Mass. utilities and Hydro-Quebec sue each other over missing hydropower

Three Massachusetts utilities are suing Canadian energy giant Hydro-Québec after it failed to deliver promised hydropower for several days during a cold snap this winter. Hydro-Québec, in turn, is suing the utilities for withholding payment for power that was delivered.

The dispute is the latest in a string of challenges surrounding hydropower imports into New England. It centers on 12 days in January and February when temperatures plunged well below zero Fahrenheit in Québec. Electricity demand surged in the region, leading the Canadian company to largely stop exporting power along the New England Clean Energy Connect (NECEC) transmission line, which began operation on Jan. 16.

Eversource Energy, National Grid, and Unitil — the three utilities that contracted to buy the power imported on the new line — claim they are owed $40 million in compensation for the lapse. When the electricity ceased, the utilities had to fill in the gap with dirtier, more expensive power and buy renewable energy credits to replace those attached to the hydropower in order to meet state requirements. Hydro-Québec, they say in their lawsuit, should have been prepared for the situation: That Canada might get very cold in the winter was ​“entirely foreseeable.”

Hydro-Québec, however, argues that the contract allows it to make up its obligations at a later date, as the province’s grid operator — not Hydro-Québec itself — made the decision to stop sending power south. The extreme cold led to unprecedented demand on the grid, and thus the need to divert power away from New England was beyond the company’s control, Hydro-Québec contends. It would owe compensation, it claims, only if it had made a voluntary choice to stop the exports.

At the same time, Hydro-Québec is suing the utilities for $50 million it says they owe for power that was delivered as expected in January and February. The utilities have declined to pay in the face of the money they say is due to them, an approach Hydro-Québec says is in bad faith and a breach of contract.

“What is at stake is essentially an argument regarding the remedies that are due to the parties under the power purchase agreements,” said Joseph LaRusso, manager of the Clean Grid Program at climate nonprofit Acadia Center.

These legal wranglings highlight persistent questions about how much new clean energy NECEC will contribute to the New England grid.

The transmission line, which took years to build and was nearly derailed by opposition from residents concerned about the impact on Maine’s forests, has been hailed by state leaders and climate advocates as a triumph for renewable energy. Massachusetts utilities have signed on to buy 9.55 terawatt-hours of hydropower per year, enough to meet roughly 20% of the state’s annual electricity demand. By the end of July, 4.43 terawatt-hours had been delivered, slightly less than half the annual obligation.

However, NECEC has gone offline several times in the eight months since it began operations, including for two weeks in the spring and another week at the end of August. Meanwhile, Canada has been importing power from New England along a separate transmission line at higher levels than in previous years. So even as emissions-free electricity has flowed in from the north, New England has still been burning gas and oil to generate power to send to Canada.

Environmental advocates are nonetheless confident that NECEC will help New England achieve its emissions goals, as well as rein in high energy costs. 

“NECEC is making a material difference to the grid here in ISO New England,” said LaRusso. ​“And I don’t see these contract disputes altering that.”

Volatile fossil fuel prices are a much bigger problem than any hiccups in Canadian hydropower delivery, said Caitlin Peale Sloan, vice president for climate and energy at the Conservation Law Foundation.

If anything, these lawsuits could even strengthen future contracts with Canada, as New England looks forward to the possibility of buying offshore wind power from Nova Scotia in the next decade or so, she said.

“There’s lots coming out of this lawsuit that will help determine what protections should be enshrined in any future Canadian supply contracts,” she said.