Email Correspondence with LS Power Rep
This is published with Jason Niven's permission.
I have noticed that protectmainefarmland.org has had a number of articles stating that the cost of the Twin States Clean Energy Link includes underground HVDC transmission and costs less than the Aroostook Renewable Gateway. That could not be further from the truth. The PUC initially put out a figure of $2.9 billion for the project, but that was the cost to Maine ratepayers over the course of the 30 year contract and not the actual capital cost to build the project. The $2B proposed cost of the NH/VT project is the estimated cost to build the project. The cost to ratepayers over the next 30 year periods will be significantly higher. Comparing a total cost to ratepayers over a 30 years period (5 development, 25 operations) to an upfront capital cost is significantly misleading.
A recent article from Maine Wire touches on this and provides an estimated cost for the capital cost of the project. A more precise capital cost estimate will be created once the route is finalized and a project cost breakdown is required to be included in the CPCN petition. Regardless of that cost uncertainty, the beauty for ratepayers is that the pricing structure of the Gateway project protects ratepayers from this cost uncertainty since the costs that will passed to ratepayers is based upon a fixed price per month is not based on the actual cost of the project. This is dramatically different than what has typically been the case in Maine and is a major benefit of the competitive procurement that was completed by the PUC.
Email 2 (My response)
Hello Jason- thanks for reaching out to Protect Maine Farmland.
I have several questions, and would be very happy to publish your responses and add updates to any prior articles:
1. Will you explain what these two statements from the Maine PUC archived press releases mean?
“LS Power Base was selected for its transmission project at a cost of $2.78 billion and Longroad Energy's King Pine 1,000 MW wind generation project was chosen resulting in savings of $1.08 billion. Together, the net cost of the two projects is a projected $1.7 billion over a 30-year period. "
What is “cost” and how is it calculated?
What is “savings” and how is calculated?
What is “net cost” and how is it calculated?
On that note, where did the $2.9 billion dollar number come from? It was reported in several places. Why would those outlets revise the Maine PUC press release in such a random way?
"With Massachusetts partnering in 40% of the project, the estimated net costs to Maine ratepayers would be about $1 billion, or about a dollar per month for an average residential customer. Costs could be reduced further if additional partners participate in the project."
What is “net costs” and is it calculated the same way as in the prior press release?
How is this increase in costs of about $12/year per residential customer calculated? 751k housing units x $12 is $9 million. Over what time period are we talking? What percentage of Maine ratepayers are residential?
2. It appears that the way the money will flow is:
-LS Power purchases the land easements (thus, effectively, owns the land)
-LS Power pays for the capital costs through its own fundraising channels
-Maine ratepayers have a rate increase of $1 per month for residential and some unknown amount per month for commercial (depends on what percentage of Maine customers are residential, the variable I’m missing), which pays back LS Power’s funders
So what is the benefit to Maine? Per the EIA, Maine is already well on the way to meeting its renewable energy goals.
3. What are the projected maintenance costs over the course of a 30 year above-ground AC transmission corridor of this length? Who pays for those costs?
4. If the PUC and State of Maine would agree to a change order as compensation to do the project underground using HVDC along existing corridors, would LS Power?
5. Based on the construction cost price of $1 billion, LS Power’s cost per mile is between $7.1 million and $6.25 million. Why did LS Power tell the town of Palermo the taxable value would be $2 million per mile?
Thank you very much for your time. I’m looking forward to your responses.
Email 3 (Jason’s Response)
The PUC was provided with proposals for renewable energy in Aroostook county along with the transmission that is required deliver that energy to market. LS Power provided a fixed price proposal for the transmission scope that included a monthly cost over the life the project. Payments started once the line is in service. Because of the fixed price nature the pricing to ratepayers is not dependent upon our actual cost to construct the project. The total sum of the payments over the contract term should be the $2.78 billion that you reference below. I have personally never made a calculation of the total payments over the life of the contract.
We do not know the cost of the Long Road energy but both the PUC and Daymark indicate that the cost of power from King Pine is less than the cost of power for the energy it would offset in the market. With that said, the two different entities have performed analyses that do not align regarding the actual value of that savings. The differences cannot be reconciled because the PUC has not shared their analysis.
The PUC estimated that the saving associated with King Pines energy cost would save ratepayers $1.08 billion over the life of the contract. This estimate was used to conclude that the net cost of the two projects would be $1.7 billion over the 30 year period. Our assumption is that the PUC asked Long Road and LS Power to find additional off takers for the energy and transmission because they viewed the net impact of the two projects as a cost to ratepayers. Massachusetts evaluated the project, determined it was beneficial, and agreed to buy 40% of the energy and pay for 40% of the transmission. This leads to the later assumption that there would be a $1 billion net cost to Maine ratepayers.
Even after the PUC issued the statements you referenced, there were a lot of public questions regarding the cost to ratepayers. Since the PUC’s analysis has not been publicized, Long Road and LS Power hired Daymark to perform an independent analysis to fill the information void. Daymark previously performed the ratepayer impact study for the NECEC project that withstood a third party validation by London Economics (hired by the PUC) so we viewed them as competent for completing this analysis. The results of the Daymark study for the King Pine / Gateway projects were the Maine ratepayers would actually save $3.3 billion over the 30 years instead of paying $1 billion. This conflicts with the PUC’s analysis. One big area of difference could be the correct inclusion of wholesale market benefits in the Daymark study, but that can’t be validated since the details of the PUC’s analysis are not public.
I don’t know where the $2.9 billion number came from. It just appeared in the public communications and has been used to incorrectly compare the long-term ratepayer cost of Gateway project against the capital cost of other projects that include underground transmission.
Based on the PUC analysis there would be an average of a $1 per month increase to residential ratepayers. Based on the Daymark study there would be an average savings of $2.33 for residential ratepayers. It would be nice to reconcile these conflicting analyses. We will be providing a more involved ratepayer study for our CPCN filing with the PUC and it will need to be vetted before the CPCN is approved.
When LS Power obtains easements they do not effectively own the land. They own the rights to construct a future transmission line in the easement area. The landowner still owns the land and maintains most rights they have always had on that land. They can access the land, they can farm the land, they can potentially store equipment on the land, etc. The major restriction is to not build permanent structures in the easement (but there is nothing that prevents a structure from being built at the edge of the easement) or perform activities that would threaten the reliable operations of the line. LS Power will not continuously mow the land or use pesticides. There is no need to perform vegetation management across landowner maintained fields.
LS Power will be responsible for the cost to build and operate the lines over the contract period. That is addressed by the fixed price that was provided in our term sheet and exact obligations will be finalized in the contracts with the Maine and Massachusetts utility companies. There are some specific major contract risks that still need to be resolved before contracts can be executed.
LS Power would be open to a change in scope if there was a corresponding change in price. Other companies that provided proposals may object to this type of arrangement and push for a new procurement based on the revised scope.
The total cost of the project includes much more than just transmission. In addition to the cost to construct transmission line, there are also three substation that will need to be built, interconnections with the existing utility that must be funded, and significant development and engineering costs. Property taxes will be based on the taxable value of the installed asset and the sum of the taxable value of the assets will be less than the total cost of the project. The taxable value of the single circuit transmission line is estimated to be on the order of $2 million per mile, which is was has been shared with multiple towns.
I hope this was helpful. It would be helpful for myself to understand why there is an assumption that transmission lines destroys organic, generational, and heritage farmland. We have not received any indication that it threatens organic certification and know it would minimally impact field productivity sine the area under the line is still suitable and available for agricultural activity.
I also want to point out that page 67 of the NextGen Highway report you reference states that “Buried HVDC transmission line is roughly 2-4 times the cost of overhead HVDC transmission.” HVDC and HVAC transmission is going to have costs that are roughly the same. This report supports that underground HVDC transmission is significantly more expensive than overhead HVAC transmission. In addition, if the project was changed to HVDC just the costs of the substations and HVDC converter station scope without any transmission line would cost as much, if not more, that the planned Aroostook Renewable Gateway project. Underground HVDC was debated in the NECEC proceeding and I have attached some relative testimony.
(Attached NECEC testimony)
(post will be updated with future responses)