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Growing transmission costs are raising region’s electricity rates



Monitor staff
Wednesday, October 05, 2016

The cost of moving electricity around New England, not just creating it in the first place, is a big part of the reason why power costs so much here, panelists were told at an energy summit Monday.

“When I was on the PUC, we gave very little attention to the transmission piece of the customers’ bill because it was rather small in comparison to the large energy segment and distribution costs,” said Susan Geiger, who was a public utilities commissioner for a decade and is now an attorney focusing on energy matters.

No longer.

Wholesale transmission costs – fees for moving electricity long distances, before it travels along streets via lower-power distribution lines – are rising fast. They make up about 11 percent of the average Eversource ratepayer bill in New Hampshire compared with just 2 percent of the bill in 2006, figures that are “similar for other utilities in the state,” said PUC Commissioner Robert Scott.

“There’s a troubling trend here,” Scott told the crowd that filled a ballroom at the Concord Holiday Inn. “New England is an outliner – with the highest transmission costs compared to any other region.”

Transmission costs are still a much smaller portion of electricity bills than the cost of creating electricity, which takes up about half of most bills. But this sharp increase is drawing attention.

Late last year FERC, the federal agency that regulates many aspects of electricity production, opened an investigation into why New England transmission costs are so high.

Scott and Geiger were among the panelists who discussed transmission costs during the morning-long summit, an annual gathering put on by the New Hampshire Independent Energy Council.

The panel, which featured quick appearances from a half-dozen candidates for statewide office, discussed topics that have long been at the forefront of the debate about New England’s electricity. These included the region’s large and growing dependence on natural gas as a fuel to create power, and the difficulties that current technical and financial models have in coping with the increase in distributed and renewable energy.

The issue of transmission has usually cropped up only in relation to the Northern Pass project, which seeks to take electricity from hydropower dams in northern Quebec and carry it through New Hampshire into the regional grid. That project barely came up in the session about transmission costs, however.

Scott mentioned possible reasons for the transmission cost increase, including the large number of projects designed both to make the electric grid more robust and to expand it. He said more than 600 transmission projects of various sizes have been built in New England since 2002, with an additional 200 planned to be in service by 2019.

But he criticized what he said was lack of cost oversight on projects.

“Some of these costs are driven by fairly high equity returns and large cost overruns. . . . From 2004 to 2008, cost overruns ranged from 30 percent to 400 percent,” he said.

Scott was critical what he called excessive use of waivers by ISO-New England, which oversees the regional power grid. These waivers allowed transmissions projects to be built without competition, partly to speed them up.

These costs are passed to rate payments through what is know as the RNS, or Regional Network Service, a cost that is shared among all six states in the New England grid.

ISO-New England has long maintained that its most important job is to keep the electric grid reliable and to avoid blackouts. Scott said it was possible this mandate had led to the grid being overbuilt in some places.

“One question I have is how much reliability do we need – that’s a hard question to have, hard discussion to have,” he said.

The third panelist in the transmission discussion was Dan Dolan of the New England Power Generators Association, an association of owners of power plants who are happy to draw attention to the cost of transmitting energy along power lines owned by utilities, rather than the cost of generating it from their own facilities.

Dolan said that New England had the lowest congestion charges in the country. These are temporary spikes in power plants’ cost of sending electricity over transmission lines, which come about when too many producers want to use the lines at once.

Dolan said the low congestion charges makes his group happy, but may be a sign that the regional grid is actually overbuilt, like a road system that never fills up because too many lanes of highway were built.

“A certain level of congestion may be economically viable,” Doland said.

(David Brooks can be reached at 369-3313, dbrooks@cmonitor.com or on Twitter @GraniteGeek.)