makes no sense from my perspective.”

Serge Abergel, a spokesman for Hydro-Quebec, said it is impossible to compare the Ontario and Massachusetts contract negotiations. First, he said, the Ontario contract is in Canadian dollars, meaning the price would be 4.8 cents per kilowatt hour in US dollars. He also said Hydro-Quebec was offering Ontario a fixed price contract throughout the year, which makes it difficult to compare to spot prices that fluctuate on a daily basis with the weather and demand.

“The spot market price is not representative of the price the rest of the year,” he said.

According to the operator of the New England power grid, the average wholesale electricity price in New England was nearly 2.9 cents a kilowatt hour last year, the lowest level since 2003. Over the last 13 years, the average wholesale price in New England went as low as 3.6 cents a kilowatt hour in 2012 and as high as 8 cents in 2008. The average wholesale price went above 4.8 cents in 2014, 2013, 2010, and 2003 through 2008.

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About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

But Dolan said the cost of electricity in the proposed Ontario contract is just for delivering the power over existing transmission lines. By contrast, all of Hydro Quebec’s proposals for Massachusetts require the construction of transmission lines likely to cost billions of dollars, which could significantly increase the price of the delivered power.

Dolan said those transmission construction costs could nearly double the price , but Abergel of Hydro-Quebec said that’s not necessarily true. He said power suppliers have to pay the cost of delivery whether they use existing or new transmission lines, and suggested the price differential might not be that great.

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