Loyal PSNH customers to pay more than those who switched, return
The Public Utilities Commission in a 2-1 ruling issued Monday authorized an "alternative default rate" for Public Service of New Hampshire customers who come back to the regulated utility from a competitive energy supplier.
Those customers will get a lower, competitive rate, while PSNH customers who stayed with the company will continue at the higher rate. Commissioner Michael Harrington, in a scathing dissent, said the move protects PSNH while damaging the competitive market that has lowered rates for consumers.
"The commission should not be in the business of favoring one energy supplier over others by authorizing discriminatory pricing as a substitute for prudent business planning and management, especially where the cost will be borne by ratepayers," Harrington wrote. "To step in as regulators and authorize an inequitable administrative rate for the same service to similarly situated customers for the purpose of attracting customers away from market competitors is simply contrary to our statutory mandate."
The consumer advocate, appointed to represent ratepayers on the commission, gave the idea a lukewarm reception. According to the ruling, Consumer Advocate Susan Chamberlin signed off on the deal because "customers would be better off with the settlement than without it."
The PUC staff said the settlement is a "just and reasonable resolution and is in the public interest."
PSNH has been losing customers to competitive electric suppliers ever since low natural gas prices enabled them to offer a better deal.
While competitors can take advantage of the wholesale market prices, PSNH has to build other costs into its rates, such as the $422 million scrubbers installed on its coal-fired power plant in Bow.
Large commercial customers have been migrating to competitors ever since deregulation was approved 10 years ago. Residential customers only began to switch over in late 2012, but have been doing so in growing numbers.
The most recent data from the PUC shows that 47,191 PSNH customers, including 30,055 residential customers, have moved to a competitive supplier, representing 9.44 percent of all PSNH customers and 43.79 percent of all electricity delivered by the utility.
PSNH still delivers the power and bills the customer, but the revenue from the electric supply charge goes to the electric supply provider.
Downward spiral concern
With so many customers making the switch, the PUC has become concerned that the costs of the regulated utility will be spread over a shrinking customer base, thus increasing default rates even higher, forcing more migration to competitors, in a downward spiral for PSNH.
The Alternative Default Energy Service Rate, or ADE rate, would be offered only to PSNH customers who have "migrated" to competitive suppliers and are willing to return.
The ADE rate was proposed at 7.76 cents per kilowatt hour (kwh) in an earlier PSNH filing, still higher than some current competitive offers.
The PSNH default rate is now set at 9.54 cents per kwh, compared to competitors like ENH Power, now offering 7.28 cents per kwh guaranteed through Nov. 30.
PSNH has been under a PUC order since July 2011 to investigate the effects of customer migration and come up with a plan to deal with it.
The PUC had problems with the company's first proposal in 2012, but accepted the more recent filing as "just, reasonable and in the public interest."
The two commissioners who voted in favor of the alternative default rate, Chair Amy Ignatius and Robert Scott, cited their concern over the burden PSNH's remaining customers will bear, should migration continue at the current rate.
The ruling said the PUC is also mindful of the need to create a safety net, at a competitive rate, for customers left hanging if their competitive supplier goes into default, as happened to approximately 7,500 customers of PNE Energy Supply when that company had to suspend operations recently.
If PSNH accepts the commission's terms for setting an alternative default rate, it will have to present the rate for approval by the PUC in the next 30 days for implementation on July 1, when any changes to the standard rate would also go into effect.
The alternative rate will be tested in a pilot program lasting a year and will be closely monitored, according to the PUC ruling.
Commissioner Harrington believes that the PUC decision will only encourage more people to move to competitive suppliers, as a way of guaranteeing themselves a lower rate should they ever return to PSNH.
"For PSNH to offer a discounted rate to attract customers back from competitive suppliers is anti-competitive," he wrote, "and the fact that the existing default service customers may subsidize those returning customers makes the proposed ADE unlawful, unjust and unreasonable."
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