August 10. 2013 10:24PM

Garry Rayno's State House Dome: Electric costs again before Legislature

State House Bureau

As New York Yankee sage Yogi Berra once said, "It's déjà vu all over again."

A meeting last week of the Electric Utility Restructuring Oversight Committee was eerily similar to legislative hearings two decades ago when lawmakers clashed with the state's electric utilities over how best to deregulate or restructure the electric industry.

In the early 1990s, the goal was to lower consumers' electric bills, which were among the highest in the country. Today, lawmakers want to reduce the bite on small businesses and residential customers who continue to buy power from Public Service of New Hampshire.

The deregulation of the industry separated electricity transmission and distribution from power production, which puts the risk for building new power plants on investors, not ratepayers.

The separation did not quite come to fruition in New Hampshire because of what was happening at the time in California, where price spikes and rolling blackouts resulted when Enron and other large electric suppliers manipulated the market.

During that period, all but one of New Hampshire's electric utilities, Public Service, had shed their ownership in power plants, and even Public Service was well on its way to reaching that goal; the company had sold its share of the Seabrook nuclear plant and many of its hydro-generating facilities.

Not wanting New Hampshire to experience the same problems California had seen, lawmakers allowed Public Service to retain its existing generating plants, including its fossil-fuel plants in Bow, Portsmouth and Newington.

Some folks warned against Public Service's retaining the plants, saying it would shatter any possibility of developing a competitive energy market for small business and residential customers. The critics' dire predictions did not come true for 15 years, but now the situation is reaching crisis stage.

As expected, the competitive market developed quickly for large electric users, such as factories and major retailers, and almost 100 percent of those companies moved to other suppliers a decade ago.

For much of the last 20 years, Public Service's power price has been competitive for small-business and residential customers, and few alternative suppliers were willing to wade into the market.

But that has changed in the last few years.

Today, more than half of New England's power is produced by natural gas, whose price has fallen to record lows.

As a result, electric costs have fallen, and Public Service's fossil-fuel generating plants cost much more per kilowatt hour to operate and maintain than the going rate in the New England market.

A competitive market has developed for smaller consumers, and now 55 percent of all the electricity flowing through Public Service's service area comes from alternative suppliers.

But with more and more small businesses and residential customers leaving Public Service, the cost has gone up for those remaining with the company on what is known as default service.

Default customers now pay the highest electric rates in New England.

One of the main reasons for the high rates is a $422 million emission scrubber at Merrimack Station that began operating about two years ago.

Since that time, the company has been recovering the cost of the scrubber from its customers.

Public Service worked with lawmakers in 2006 on a law mandating the scrubber as part of a program to significantly reduce mercury emissions. As a result, Public Service claims it legally can recover 100 percent of its investment.

That is very similar to the company's claims 20 years ago, particularly for its investment in Seabrook Station and its obligation to buy over-market-priced electricity from a half-dozen wood-burning power plants.

As was the case then, the company now wants to collect 100 percent of what are called stranded costs from its customers. Stranded costs are akin to the costs a homeowner faces when a house is worth less than what is owed on the mortgage.

Twenty years ago, Public Service eventually wrote off some of its investment in Seabrook, but the company's former CEO, Gary Long, said last week before the legislative oversight committee that Public Service is not going to write off any of its stranded costs this time if it is forced to sell its generating plants, which the Public Utilities Commission staff, environmentalists and the company's competitors are all pushing.

And as was the case 20 years ago, those opposing Public Service's position say the utility has greatly inflated the value of the plants, and consumers should not be burdened with ensuring the profits of Public Service's parent company, Northeast Utilities, for the next 20 years to pay off those stranded costs.

All this set up a heated exchange between Long and Sen. Jeb Bradley, R-Wolfeboro, last week before the oversight committee.

In defending his company's position that the power plants are needed, Long laid out four or five reasons why electric rates were high, and all were attributable to what lawmakers or state regulators had done.

That set off Bradley, who reminded Long the company was complicit in many of the problems Long outlined, and the war of words began.

There is obviously a lot of blood in the water right now.

Like 20 years ago, this is not going to be an easy or quick fight, but both sides know time is short as more and more Public Service costumers leave for other power suppliers and the cost for those remaining customers goes up.

The vice president of one of the competitive suppliers, Dan Allegretti of Constellation Energy, said the situation is like playing musical chairs. "If you're the last customer standing, you'll be handed a bill for four hundred and something million dollars," he told the committee.

Lawmakers know they are going to have to do something, but just what is the question, particularly in an election-year session.

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Brown Alert: Although former Massachusetts U.S. Sen. Scott Brown appears more interested in running for governor of the Bay State than jumping the border and seeking a showdown with U.S. Sen. Jeanne Shaheen, D-N.H., that did not stop her campaign from ramping up the fundraising last week.

Brown appeared in Salem Friday to benefit state Republican Rep. Joe Sweeney's reelection campaign.

According to the Friends of Jeanne Shaheen email, written Friday by Kari Thurman: "For Brown, who's said he 'isn't ruling out' running against Jeanne, this is his fifth trip here in the last four months. He's also got Karl Rove talking him up in the pages of the Wall Street Journal.

"Jeanne is the only Democrat elected to the Senate from New Hampshire in 30 years. The only way to win again - especially against fundraisers as prolific as Brown and Rove - is to run the strongest grassroots campaign in New Hampshire history.

"To do that, we need 150 donations to come together by midnight to show Brown the strength of the campaign we're building. Jeanne is counting on your support - it's the only way."

Shaheen has already raised several millions dollars for her reelection effort, while there are no officially announced candidates on the Republican side, although Bradley, former state Sen. Jim Rubens and former gubernatorial candidate Karen Testerman are exploring a run.

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Rest In Peace: Former state Sen. Leo Fraser, R-Pittsfield, died last week at the age of 86.

Fraser served five terms in the Senate from 1991 to 2000 and served three terms in the House, where he chaired the Commerce Committee.

Fraser, who served a short time as the state's insurance commissioner, was the Senate's insurance expert, but also worked on many economic development initiatives. In the House, he was one of the architects of the Pease Development Authority, created to develop the former Air Force base after it was closed.

Fraser was a true gentleman and one of the nicest people to grace the halls of the State House. He will be missed.