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Electricity landscape: Eversource customers on the hook in biomass deal

New Hampshire Union Leader

December 03. 2017 2:11AM
The Burgess BioPower plant in Berlin employs 27, but supports nearly 200 other jobs in the North Country, according to a study. (COURTESY)

CONCORD - Eversource customers are footing the bill for the company to pay $100 million over-market rate to buy energy from a Berlin biomass plant by 2020.

But a spokeswoman for the plant's manager said the 4-year-old Burgess BioPower plant provides more economic benefits than the cost of over-market rates.

The power deal was part of a jobs vs. electricity cost debate played out early this decade when many state policy leaders backed the deal to help the North Country economy.

"People made essentially a policy choice of trading ratepayer benefits against broader economic interests," said Donald Kreis, the state's consumer advocate.

Eversource customers buying 650 kilowatts of power a month have paid between $1 and $4 a month, depending on energy market prices, since the plant opened, Eversource spokeswoman Kaitlyn Woods said Friday.

Eversource had more than 375,000 customers affected as of June 30. Senate Majority Leader Jeb Bradley, R-Wolfeboro, was among those backing the deal.

"There's a balancing act, no question about that," Bradley said last week. "Rates are high in New Hampshire, and I think we have to be cognizant of that."

Bradley, who said the cap will be hit earlier than he thought, said he thinks the state's Public Utilities Commission, which approved the agreement, should revisit the issue and "potentially look at whether the $100 million threshold should be extended somewhat."

The Berlin power purchase agreement provided a contractural kilowatt hour price, but with natural gas prices suppressing the wholesale market price during some years, that increased the gap between the market rate and the kilowatt hour price set in the contract, said Tom Frantz, director of the PUC's electric division.

Once the $100 million cap is hit, Eversource's payments to the Berlin power plant would be discounted by the amount in excess of $100 million in the following year's energy payments by Eversource to Burgess, he said. The commission also put a limit on how much energy could be purchased.

The deal explained

Some details of the agreement were released recently when the PUC lifted the "confidential" label from a hearing transcript and supporting exhibits.

Through last April, Eversource paid $52.3 million more for biomass power than if it had purchased the same amount on the open market, according to Eversource's Frederick White.

The document from last spring estimated the $100 million cap will be reached by April 2020, Frantz said. Eversource officials indicated the cap could be reached earlier, by December 2019.

"There is that cap of 100 million bucks that limits the exposure that consumers suffer," said Kreis, who wasn't in his post when the deal was approved by different PUC commissioners than the ones serving today.

The PUC staff and a former consumer advocate warned of large potential above-market costs. One PUC commissioner at the time was Thomas Getz, now a member of the Northern Pass Transmission legal team. Northern Pass is a subsidiary of Eversource.

In 2011, Berlin Mayor Paul Grenier said the plant would bring 40 direct and 200 indirect jobs to the region. A new economic study said the Berlin plant supports 221 jobs - 184 in Coos County, including loggers and truckers. The plant itself employs 27, according to Sarah Boone, vice president of public affairs for Portsmouth-based CS Operations Inc., which manages the plant.

"The economic benefits resulting from the operation of Burgess BioPower exceed the economic impacts associated with Burgess' above-market electricity rates by a factor of at least three to one," she said.

The numbers come from a yet-to-be-released economic impact study done by PolEcon Research in Dover.

"These jobs accounted for $11.5 million in labor income in Coos County, and another $2.4 million in other parts of the state," Boone said.

"The annual economic impact of Burgess BioPower throughout New Hampshire in 2016 was 221 jobs, $13.9 million in labor income, and $63.4 million in output of goods and services," Boone said.

Buying biomass

The plant to date has spent about $91 million for biomass material - mostly wood chips - including about 55 percent from New Hampshire, Boone said.

Woods explained the reasoning behind the deal by Public Service of New Hampshire, now Eversource.

"PSNH agreed to the power purchase agreement for biomass because of the call from across New Hampshire government for the company to help support forestry jobs in the North Country," Woods said. "Our agreement with Berlin BioPower had the strong support of many New Hampshire officials, including then-Gov. John Lynch; Executive Council members Ray Burton and Daniel St. Hilaire; Sen. Jeb Bradley, Sen. John Gallus and Coos County Commissioners Bing Judd, Tom Brady and Paul Grenier."

Once the $100 million cap is reached, what will that mean for the plant's future?

"Burgess has previously articulated its commitment to continued operations," Boone said. "Burgess will evaluate all options available should the need arise. The state has made an investment in increasing the amount of renewable energy we generate and use. It strongly supported Burgess' construction and the power purchase agreement. We are committed to producing clean, renewable power into the future."

Jasen Stock, executive director of the New Hampshire Timberland Owners Association, estimated the plant produces up to 350 direct, indirect and induced jobs within a 50- to 100-mile radius.

"In many respects, it basically helped fill a vacuum that once the paper mills occupied," Stock said. "It fills an important niche."

The Burgess plant and other biomass plants use low grade wood coming from trees that are too crooked or malformed to make lumber from, Stock said.

Burgess BioPower is owned by Burgess Holdings LLC, which is owned by NewCo Energy Holdings LLC.

The 75 megawatt-hour plant - among the nation's 10 largest biomass plants - is the state's second-largest renewable energy producer behind only the 99 megawatt wind farm in the Dixville-Millsfield area, Boone said.

"Burgess is virtually new, only 4 years old, and is a valuable, major source of renewable power that will help New Hampshire meet its mandated renewable energy goals," Boone said. "It is a crown jewel in New Hampshire's renewable energy portfolio."

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