Is Baker having a Cape Wind moment?

GOV. CHARLIE BAKER’S PROPOSAL to import hydropower from Canada would end up raising electricity prices in Massachusetts and have limited impact on reducing carbon emissions, according to a report released Wednesday by a group representing the region’s existing power plants.

The report, written by Susan Tierney of the Analysis Group, said Baker’s legislation would authorize the state’s utilities to solicit long-term contracts for power equal to one-third of the state’s electricity usage. The utilities, if a deal is approved by state regulators, would pass the cost of the contract along to their customers.

Tierney said the price of the power, once the cost of a transmission line to bring it down to southern New England is included, would be well above market levels. She estimates ratepayers would pay $777 million a year in above-market costs.

The report also disputes the Baker administration’s claim that such a large-scale hydroelectric contract is needed to help the state reach its climate change goals. Tierney said the state’s existing power plants have already met their 2020 emission targets and bringing in such large amounts of hydroelectricity could hurt that effort. She said the hydroelectricity imports could end up increasing emission levels by crowding out other power generators such as nuclear power plants, which have zero emissions.

The New England Power Generators Association, which commissioned Tierney’s report, views hydropower generators from Canada as competition and wants to keep the wholesale power market pretty much as it is. The generators sell power in New England at their own risk, meaning that, if they are unable to sell their electricity in New England at a profit, they have to absorb any losses. The association feels hydroelectricity producers from Canada should abide by the same rules and not put the financial risk on ratepayers for the duration of the 15 to 25 year contract.

Baker was questioned by an industry official about the “massive government intrusion into the market” at an event last week and he bristled at the suggestion the New England electricity market is competitive.  “We pay somewhere between the highest and the second and third-highest rates for electricity in the county. That’s a fact. So whatever’s going on in our competitive market, it’s not very competitive,” Baker said, suggesting the hydro power contracts will bring down electricity ratesl

The US Bureau of Labor Statistics said on Wednesday that the average price of a kilowatt hour of electricity in Boston in August was 17.9 cents, compared with 14.2 cents nationwide.

Tierney doesn’t say so in her report, but in an interview she said the contracting arrangement Baker is proposing for hydropower is similar in some respects to the one former governor Deval Patrick used in contracting for power from Cape Wind. National Grid and Eversource negotiated long-term contracts with Cape Wind at above-market prices; the contracts lapsed when Cape Wind was unable to come up with financing for the project. Baker, when he ran for office in 2010, called the Cape Wind contracts “sweetheart deals” that benefitted Cape Wind at the expense of ratepayers.

Baker’s hydroelectric proposal is different from Cape Wind in several key ways. Instead of purchasing power from a single supplier, the Baker administration, through local utilities, would seek bids from multiple suppliers in Canada and presumably scrap the deal if no bid was satisfactory.

At the same time, the utilities would be contracting for 33 percent of the state’s electricity needs, far more than the 3 percent envisioned by the Cape Wind contracts. The utilities who would be involved in the hydropower deal could also have a financial stake in the outcome. Both Eversource and National Grid are involved financially in projects to build transmission lines to bring hydroelectricity from Canada.

Tierney said she supported the Cape Wind deal because ratepayers were being asked to pay above-market rates for power to kick-start what would have been the nation’s first offshore wind farm. She said hydropower from Canada is not a new technology deserving of any subsidies.

In a statement, the Baker administration said it “has prioritized reducing and stabilizing the rising cost of energy for consumers and remains committed to pursuing innovative opportunities to ensure a diversified energy portfolio, including both solar and hydropower, that are cost-effective for ratepayers and environmentally-conscious. We are confident that the hydro proposal will spur Massachusetts utilities to jointly, and competitively, solicit long-term contracts for small and large-scale clean energy generation resources and associated transmission infrastructure, enabling the Commonwealth to procure cost-effective resources and meet our Global Warming Solutions Act goals.”