As State Considers Hydro System Bid, Officials Say Needed Updates Will Make Dams Less Profitable

May 23, 2016

State officials are trying to figure out if Vermont should make a bid for a 560-megawatt hydroelectric system on the Connecticut and Deerfield rivers. And the Agency of Natural Resources says the system will generate less revenue in the future as older facilities are upgraded to meet modern environmental laws.

TransCanada's hydroelectric system includes 13 dams, and three of those dams on the lower Connecticut River are up for federal relicensing.

The Federal Energy Regulatory Commission (FERC) issued the current licenses for the dams in Wilder, Vernon and Bellows Falls in 1979. Administration Secretary Justin Johnson says the new licenses will demand more improvements for the environment from the hydro system.

"Since the last round of licensing, the federal EPA was established and the Vermont Water Quality Standards were written," Johnson says. "All these changes mean you would expect there would be some changes."

Johnson is heading the Vermont Hydro Power Working Group, an eight-member committee that's assessing the potential acquisition for the state.

The Agency of Natural Resources says the water quality standards required under the relicensing could reduce the amount of electricity produced by the three dams by up to 30 percent.

The new FERC licenses will give dam operators less control over river flow, and that will affect the amount of electricity generated.

And the older infrastructure in those dams will likely require investment to meet the current water quality standards.

"Since the last round of licensing [in 1979] the federal EPA was established and the Vermont Water Quality Standards were written. All these changes mean you would expect there would be some changes." — Justin Johnson, Administration Secretary

Johnson says the potential reduction in income is only one consideration the state is weighing.

"I think one of the big interests of the state in being involved in this, is not necessarily to maximize power generation revenue. We're not an energy utility," he says. "I think it's all of these other benefits around trying to manage the land around it. Trying to manage the flow, protect the fisheries, reduce erosion. All of these issues have come up as things we would want to look at."

Leslie Welts, an attorney with the Agency of Natural Resources, helped write the report.

The environmental concerns highlighted in the report include water level fluctuations, eel and American Shad passages, and the protection of critical habitat for endangered species.

"So we've identified the various components that are generally necessary to pass the flows that we would typically require for something like this," Welts says. "And we've called them out because they are potentially added costs beyond the costs of changing your operations and the amount of  water draw down that you can maintain at a given time."

Transcanada has not yet done all of its environmental studies in anticipation of the FERC relicensing.

The FERC licenses for the three dams on the lower Connecticut River expire in April 2019 and the new license proposal is due April 2017.