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V o l . X X I N o. I Ja N ua r y 1 2 , 2 0 1 5 14 more dramatically in the electricity prices, because the electricity generators don't have the long-term contracts, so they're buying it on the spot markets. So when the pipelines are full, typically on cold days, there's a huge premium to be paid for the gas that they buy. And that gets translated into higher electricity prices. MB: The latest ISO-New England forecast indi- cates that problem could get worse — and that it will drive up electricity prices — if the natural gas bottleneck isn't addressed. TW: I think that's probably true. Other factors [driving the cost of electricity in the region] are the closure of Vermont Yankee nuclear power plant and the closure of Brayton Point [a coal-fired power plant in Somerville, Mass.] expected in 2017. What would ameliorate the problem is warm weather, which is not under our control. e other thing that will make it better, in about two or three years, is that there is some additional capacity coming on in the Algonquin Incremental Market (AIM) Project [a Spectra Energy project that expands the pipeline capacity of the exist- ing Algonquin Gas Transmission system] and the smaller Tennessee-Connecticut project. … ere is a potentially ironic, and in some senses a tragic, self-fulfilling prophecy here, which is: If you don't solve the problem, you will reduce load, because you will lose your economic base. at would not be, in my view, a sensible or responsible way to address the problem. I find it hard to believe that New England will be willing to 'export' $3 billion a year [due to higher energy costs resulting from the natural gas bottleneck] due to a failure in political will. MB: Under the Omnibus Energy Bill approved by lawmakers this past spring, wasn't there a provision that would allow the PUC to assess a tariff on electricity ratepayers to pay for new pipeline capacity? TW: at's what the law contemplates. MB: So, it's just a proposal? TW: at's correct. e Omnibus Energy Bill would permit the commission, under certain circum- stances, to write a bill that would require electricity customers basically to pay for gas pipeline infra- structure — not the local infrastructure but the regional pipeline infrastructure. MB: Are the other New England states also considering adopting the same provision for their electricity ratepayers? Otherwise, wouldn't we be at risk of having Maine ratepayers pick up the tab for the regional pipeline expansion? TW: at's exactly right. at's what makes the Maine calculation very complicated. In the worst case, you end up paying 100% of the cost for 8% of the benefit. So that is really what caused Maine to try to put together a regional solution, in the first place. It clearly works best if New England works together. It might not work if Maine goes alone, but that's the question before the commission right now. I think the decision of whether or not to go forward with something specific in Maine will be made in the first half of 2015. I think the question of whether there's a regional approach that works, in which Maine would participate one way or another, is probably also in the same time frame. But those things always take a bit longer than I think they will. MB: Weren't the New England governors also exploring how to access Hydro-Quebec power? What are your thoughts on that? TW: at was part of the discussion and, to some extent, remains part of the discussion. Whether that will continue to remain as part of the package I really don't know. e value of accessing major hydro-power resources in Canada, when we have resources in Maine, is mostly on the environmental side: basi- cally, it would increase the percentage of 'zero carbon' electricity generation. e gas pipeline issue is very substantially an economic and a reliability issue, because it would certainly improve the reli- ability of supply being available when the demand is highest. You are basically reducing the cost of the fuel that's needed to generate electricity. And you're also reducing the cost of the fuel that essentially sets the price of electricity. With something like Hydro-Quebec — or the Nalcor Energy project, which is a big Newfoundland-Labrador project — although it's cheap for them to produce it, they are not going to sell hydro-power to us at their production cost. MB: And that's because it's a commodity? TW: Exactly. ey're going to sell it to us at the price that they expect [they can get]. Paradoxically, "Looks like the energy project is a go." "But the permitting still needs to be ironed out." "Let's work with Perkins." "Let's get it done." When it comes to understanding energy and environmental projects, Perkins Thompson is the region's trusted full-service business law firm that gets it right. Depend on the lawyers of Perkins Thompson to deliver integrity and value. We work hard, treat you with respect, and get the job done – with energy to spare! Business Law » Energy & Environmental » Real Estate » Commercial Finance One Canal Plaza • Portland, Maine 04101 • 207.774.2635 www.perkinsthompson.com © 2013 Perkins Thompson, Attorneys & Counselors at Law » C o n t i n u e d f ro M p r e v i o u s pa g e

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