Fergus Cullen: Northern bailout -- PSNH, public assets and private profits
THE FUSS ABOUT the Northern Pass energy transmission project’s northernmost 47 miles, the part starting at the Canadian border in Pittsburg and heading south through the White Mountains, is a distraction. What’s really driving the project’s proposed route is the other 140 miles, from Coos County to Deerfield, tracing Public Service of New Hampshire’s existing right-of-way.
That right-of-way is worth a fortune. PSNH needs Northern Pass to monetize the right-of-way by turning it into a lucrative toll road for Canadian-generated power en route to higher value markets in southern New England. The right-of-way was granted to PSNH because the utility served the public interest by providing power to New Hampshire customers. The toll money would not go to ratepayers, though. It will go to stockholders of Northeast Utilities, PSNH’s parent company. Thus would the value of public assets be transferred to private interests without compensating New Hampshire ratepayers.
PSNH estimates the Northern Pass project will cost $1.4 billion. Since the project’s botched rollout three years ago, the company spent $40 million buying land in the North Country to control alternate routes to hook up to the right-of-way. PSNH estimates its new plan to bury eight miles of the route will add $200 million in expenses. This gives you a sense of just how much money that toll road must be worth over the next 50 years.
Blurring the distinction between public and private benefits is standard operating procedure for PSNH. The entity has long sought to be treated like a private company when that’s in its interests, and like a protected, regulated concern when that’s in its interests. Whenever PSNH is inefficient or expensive, PSNH can conveniently blame the Public Utility Commission or the legislature, both of which have historically been overly accommodating to PSNH.
Northern Pass illustrates PSNH’s pattern of trying to have it both ways. PSNH likes to pretend Northern Pass is a separate entity, but they are more like conjoined twins. It’s impossible to tell where PSNH ends and Northern Pass begins.
The slick statewide mailer promoting Northern Pass that you probably received this month, estimated by me to cost $125,000, carries the same return address as PSNH’s Manchester headquarters. Departing PSNH president Gary Long led the press conference unveiling Northern Pass’s new route. (Polite talk aside, Long was subsequently demoted. That’s what you call it when one’s new job has fewer responsibilities than the former one.)
So forgive the little ratepayer for getting the impression that PSNH is using ratepayer money, directly or indirectly, to fund or subsidize the elaborate PR campaign promoting Northern Pass. PSNH officials say all Northern Pass marketing is paid for entirely by Northern Pass and that staff track time spent on Northern Pass and get compensated by Northern Pass, not PSNH, for that time.
If Northern Pass were about energy, not monetizing the right-of-way, then Hydro Quebec and Northeast Utilities would pursue alternatives. They could transmit power over an existing route that goes through Vermont and New Hampshire, but that route is controlled by rival National Grid and would subject the project to Vermont’s less accommodating regulations. A private company could assemble a route, like pipeline companies do, but then they would get to be the toll collector, not PSNH.
PSNH is desperate for Northern Pass because the project would bail them out of an economic death spiral. The natural gas revolution means coal-dependent PSNH can’t generate power as cheaply as others can. Competitors are underselling PSNH and it is hemorrhaging customers.
When technological innovations affect companies in other industries – think BlackBerry, Borders, or Kodak – they must adapt quickly or die. Monopoly utilities like PSNH can survive for years as zombie corporations by pushing high costs and inefficiencies onto ratepayers.
That’s what PSNH has done for decades. Its customers are still paying for the Seabrook nuclear power plant construction debacle that put PSNH into bankruptcy. Ratepayers are also paying for PSNH’s $422 million scrubber on the Merrimack Station power plant in Bow. Given that the scrubber went 69 percent over budget, who knows what the final cost of Northern Pass will be. When PSNH can pass on its costs to ratepayers, there’s no incentive to keep expenses down.
No wonder PSNH has so little goodwill among its customers.
Fergus Cullen, a freelance columnist, can be reached at email@example.com.