Natural gas prices may lower economic benefits of Northern Pass

Fluctuations in market conditions since Northeast Utilities (NYSE: NU) originally proposed Northern Pass could negatively influence the economic benefits of the project, according to the second of two empirical analyses commissioned on the project by the New England Power Generators Association (NEPGA) this year.

An earlier report by NEPGA also suggested that job impacts in New Hampshire from construction of the line would be less than projected by Northern Pass Transmission (NPT). These and other ongoing concerns about the proposal to bring Canadian hydropower into New England via a high-voltage transmission line through New Hampshire are not deterring the developer from moving forward with land acquisition and route development.

In an update to financial analysts on Oct. 5, NPT said it has secured 99% of the property necessary for a new route proposal. It also said that the company will amend its permit application to the U.S. Department of Energy (DOE) by the end of the year and propose a new route in the North Country.

Market impacts

PA Consulting Group conducted the study “Electricity Market Impacts of the Northern Pass Transmission Project” on behalf of NEPGA. Released in June, the economic study provides the results of a critical review of the December 2010 report “LMP and Congestion Impacts of Northern Pass Transmission Project – Final Report” prepared by Charles River Associates for the developer.

PA Consulting Group’s report highlighted changes to the anticipated project benefits that would occur using a 2012 natural gas price forecast from the Energy Information Administration.

“Given the dominance of gas fired combined cycle generation in the ISO-NE market, lower natural gas prices translate directly into lower ISO-NE energy prices,” according to the report. “Those lower prices translate directly to lower wholesale costs of energy.”

Updating the market impact analysis using a forecast for significantly lower natural gas prices as compared to 2010 data showed that the estimated energy price benefits from the line would drop by about 50%.

The results of a January 2012 report commissioned by NEPGA indicated that job impacts from construction of Northern Pass also would be considerably lower than projected in studies conducted by the developer.

The independent economic study by PolEcon Research, “Job Impacts in New Hampshire from Construction of the Proposed Northern Pass High-Voltage Transmission Line,” challenged job estimates released in an April 2011 economic impact update by Lisa Shapiro, chief economist for Gallagher, Callahan & Gartrell.

The 2011 update showed that an average of 1,100 to 1,500 jobs would be created annually in New Hampshire over the three-year project construction phase, as compared to 2010 estimates of between 1,100 and 1,300 jobs over the three years, with a peak of between 1,370 and 1,670 jobs in year one.

Job estimates in the 2012 PolEcon study are less than half the projections of Shapiro’s update. Impacts ranged from a high of 533 in the second year to a low of 241 in the first year. According to the study, the much lower numbers account for skill sets special to transmission development that will force the developer to import out-of-state construction firms.

Route alternatives

The route update NPT has promised by the end of the year should resolve questions about holes in the proposed route that have been outstanding since the developer withdrew several alternatives from its DOE application last April.

Two alternatives were removed from the application for a segment of the line north of Groveton, N.H., where there is no existing right-of-way (ROW).

The company has been working with willing landowners for the past year to piece together the ROW for the northern segment, a spokesperson for NPT told TransmissionHub Oct. 12.

Regional controversy over that northern segment has been high.

The Society for the Protection of New Hampshire Forests issued an earnings update on Oct. 11 for its campaign to block Northern Pass by establishing conservation easements on any lands the society believes the developer would need for interconnection with Canada. The campaign has raised $500,000 toward its goal to conserve 1,800 acres in the region.

NPT will make its application update to the DOE specifically to present the new route alternatives, the NPT spokesperson said, and those alternatives will be simultaneously released to the public.

The Conservation Law Foundation (CLF) has taken the opportunity of NTP’s pending application update to the DOE to address its concerns about the review process for the project.

CLF on Oct. 9 filed comments with the DOE requesting certain changes to the development process of the project’s environmental impact statement (EIS), stating that “NPT took on a much broader role in the selection of the current EIS contractor team in violation of regulations and guidance” and a new contractor should be selected.

CLF, alongside other interveners to the Northern Pass application, already successfully pushed to replace the first EIS contractor for the project.

“Despite the lesson of DOE’s unsuccessful experience with choosing a consultant with clear conflicting interests, DOE is, for the second time, proceeding with a conflicted EIS contractor … the improper selection of which was advocated and choreographed by NPT,” CLF said in the filing.

The NPT spokesperson did not comment on the NEPGA’s June study and said NPT has not released an official response to the findings.