Paying environmental tribute to neighboring states

Paying environmental tribute to neighboring states

Mass. may fork over millions in ‘mitigation’ payments

THE BIDS ARE IN: Developers of transmission for hydroelectric energy from Canada, wind from Maine, and solar power from all over New England sharpened their pencils, negotiated with property owners, conducted environmental assessments, and lobbied political leaders for years in anticipation of Massachusetts’ biggest renewable energy RFP. When the cost of energy and the transmission to bring it into the market are added up, the contract ultimately awarded will entail billions of dollars of payments by the electricity consumers of Massachusetts.

The question no one is asking, however, is how much of that total is going to our neighboring states in the form of “mitigation” – generous payments sent to host communities. These tolls are getting so expensive that they beg the question of whether we should pay the tolls or develop our own renewables off the coast of the Commonwealth.

Eight transmission projects submitted bids, and several of the developers of power from the north have showered especially lucrative commitments for benefits on towns, states, and environmental entities:  Eversource’s Northern Pass, and Blackstone’s New England Clean Power Link will offer a cocktail of wind and hydro (or hydro only, if the buyers prefer) from Quebec via New Hampshire (Northern Pass) and Vermont (Power Link).

In the absence of eminent domain — not available for these projects because they are not essential for electric reliability — it may be necessary to offer mitigation payments to localities, states, well-placed environmental groups, and private landowners over or under whose property easements are required. These payments are the straw that stirs the drink of any infrastructure project, whether they’re highways or skyscrapers or water mains. Mind you, the mitigation payments are on top of the usual costs of the infrastructure, including property taxes and state income taxes.

It is very difficult to define precisely how much mitigation payment is too much. Most would agree that, as they continue to increase, at some point the payments will be seen as a form of profiteering, whose costs ultimately are borne by Massachusetts ratepayers.

At a minimum, Massachusetts consumers should know how much these mitigation and customary payments amount to over the 20-to-40-year lives of these projects. The total cost of energy that will be bid into the Clean Energy RFP will include the payment for electricity, the cost of building the transmission project (likely between $1 and $2 billion), and these mitigation payments. Sometimes the payments aren’t obvious, so one has to mine whatever information is available to obtain a complete picture.

For example, the Vermont Public Service Board provided some information on the Blackstone project in an order dated January 5, 2016. “The total direct economic benefit of the project in Vermont during the construction and commercial operation periods is estimated to be approximately $1.935 billion,” the order said. “This benefit includes $509 million in public good benefits, $900 million in taxes and required lease payments, $215 million in direct spending during construction, and $309 million in direct spending during operation.”

In the case of the Northern Pass, Eversource has created the “Forward New Hampshire” program. The website for the program indicates its benefit to New Hampshire totals $3.8 billion, including a “$200 million fund to support community betterment, economic development, clean energy and tourism initiatives in NH, with emphasis on the North Country; $30 million annually in new tax revenue for New Hampshire’ $7.5 million for North Country Jobs Creation Fund; and $3 million for Partners for NH Fish and Wildlife program.”

It’s time to ask why transit states should receive such extremely high compensation for facilitating an energy source that provides an important public good to the entire region. Are the neighboring states ultimately taking advantage of the Commonwealth’s desire to use clean energy? If so, is this really the way to create “a more perfect union” between like-minded states that are trying to reduce carbon emissions?

Meet the Author
For those who think the Commonwealth’s consumers should not have to make such payments, there is a choice. There is also an RFP for wind energy off the southern coast of Massachusetts, and offshore wind is a viable alternative to imported energy. No extra payments to other states or provinces are required. As always, competition helps to reduce costs, and it would certainly be in the interest of Massachusetts consumers to turn offshore if the demands for mitigation payments from neighboring states render the costs of imported electricity unreasonable.

Edward N. Krapels in the president and CEO of Anbaric Development Partners.

  • NortheasternEE

    We are told that local coal and nuclear power plants are forced into early retirement because they at not economically viable. Yet, replacing their power with Canadian Hydro, and offshore wind promises to send rates sky high.

    The unintended consequence of the war against the polluting power of coal is forcing the early retirement of non polluting nuclear power as well. When done, natural gas from Pennsylvania will be the primary source of power. Canadian hydro and offshore wind will be inconsequential add-ons.

    The replacements will leave us with a less reliable grid, skyrocketing rates, little to no avoidance of carbon, and Global Warming to boot!

  • Jon

    Legislators and regulators are outsourcing the Massachusetts energy supply to other states and even other countries. How secure is that and once our state is dependent on out-of-state energy resources, the price premium will increase since there are no local alternatives.