PSNH Response to NHPUC Staff Report

Public Service of New Hampshire, the state’s largest electric utility, has responded to a recent study report by the staff of the N.H. Public Utilities Commission (PUC), which focused on the ownership of the company’s state-regulated power plants.

Our viewpoint:

Since New Hampshire restructured our retail energy market in 1999, our state has chosen a sound policy path, providing consumers competitive options, as well as a safety net.  This safety net includes “default” energy service, which is provided by PSNH, at prices set by the PUC.  Because PSNH retains electric generating facilities in New Hampshire, our retail customers have saved more than $700 million compared to open market rates over the last ten years.   Is the system perfect?  No, it’s not.  In particular, we have a situation now where PSNH retail customers are subsidizing costs of the competitive market.  We think that’s unfair to our customers, and should change.

Earlier this year, the PUC wisely opened a docket to examine some of these issues.  In a surprise move, the PUC staff issued a non-binding recommendation urging policymakers to force PSNH to sell its power generating facilities.   In our response, we note that the Staff recommendation is inconsistent with the PUC directive under which it was initiated, and we respectfully disagree with its analysis and conclusions.  Their conclusions reflect a short-term view of our energy markets, which is not supported by sound analysis or history.

In recounting some of that history, we note that as part of restructuring, the  Legislature initially directed PSNH to sell off all our generating facilities. PSNH began that process, with the selling of our interest in Seabrook, Millstone and Vermont Yankee assets. But then, amid growing concern over the Enron scandal, energy shortages and price spikes in other parts of the country, state lawmakers in 2001 prohibited the sale of any remaining PSNH generation assets. They strengthened that prohibition in related legislation in 2003.

Since then, New Hampshire has taken other steps to ensure home grown energy remains a part of the mix.  For example, in 2006, New Hampshire passed a law requiring PSNH to install a state-of-the-art “scrubber” on our coal-burning plant in Bow to radically reduce mercury and sulfur emissions, making it one of the cleanest coal-burning power plants in the nation.  The cost – at around four hundred million dollars – was specified under state law to be recovered through our default energy service rate.

New Hampshire’s decision to have PSNH retain its fossil fuel and hydro generating facilities has provided a real price hedge for customers, saving them hundreds of millions of dollars.  Moreover, these generating assets continue to provide a reliable source of electricity, helping keep the lights on throughout the year.  With the market price of electricity relatively high, few competitors entered the New Hampshire retail market.  But with the recent dip in the price of natural gas, more competitors have come into the market.   Today around 50,000 residential customers have chosen competitive suppliers, while more than 370,000 have stayed with PSNH default service.

New Hampshire customers enjoy the best of both worlds.  They can choose from a variety of suppliers, or they can choose to receive service under PSNH’s regulated default energy service rate.  If a competitive supplier suspends its business or defaults on its obligation to customers– something we’ve already seen – PSNH picks up the service, without electric service ever being interrupted to customers.  Despite the risks and uncertainty of the competitive electric market, consumers can be assured PSNH will always be there, providing reliable service, at a reasonable, state-approved price.  

One unintended consequence of customers choosing other suppliers is that a smaller number of customers are left to cover the fixed costs of default service -- a situation we think is unfair to default customers.  There are fixed costs to maintaining the safety net of universal service and system integrity for current or returning default service customers, while preserving the flexibility for customers to move back and forth between PSNH and other suppliers.  Additionally, PSNH is required to provide the billing and administrative functions for competitive suppliers - - at very low below market cost, thus subsidizing the profits of competitive suppliers.  Our customers should not have to subsidize these services provided to other suppliers.  PSNH is proud to serve as the safety net to New Hampshire’s energy delivery system, but we think the costs of providing default service should be shared fairly across the system.  

The Legislature this session established a process, SB 191, for creating a state energy strategy.  This is a much-needed and thoughtful approach, which we strongly endorse.  With this process in place, it does not make sense to now undertake a wholly separate track of policymaking regarding the question of PSNH’s generating facilities.  These issues are complex, and interrelated, and should be carefully considered as part of an overall strategy.  

It is our intention to engage with the Legislature through the SB 191 planning process, to discuss how New Hampshire can continue to lead the nation in providing reliable, reasonably priced energy for our citizens.

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