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Panel listens to what would be outcome of selling PSNH plants

State House Bureau

September 26. 2013 9:16PM

CONCORD — Electricity would cost less if Public Service of New Hampshire’s electric generating plants were sold, a legislative oversight committee was told Thursday.

The Regulatory Assistance Project developed a model that depicts the relative increase and decrease in electric rates if more of the utility’s customers leave for lower-cost suppliers, how much electric users have to pay for the $422 million emissions scrubber at the Merrimack Station generating facility and the sale price for the company’s generating plants.

Former state Air Resources director Ken Colburn walked the Electric Utility Restructuring Oversight Committee through the program with different scenarios all indicating selling the plants would save Public Service electric customers money because they could buy electricity at market rates, which are about 1 cent a kilowatt hour (kwh) less than Public Service’s costs to produce it.

The model is still in the testing phase, Colburn said, and cautioned that he is not making any recommendation about divestiture of the fossil-fuel burning plants, but noted the model assumes the plants will be sold.

The committee is deciding what action — if any — lawmakers should take to help lower rates for Public Service power customers, who pay the highest rates in New England for their electricity.

The rates could increase by as much as 3 cents per kwh if the company’s electric customers have to pay for the entire cost of the scrubber, which began operating about two years ago.

Public Service is the only electric utility in New England that owns its own generating plants. The company was set to auction its fossil fuel plants and had sold its hydro facilities and the Seabrook Station nuclear plant when the 2000-2001 California energy crisis prompted lawmakers to decide PSNH could retain its generating facilities.

But today, low natural gas prices have reduced the cost of electricity below what PSNH can produce it for, which has allowed competitive suppliers to enter the residential and small business market. Large electric users have had a competitive market for some time; almost all buy their power from competitive suppliers.

Today, about 55 percent of the electricity used by PSNH’s customers is supplied by its competitors.

As long as natural gas prices remain low, experts expect more customers to look elsewhere for their electricity. Public Service continues to maintain and operate the transmission and distribution system.

The Public Utilities Commission staff issued a report in June saying Public Service’s continued ownership of generating plants contribute significantly to rising rates for residential and small business customers who buy power from the company.

The report also focused on ways to reduce potential stranded costs associated with the divestiture of the plants and sought additional expertise in determining the value of the generating plants, and last week the PUC issued a request for proposals to hire a consultant to do that.

The staff report also asked for guidance from the Legislature and urged the PUC to explore the issue.

During Thursday’s meeting, Thomas Frantz, PUC electric division director, said the report tracks what happens to rates if customer migration continues away from Public Service. He said a change from 40 to 50 percent would increase rates for those remaining by almost 1 cent a kwh.

“This is all highly linked,” Frantz said. “The major driver is the price of (natural) gas.”

He said what goes on in the market is linked to the price of gas, which is linked to the price of electricity, and the price of electricity is linked to customer migration.

The legislative oversight committee had asked Colburn to help determine how different scenarios would affect rates.

Under Colburn’s model, if Public Service is allowed to collect 100 percent of its scrubber costs and about $373 million in stranded costs because the sale price of the plants would be less than their estimated value, residential and small business customers would be paying about 8.3 cents a kwh compared to 8.6 cents today.

However, customers who buy power from other suppliers would see their costs increase from 7.5 to 7.6 kwh.

Similar reductions and increases occur with more or less stranded costs, with customer migration and with cost recovery for the scrubber.

The committee’s next meeting is Oct. 2 when Frantz testifies as well as a representative from the New England electric system independent operator, ISO — New England.

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