What is Merchant Transmission? (Part 2)

New York tightened up eminent domain laws to block a Canada-based corporation from erecting an aerial HVDC line across upstate New York to NYC.

In March 2006, Canada-based New York Regional Interconnect Inc. (NYRI) sought state approval to erect a 190-mile aerial HVDC transmission line from Marcy, New York to the outskirts of New York City. It was to ship a massive amount of power generated by upstate big hydro sources south to the energy-hungry metropolitan area. Its route would have ripped through thirty seven towns and villages and countless farms and then down through the Catskills and the historic Hudson River valley. The line was to be private, a merchant transmission venture.

In April 2009, NYRI withdrew its application. The earliest and most important reasons for this withdrawal were, first, public opposition and, subsequently, legislative action to tighten New York’s eminent domain laws in response to the new player in the utilities industry, merchant ventures.

The opposition formed immediately and organized effectively. The basis of the opposition to NYRI sounds familiar to us in New Hampshire—the havoc that this long distance aerial HVDC line would wreak on people, communities, the environment, the economy, historical and cultural resources, not to mention that big hydro is brown not green power. Rural upstate New York would have borne an additional burden to keep the lights burning all night more cheaply down in the City: its electricity rates would have increased.

Grass roots opposition led to legislative action. Two upstate legislators drafted a bill to amend New York’s Transportation Corporations Law to prohibit gas and electric merchant transmission corporations from using eminent domain in New York if the construction increased rates in any part of the state and if the corporation did not receive early designation as a National Interest Electric Transmission Corridor. “No eminent domain for corporations” became the rallying cry for the opposition.

In October 2006, New York Governor Pataki signed the bill into law. It was the death knell for NYRI. Unable to take people’s land by eminent domain, NYRI had to compete on its own merits as a private business. It foundered, cost estimates rose, FERC balked, and Canadian investors cooled. Investors delivered the coup de grace at lunch on April 3, 2009, informing NYRI that they were pulling out.

One of the architects of the regional effort to block NYRI, state Senator Joseph A. Griffo, remarked that “NYRI was nothing more than a group of investors trying to make money while ruining our environment and putting the health and safety of thousands of people at risk. They tried to end run the process, they tried to jam this project down our throats.” The NYRI project was “the effort of a foreign company to run roughshod over the lives, homes, and communities of Central New York.” U.S. Senator Chuck Schumer confirmed that the three-year ordeal was over for the opposition.“Ding Dong the witch is dead,” the Senator remarked.

Predictably, New York City Mayor Bloomberg decried Gov. Pataki’s tightening of the state’s eminent domain law to block NYRI’s merchant transmission line. He cited the benefits to the city of the new line and recent power breakdowns in Astoria and Westchester County. Despite Bloomberg’s fuming over the death of NYRI, the sky didn’t fall in, the lights continued to burn all night in the city.

In fact, another Canadian group soon emerged with another plan to send hydro power down to the city from Quebec, but there is at least one critical difference. This time, the line, 420 miles long, will run underground—under Lake Champlain and the Hudson River and, for 70 miles, under land. It’s the Champlain Hudson Power Express (CHPE). Four six-inch diameter cables are to be buried three feet below water in a narrow trench carved out by air jets from a robot. The developers of this project hope to avoid the opposition that led to the tightening of eminent domain laws against merchant ventures and to the death of NYRI.

Environmental groups have not weighed in on the effects of CHPE, and surely impacts exist. But it is fair to say that by modernizing its eminent domain legislation for the era of deregulation, New York warded off a disastrous aerial project and gave itself a chance to attract investors offering a better deal. Theoretically, that is how capitalism is supposed to work. Remove the socialist prop of eminent domain from a private corporation trying to force a bad deal on rural communities and a better deal comes along.

New Hampshire would do well to follow suit.

Bury the Northern Pass, a group of concerned citizens, is a member of the No Northern Pass Coalition. To join the email list, write to burynorthernpass@gmail.com

Guest Column: An Open Letter by Thomas N. T. Mullen to Governor John Lynch

Tom Mullen, Master Developer, Owl's Nest Resort and Golf Club, Campton, writes on the business, real estate, tax, and other economic impacts of Northern Pass




Greetings to all opponents of the Northern Pass,

Here is the message I plan to give to Governor Lynch and other decision makers in the Northern Pass permitting process.

The attempt by Northern Pass LLC to bring a power line on high towers south and down through the mountains and valleys of the North Country, and then continuing south roughly parallel to Interstate 93 and the Pemigewasset River corridor, thence further south ultimately to Deerfield, New Hampshire will cause the following calamitous (word used advisedly) effects to occur:

1.               All licensed real estate brokers and real estate sales people will be required to disclose to any and all customers looking at real estate in New Hampshire that is exposed in any way to the proposed power lines that these power lines may in fact, at some point in the future be constructed.  Owners of impacted real estate will have to authorize the disclosure of the planned tower locations in all listing agreements.

2.                For as long as this threat exists, prospective buyers will have to be told where these power lines are proposed to be built and all real estate brokers and sales people will have to make their customers aware of the ramifications of being near a power line or being able to see a power line of the scope proposed by Northern Pass.

3.                The required revelation of the Northern Pass plans will bring the potential sale of any of these types of properties impacted by the possible construction of new power lines to a stand still.  Thousands of properties will be affected by this reality.  Obviously the properties immediately adjacent to these power lines will see their property values destroyed by the presence of these lines. Properties near the power lines, especially if the power lines can be seen, will also see property values plummet to a next to nothing level.  Properties that can view the power lines, even at a significant distance away from the power lines will see their property values dramatically reduced, especially in the North Country where one of the critical factors in establishing value are views.  

4.                The impacts on existing residential properties will also impact raw land.  So, over time, the construction industry will be impacted as well as the real estate industry. Hundreds of construction related jobs will begin to fade and at some point, will be totally annihilated in areas where vistas/views are critical elements in establishing a demand for real estate.

    

 5.        The impact on the tax bases of the towns where these power lines end up being located will be catastrophic. Just in Campton and Thornton alone where most of my business is done, these towers will have the impact of destroying upwards of 50% of the present valuation of each of these two towns.  Other towns up and down the entire length of the proposed power lines will be similarly impacted.   

6.               Other insidious impacts will creep into the picture over time.  Think of the hundreds of thousands of people who drive up Interstate 93 from out of state and reach the Plymouth area, generally perceived as the gateway to the White Mountains, only to see the views that traditionally stir their hearts and make their pulses quicken destroyed by the placement of these towers in line with those views.  Over time, they will seek other routes for coming up into the North Country, probably choosing to go to other states so they don’t have to be confronted by this atrocious intrusion on their senses. Over time these power lines, placed where they are currently proposed, will result in the elimination of hundreds of regional jobs and the attendant loss of significant revenues to the State of New Hampshire in the form of Rooms and Meals Taxes, Gasoline Taxes, income from the sale of alcoholic beverages and receipts from the toll booths along Interstate 93.  The impact on the State's collection of Transfer Tax Stamps will be immediate and dramatic.

7.         Banks that have provided mortgages on properties affected negatively by the proposed power lines at 70% to 80% of the pre-power line valuations will find that the principal balances on those mortgages are well in excess of the new market values of same.  Consider homes with mortgages in excess of $500,000 becoming deminimis in value forcing banks to write down those loans on their books.  Such cases will not be unusual.  Additionally, banks will be reluctant, if not unwilling, to lend any new mortgage money against properties near or within view of the proposed new power lines.

8.               There will need to be a very carefully researched economic analysis prepared in order to document the impact of all of the consequences of the proposed power lines.  But, this will take time – too much time, so we need to start talking about these impacts now and getting the message through to Governor Lynch that his early support of the Northern Pass was ill founded, politically incorrect and potentially economically catastrophic for the State that he is sworn to protect.     Efforts are now underway to engage the services of a well known economist from UNH to undertake the aforementioned economic analysis, but this will take many months and perhaps up to a year.  In the meantime, our already distressed northern New Hampshire economy will worsen and irreparable damage may be done to a large portion of New Hampshire's critically important vacation and second home industry and to the primary home marketplace up and down the length of these new power lines.  Governor Lynch was recently seen touting New Hampshire's economy as being the fastest growing economy in New England.  That will become an empty boast if the Northern Pass project moves forward.

It seems to me that there are a number of fundamental inequities in a law that permits a public utility like PSNH, using the eminent domain mechanism, to quite literally terrorize thousands of property owners with the threat of taking their land for a project that is not remotely close to being permitted; that may, in fact, never be approved; and for which there has been no present or immediate future need shown.  New Hampshire does not currently need the Hydro Quebec power and if natural gas remains plentiful and cheap and if other sources of power continue to be developed, New Hampshire may never need to tolerate the encroachment on its natural beauty that the Northern Pass represents.  The mere possibility of the H Q power being available in New England creates disincentives for other truly renewable, green and sustainable power sources to be developed.

For the last couple of decades, the public has been warned about being and becoming even more dependent upon foreign sources of power like imported oil.  Hydro Quebec is a foreign source of power no different in character than Saudi Arabia and Venezuela -- friends today -- perhaps not so friendly tomorrow.  Our government has been preaching that we have to reduce our reliance upon foreign sources of power and here we are looking at powering up New England (not including New Hampshire) at New Hampshire's expense with what appears today to be cheap hydro power.  This past spring and summer, there was a drought in Quebec that forced HQ to cutback on its deliveries of power to some of its customers.  Had the Northern Pass been in existence this past spring/summer, there's a pretty good chance that power to New England would have been cut off or drastically reduced.  Relying on foreign power from Quebec puts New England pretty low on the totem pole of megawatt flow if shortages occur in the future.  

Northern Pass and PSNH should be enjoined from continuing to threaten the peace and tranquility of New Hampshire while it attempts to demonstrate that the power it will bring into New Hampshire will stay in New Hampshire and benefit New Hampshire's citizens and not Northeast Utility's out of state interests and stock holders.  The mere fact that PSNH has the ability to utilize the eminent domain mechanism places an awesome responsibility on its shoulders to only utilize that mechanism when all other remedies and alternatives have been exhausted, including burial of the line at the expense of Northern Pass.  Surely a firm that bills its customers at a rate of $10 Million US Dollars per minute around the clock can afford to do the right thing for New Hampshire and dig deep both literally and figuratively.  

A lethal bomb now hangs over the heads of every affected New Hampshire property owner, real estate broker, mortgage lender, business and town and it will remain there, possibly for a half dozen or more years, while the permitting and legal procedures drag on.  New Hampshire's popular motto, Live Free Or Die may end up having to be changed to Live Free Or Die A Thousand Deaths since it may well be a thousand or more days before the outcome of the Northern Pass attack on New Hampshire's freedoms, environment, economy and sensitivities is resolved.  This is NOT the New Hampshire way!!!

If I have the opportunity of personally addressing Governor Lynch, I will ask him to please take a pass on this Northern Pass deal!  It's not good for New Hampshire and it's not good for New Hampshire's people.  Since he is now serving an historic fourth term, I will suggest that he has a chance to leave an indelible mark on our state having been a linchpin (another word used advisedly) in the process of creating prosperity for the entire state.  I will beg him to please not allow his legacy to become a massive scar down the spine of New Hampshire bringing unnecessary power to the rest of New England at New Hampshire's expense.

Respectfully submitted this 10th day of January, 2011,

Thomas N.T. Mullen, Master Developer

Owl's Nest Resort & Golf Club

Campton, New Hampshire

603-759-2510 Cell

603-726-3076 X 219

tntmullen@owlsnestgolf.com

 

Bury the Northern Pass, a group of concerned citizens in Grafton County, belongs to the No Northern Pass Coalition. To join the email list, write to burynorthernpass@gmail.com.

What is Merchant Transmission and Why Should You Care? (Part 1)

Part 1 of a two-part blog.




Many people reading this blog are old enough to view their power company as an extension of state government that acts under regulation to serve the public by keeping the lights on at the lowest possible price. Power companies were never, in fact, so beneficent, but the words “public,” “service,” and “New Hampshire” in a dull but reassuring name like “PSNH” at least suggest as much. We gave them a certain amount of deference and respect because they were serving us, the public, and they knew what was best for us. To a degree, we tolerated their intrusions because they were acting in the public interest; in particular, we gave them the power of eminent domain to take private land when it served the greater good. Because of the stigma, we never associated the “s” word (socialism) with this collectivization, but the resemblance is obvious.

Now out of the blue comes the “Northern Pass,” and the name alone suggests something other than a public utility.  It evokes the fabled and much sought-after Northwest Passage, even though that is a route through the Canadian arctic seas, not the mountains, and in northern New Hampshire we call them notches, not passes anyway. Suddenly we went from bureaucratic, geographical public utility names like “PSNH” and “Northeast Utilities” to a mythical, nowhere name like “Northern Pass” evidently conjured up by a flatlander advertising firm as a sales pitch.

This apparent need to “sell” the Northern Pass points directly to what has happened in the electricity business.  There are now “merchant” ventures in generation and transmission, private free-lancers, so to speak, who must compete with one another in order to stay in business. To the winner go the spoils, and in the transmission business, the spoils to investors, stockholders, are huge profits.  The losers are “disincentivized,” weeded out. This is capitalism at its finest. It’s the American way.

The Northern Pass is one such merchant transmission project.  (Never mind that the Federal Energy Regulatory Commission, FERC, has just invented a new term solely for Northern Pass, "cost-based participant funded transmission line”; the concept is the same, it’s private.) Northern Pass is supposed to sell itself to us if it is to succeed and reward its shareholders. Hence the public relations push and the fancy albeit inappropriate name. If it fails to sell itself, it is supposed to go out of business.

There’s nothing wrong with “selling” one’s product, but ultimately the product must stand on its own merits, not on the advertising.  It has become increasingly clear that the Northern Pass project lacks public merit; it’s wrong for the White Mountains, a bad deal for all of New Hampshire. How many editorials, opinion pieces, news releases by elected officials, conservation and outdoor groups, business leaders, private individuals have made that point now? Their collective weight should bring the project down sooner or later if capitalism works as capitalism should. 

But the elephant in the room is eminent domain, the privilege we grant to entities to take private land. Should we give a private corporation like Northern Pass the privilege that we have traditionally bestowed upon public utilities? If Northern Pass can’t sell its product to New Hampshire on its own merits, should this private company then be allowed to take our land in order to succeed and to reward its investors anyway? Should a losing capitalist venture be shored up with a socialist prop like eminent domain? Can you spell "bailout"?

With more and more merchant transmission projects popping up in the United States, this question has come to the forefront recently. In Part 2 of this blog, we’ll look at the answers given recently by the states of New York and Montana, no and no again.

Bury the Northern Pass, a group of concerned citizens in Grafton County, belongs to the No Northern Pass Coalition. To join the email list, write to burynorthernpass@gmail.com.