Debate: Who covers loss if PSNH sells its plants?
CONCORD — When Public Service of New Hampshire sold the Seabrook nuclear power plant in 2002, state Sen. Jeb Bradley, R-Wolfeboro, was among the lawmakers who negotiated a settlement that saw the $450 million loss split between ratepayers and company shareholders.
Now he’s pushing for a similar solution if PSNH is forced to sell off its remaining power plants, particularly the coal-fired plant in Bow, where $422 million has been invested in pollution control technology.
“In order to solve the problem, there has to be responsibility on all sides,” he said Wednesday at a legislative hearing on utility restructuring. “We reached a win-win before, and the numbers are smaller this time. It’s important that there be some give and take.”
Donna Gamache, director of governmental affairs for PSNH, was across the table from Bradley a decade ago, and sat across from him again in the witness chair at Wednesday’s hearing before the Oversight Committee on Electric Utility Restructuring.
Rather than argue vigorously against the sale of the PSNH power plants — as former president and CEO Gary Long did at past committee hearings — Gamache sounded a conciliatory tone, urging lawmakers to allow the Public Utilities Commission to decide the matter, perhaps with some legislative guidance.
The stakes are high for PSNH ratepayers, who just finished paying off their share of the bonds for the Seabrook losses, which in the early years added more than 3 cents per kilowatt hour to electric bills for “stranded costs.”
The final report of the joint oversight committee, due Nov. 1, is expected to provide some guidance to the Public Utilities Commission, but legislation calling for divestiture is unlikely.
“I don’t think we need legislation,” Bradley said.
Committee Chairman Rep. David Borden, D-New Castle, said he filed legislation last week as a placeholder for whatever the committee decides, describing the bill as an attempt to “reduce any barriers that would prevent the PUC from ruling on divestiture.”
Gamache said the utility would prefer a regulatory process over a legislative mandate, but reserves the right to appeal any decision to the courts. “What we’re asking for is for the process to be fair,” she said. “We haven’t looked at what’s going to happen at the other end.”
PSNH and its parent company, Northeast Utilities, now appear willing to sell the power plants, as long as they are allowed to recover all stranded costs — the difference between what they owe on the assets versus what the power plants would fetch at an auction.
That difference could be substantial. An energy industry consultant who created a model for the committee to review in its deliberations used $300 million as a rough estimate of sale proceeds from PSNH power plants, based on the highest estimates of the PUC staff. The company invested $440 million in the Merrimack Station scrubbers alone, and very little of that has been recovered.
Regulators are about to hire a professional appraiser to determine more precisely what the plants are worth, a process that could take until June, the committee was told.
Meanwhile, the PUC has only allowed partial recovery of the scrubber costs through electric rates since the technology went online in 2011. The utility company has a case pending before the state Supreme Court, claiming the pollution controls were mandated by the state and it is entitled to full cost recovery from ratepayers.
Estimates way off
Bradley hammered away at the notion that the final cost of the scrubber project was so far above the initial estimates that PSNH has to bear some responsibility. When first proposed, the cost was estimated at $250 million; the impact on electric bills was supposed to be three-tenths of a cent per kilowatt hour.
The cost recovery allowed so far by the PUC has already added nearly a penny to PSNH rates, and full recovery could add almost three cents.
Consumers have been paying, but the utility has actually benefitted from the cost-overuns, Bradley pointed out. As a regulated utility, PSNH and its parent NU are guaranteed a return in the 9-percent range on capital investments. Getting that return on a $440 million investment has netted the utility $38 million a year, Bradley said.
A final vote on the committee report to the full Legislature is expected at the Oct. 30 meeting.