Burden sharing in sale of fossil-fuel plants getting hard look by state
CONCORD — A legislative oversight committee wants state regulators to determine if Public Service of New Hampshire electric users would benefit from the sale of the utility’s fossil-fuel burning generating plants.
If the Public Utilities Commission determines the plants should be sold, the committee wants the company to share some of the burden with ratepayers for any stranded costs.
The sale price of the plants is not likely to cover investments made in the generating facilities, particularly Merrimack Station in Bow and its recently completed $425 million air emissions scrubber.
The Electric Utility Restructuring Legislative Oversight Committee wants the company to share the burden with ratepayers as it did more than a decade ago when the electric industry was deregulated.
Committee member and Senate Majority Leader Jeb Bradley, R-Wolfeboro, said sharing the burden is the key issue before the committee.
Any settlement “has to be fair to the people we represent,” Bradley said. “Given what was said and when it was said and the predictions made by (former PSNH CEO Gary) Long, there has to be burden sharing.”
Bradley said the company has to agree to share the burden before lawmakers approve securitization, which allows the company to receive a one-time payment for its stranded costs through low-interest bonds that ratepayers pay back over a 10- or 20-year period.
The committee began work this summer after the PUC staff issued a report suggesting the plants be sold in order to reduce electric bills — the highest in the Northeast — for customers who continue to buy power from Public Service.
The abundance of natural gas has driven down the cost of electricity, making it significantly less expensive than Public Service’s generated power.
As a result, many residential and small business customers have opted to buy power from alternative producers. Large power users stopped buying electricity from Public Service some time ago, but with low natural gas prices, a competitive electric market exists for small users.
With more and more customers buying power elsewhere, the cost for the remaining Public Service customers have increased as they pay for the scrubber that began operating about two years ago.
The PUC has been reviewing how much customers should pay for the $422 million investment, but Public Service appealed to the state Supreme Court claiming legislators passed a law requiring the scrubber be built as part of a program to reduce mercury emissions.
The cost of the scrubber increased from an estimated $225 million to $422 million between time the legislation passed and when construction began.
Public Service spokesman Martin Murray said discussions of the company writing off any of its investments has focused on the cost of the scrubber. The scrubber law — which had many partners — included an absolute assurance the company would recover all of its costs, he said.
“We kept our part of the bargain,” Murray said. “The business community would be very uncomfortable if the Legislature tried to ignore the law and that agreement that was stuck in good faith.”
Yesterday, the committee approved a letter asking the PUC to determine if it would be more economical for consumers if the generating plants were sold.
Donna Gamache, Public Service director of governmental affairs, said her company always wanted the PUC to handle the process and the committee’s letter is in line with that view.
Murray said any honest analysis should acknowledge that two large New England power plants will be shut down soon and the region’s over-reliance on natural gas to generate power.
The letter signed by all seven committee members wants the PUC to complete its analysis by April 1 so legislation can be filed if necessary to force the sale of the plants.
Ann Ross, PUC general counsel, said the April 1 deadline would be “pretty tight,” noting the agency just received bids for a company to determine the value of the plants, and added there are likely to be disagreements over issues.
The committee wants a preliminary report by Feb. 15 and a final report by April 1.
Not all committee members were happy with the draft report the committee will finalize Oct. 30, which calls for burden sharing between Public Service and its ratepayers.
Rep. Jacqueline Cali-Pitts, D-Portsmouth, called sections of the report biased. “This is getting more and more biased as we go,” she said. “You’re not telling the whole story.”
She objected to a section saying it is time for Public Service to complete electric industry deregulation by selling its generating plants.
When the state deregulated the electric industry about a decade ago, Public Service was allowed to retain its generating plants, although the other electric companies had to sell their generating facilities. Now-defunct Enron manipulated energy markets, which led to rolling blackouts in California. That caused lawmakers to back off full deregulation for Public Service allowing the utility to retain its generating plants.
The company says retaining the plants has saved its customers millions of dollars and has fought divestiture and any attempt to force the company to share in the stranded costs burden.