Energy From Canada Via Sea Cable*
[Reviewed]

May 23, 2001

Groups Propose Jules Verne-esqe Idea

To Import Cheap Canadian Power

By ANDREW CAFFREY

Staff Reporter of THE WALL STREET JOURNAL

President Bush envisions expanding links with energy-rich Canada the conventional way: land-based pipelines shipping natural gas and oil to U.S. markets.

But taking a cue from Jules Verne, several energy companies are exploring a more unconventional approach: submerging thousands of miles of transmission lines under the Atlantic Ocean to deliver Canadian electricity to the energy-thirsty Northeast.

The plans are preliminary and face formidable hurdles, including a price tag of several billion dollars. But they are being taken seriously by some regulators and utilities that would be the underwater lines' customers, partly because they offer a novel solution to two of the nation's thorniest energy problems: upgrading antiquated power lines and building power plants, which often can't win approval due to the objections of nearby residents, especially in the crowded Northeast.

"It's intriguing," says Richard Bolbrock, vice president of power markets for the Long Island Power Authority, a New York utility. "You're not going to have opposition at every street corner along the way."

The companies proposing the schemes have potentially crucial allies on the other end of the transmission lines: Canadian officials eager to sell surplus power. The provincial government-owned power company in New Brunswick says it anticipates buying transmission capacity on the larger of the two projects, dubbed Neptune, and also is considering investing in the venture.

Proponents also cite the profit potential created by the Northeast's relatively high electricity prices, a function of a shortage of locally produced power and congested transmission networks. "We've targeted the places that need the power the most and that are currently paying the highest prices," says Charles Hewett, chief executive of Atlantic Energy Partners LLC of Pittsfield, Maine, which is proposing Neptune.

Though Not All Will Have Blackouts, Most Regions Will Feel Energy Pinch

The idea, says Mr. Hewett, is to tap into Canada's vast natural-gas and other energy resources to generate cheap electricity. He believes electricity production costs will be low enough in Canada to offset the steep capital costs of his project, and still undercut the price of power produced in U.S. markets. And just the mere addition of new supplies to competitive markets, he and others note, should drive down overall prices.

Atlantic Energy Partners is a consortium that includes Cianbro Corp., a construction firm in Pittsfield, Maine; Energy Security Analysis Inc., a Wakefield, Mass., market-research firm; and the law firm of former Maine Gov. Ken Curtis. The group has retained France's Societe Generale as investment banker and intends to file its proposal today with the U.S. Federal Energy Regulatory Commission. That will trigger a process of soliciting customers and obtaining environmental and other regulatory permits.

Underwater natural-gas pipelines are common, most notably in the Gulf of Mexico. And underwater transmission systems carrying electricity from power plants to customers are used in Europe and Asia. But these proposed projects would represent the first large-scale underwater transmission line in the U.S., industry officials say.

Using cable-laying ships similar to those that install underwater phone lines, Atlantic Energy would deploy 1,800 to 2,500 miles of foot-wide cables, one set each from Nova Scotia, New Brunswick and Maine, with a fourth shorter leg from New Jersey to New York. Both Maine and New Jersey will have new power plants that need an outlet for their electricity beyond local markets.

The cables aim to connect with local power systems in Boston, central coastal Connecticut, New York City and Long Island, delivering a total of 4,800 megawatts of electricity -- about the capacity of six large power plants. Atlantic Energy plans to start with the New Jersey leg, which it hopes to have in operation by summer 2003, with the other segments online by 2006. Total estimated cost: $2 billion to $3 billion.

The transmission lines would carry high-voltage direct current, instead of alternating current as most power lines do today. Direct-current lines don't create fluctuating electromagnetic fields, which some have raised as health concerns, and lose less power along the way than do alternating-current lines, the companies say. Neptune's developers say they intend to use a newer type of cable that doesn't use liquid oil for insulation, which can leak.

However, the direct current must be converted to alternating current once the lines hit land. And here Atlantic Energy could run into opposition, since the conversion stations would take up as much as nine acres. Mr. Hewett is betting they won't be as controversial as power plants because the stations don't make noise or emit pollution. But they are expensive -- tens if not hundreds of millions of dollars each, depending on their size, according to Assef Zobian, a transmission specialist at energy consultant Tabors Caramanis & Associates in Cambridge, Mass., who adds that the huge capital outlay makes the economics of a project of Neptune's scale questionable.

Atlantic Energy proposes to finance Neptune like a gas pipeline: presell most of the capacity of the lines to power generators and borrow construction funds against those contracts. The consortium also is inviting energy customers to be investors.

"We are very interested in investing in the venture," says David Boguslawski, vice president of transmission for Northeast Utilities, Berlin, Conn., New England's largest energy company. Joseph Oates, director in central operations for the Con Ed unit of Consolidated Edison Inc., a New York utility that also has been wooed by Atlantic Energy, adds, "These are the kinds of things we were hoping that would happen with the opening of competitive markets."

Also testing the water for undersea power lines is GenPower LLC, a Needham, Mass., independent power producer that has recently built power plants in Arkansas, Maine and Mississippi, in partnership with GE Power Systems, a Schenectady, N.Y., unit of General Electric Co. GenPower says it has just started exploring the feasibility of an 800-megawatt power plant in Nova Scotia that would ship its juice to Manhattan via about 400 miles of undersea cable. John O'Leary, a GenPower managing director, says the company initiated the study at the suggestion of Nova Scotia's petroleum commissioner.

Nova Scotia Premier John Hamm has repeatedly said he would like his province to export electricity in addition to natural gas. Without endorsing any one proposal, Bruce Cameron, a spokesman for the Nova Scotia Petroleum Directorate, the province's energy agency, says the government is encouraging GenPower, Atlantic Energy and other developers to pursue such projects in the hope they would bring much-needed economic development.

For now, GenPower is studying whether Con Ed's system could handle an 800-megawatt infusion at a single connection point. Atlantic Energy's Mr. Hewett says based on an initial assessment, his team "has confidence" the system can handle the up to 1,800 megawatts of power that Neptune would bring into New York. Con Ed says it is cooperating with the two companies' studies.

Mr. Hewitt says Atlantic Energy also is negotiating with fishermen for the best routes for the Neptune cables, which may run as far as 70 miles offshore. The cables would be buried in several feet of soft ocean bottom or shielded to protect them from being cut by fishing or boating gear.

Anthony Chatwin, a scientist at the Conservation Law Foundation in Boston, says it is unclear whether underwater power lines raise special environmental issues. But he says Massachusetts, for one, has a marine protection law that will likely require closer scrutiny of Neptune.

Already in Connecticut, officials in March rejected a 24-mile power line under the Long Island Sound to Shoreham, N.Y., because it would have run through shellfish beds. The company behind the line, TransEnergie U.S., a Westborough, Mass., subsidiary of Canadian power company Hydro-Quebec, says it is working on an alternate route. The Long Island Power Authority has contracted for the transmission line's 330-megawatt capacity.

But the biggest risks are likely to be economic. Jose Rotger, director of regulatory affairs for TransEnergie U.S., says a project as big as Atlantic Energy's Neptune requires huge upfront costs that would likely require extensive long-term commitments from customers in an era of deregulation, where buyers and sellers are constantly switching allegiances. Moreover, the energy crunch could prompt places such as New York to build new plants, undercutting the northern imports.

In the 1980s, Nova Scotia proposed a network of new power plants that would burn the region's coal and export electricity to Boston through new underwater power lines. But it proved too expensive to develop, and Bluenose, as it was named, was shelved by the government.

Write to Andrew Caffrey at andrew.caffrey@wsj.com

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