, Salem, MA


August 1, 2013

Keenan: Important to know true cost of cable project

Two weeks ago, the Salem City Council voted to put a nonbinding public opinion question on the November election ballot. This question asks whether the public believes the city should advocate for National Grid to utilize a method called horizontal directional drilling to carry out a statutorily mandated transmission cable replacement project. Horizontal directional drilling entails drilling beneath the Salem Harbor floor, burying the transmission cable, and continuing to dig a land route through the Point neighborhood to the Canal Street substation. The alternative route is solely a land-based route that would travel Webb Street, Forrester Street, Hawthorne Boulevard, and via Congress, Leavitt, Fairfield and Cypress streets to the Canal Street substation.

On its face, horizontal directional drilling may sound like an easy alternative to avoid possibly disruptive road construction. However, it is important to inform voters of what the potential implications are for advocating for this proposal. For example, what would the cost of horizontal directional drilling route be, you ask? You won’t find it in the ballot petition. A feasibility study recently released by National Grid estimates that the total cost will be $110 million—perhaps twice the cost of the preferred land route. The logical question that follows is: Who picks up this tab? The ratepayers. WE are the ratepayers. This seems a rather pertinent fact that was left out of the ballot petition.

Some have argued that National Grid profits by proposing one less-expensive route (the land route) over another (the water route.) This view expresses a misunderstanding of the regulated utility industry and is misleading to the city’s voters. National Grid is the regulated monopoly provider of electricity transmission and distribution in this region. In this model, each investment they make, plus a regulated profit, is recovered from ratepayers over a period of time determined by a government regulatory agency. This results in the price of electricity that we pay. The profit that National Grid recovers on each prudent investment that they make is a regulated percentage of their actual capital investments. This means the larger the prudent capital investment, the larger the company’s profit from that investment. Ultimately, any costs that National Grid incurs from these types of projects are passed on to their ratepayers, you and me, and results in higher bills for years to come.

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