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Northeast Utilities (NU) and NStar (NST) said Monday that they have signed an exclusive agreement with Hydro-Quebec to build a high-voltage transmission line to boost imports from eastern Canada into New England.

The two U.S. utility companies have filed a proposal with the Federal Energy Regulatory Commission asking for approval for the interconnection with Canada. The companies said in a press release that the line, which would run from the Des Cantons substation in Quebec to southern New Hampshire, would transmit at least 1,200 megawatts of power, or enough to supply around one million homes.

The companies didn't include a cost estimate, but said the project could meet nearly a third of New England's greenhouse-gas reduction goals.

Province-owned Hydro-Quebec is aggressively expanding its hydroelectricity output, rerouting rivers with U.S. exports in mind. At the same time, New England utilities are looking for cleaner sources of power to meet limits on carbon dioxide emissions and ever-increasing requirements to use more power from renewable sources.

"New England has some of the most ambitious environmental goals in the nation," said Charles Shivery, Northeast Utilities chairman and chief executive, in the release. "With this project, we can help the region meet its energy, environmental and economic needs. In addition, we will materially diversify New England's generation mix."

Northeast Utilities, NStar and Hydro-Quebec have started discussions about a long-term power purchase agreement. The structure is expected to allow other utilities in New England to participate in the pact, the companies said.

If the project wins FERC approval, the companies would negotiate the purchase agreement and a development plan to build the line. NU and NStar would own the U.S. portion of the line.

Already one of the largest generators in North America with an installed capacity of 36,000 megawatts, Hydro-Quebec is expanding. Projects include the expansion of hydroelectric generation near James Bay to produce an additional 8.5 billion kilowatt hours of power a year. Hydro-Quebec is next scheduled to build a 1,550-megawatt hydro facility on the Romaine River, for an estimated cost of $6.5 billion.

Northeast Utilities owns electricity utilities in Connecticut, Massachusetts and New Hampshire, while NStar owns and operates a power utility in Massachusetts.

-By Mark Peters, Dow Jones Newswires; 201-938-4604; mark.peters@dowjones.com

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