Even This Winter, PSNH Coal Plants Aren’t Cheap

Nov 14, 2014 by  | Bio |  Leave a Comment

With electric rates headed up for the winter, more than a few people are admiring the perennially high but stable rates of PSNH, New Hampshire’s largest utility and the owner of the state’s two coal-fired power plants. But what’s behind PSNH’s rate’s new luster—the first time in the state’s decade-plus experience with a restructured electric market that PSNH’s rate is appreciably lower than other utilities?

PSNH's Schiller Station in Portsmouth

PSNH’s coal and wood-fired Schiller Station in Portsmouth

Just like they did last winterPSNH and its parent company Northeast Utilities are touting PSNH’s ownership of coal plants as a “hedge” against the natural gas-driven volatility in the overall market for electric power. In fact, they’ve been repeating similar things for years, and this winter’s rates might seem like vindication. That’s probably why it’s popping up as fact in letters to the editor and in news stories, to the extent that some are second-guessing the state’s ongoing review of whether PSNH should own its power plants.

Franklin Pierce University Professor Michael Mooiman, the author of an assiduously even-handed and deeply researched blog on New Hampshire energy issues, put that idea to the test. He burrowed into PSNH’s most recent regulatory filing to analyze the costs of PSNH generation. And he reached a conclusion directly at odds with the PSNH talking point:

PSNH rates are low this winter but this is not a consequence of owning their generating assets. Instead, it is a result of their low cost purchases through a portfolio of long-term power purchase agreements and wholesale market purchases.

Professor Mooiman pegs the all-in cost of PSNH generation at a year-round 13.2 cents per kilowatt-hour. Even with this winter’s dramatic price spikes, the year-round average retail rates for the state’s and region’s other utilities are much less than this, and competitive suppliers are offering year-long fixed rates well below that figure. Compared with the contracts available for new wind power or energy efficiency, PSNH plants are much more costly. (If the Merrimack Station scrubber is fully added to rates, PSNH’s generation will only look worse.) In other words, PSNH customers could replace all the power from its power plants with other resources available in the market, and its customers would pay lower rates than they are now. So PSNH’s talking point about the “value” of its coal plants in keeping PSNH rates “low”? It’s just not true.

You can read Professor Mooiman’s full analysis here.

If you’re looking for the straight story on what’s happening with winter price spikes, be sure to read my colleague Shanna Cleveland’s post on the 3 things no one is telling you about rising energy costs. And, if you’re looking for ways to save money on your energy bills this winter, look no further than Shanna’s video series demonstrating low-cost ways to save energy at home. You also can learn more about competitive supply options from EmpowerNH.

Setting the Table for Clean Energy Progress in the Granite State

Aug 12, 2014 by  | Bio |  Leave a Comment

Without much fanfare, New Hampshire lawmakers took important steps in 2014 toward clean energy progress. This spring, the legislature completed what is arguably the most successful session for energy issues in many years with a series of significant bills each addressing different parts of the clean energy puzzle: a pathway to ending the state’s inexcusable subsidies for its two coal plants, scaling up energy efficiency, reforming the process and standards for siting new energy facilities, ensuring sound utility planning, and protecting our natural resources from the ongoing risks of fossil fuels. Notably, this work steered clear of the risky and controversial gas and transmission infrastructure plans that captured most energy headlines. With Governor Hassan’s signatures this summer, these bills are now New Hampshire law:

clean-energy-progress

(photo credit: flickr/gcimms)

PSNH Divestiture: New Hampshire’s single biggest clean energy opportunity is the new pathway, established by House Bill 1602, that could lead to the sale and eventual retirement of PSNH’s coal-fired power plants in Bow and Portsmouth.  As CLF highlighted when the bill passed, these old and inefficient plants—historically, New Hampshire’s largest sources of toxic and carbon pollution—have no prospect of providing net benefits to customers, who are now subsidizing the plants by tens of millions of dollars per year. Now the Public Utilities Commission has a clear mandate to open a proceeding and compel PSNH to take appropriate steps to sell the plants, which will then be forced to compete with cleaner, cheaper resources in the marketplace.

Energy Efficiency and C-PACE: In June, CLF profiled the two major bills focusing on energy efficiency, our cheapest and cleanest energy resource. With House Bill 1129, New Hampshire continues its progress toward implementing an Energy Efficiency Resource Standard, which would allow the state to capture much greater levels of cost-effective energy efficiency; the bill creates a stakeholder process to develop energy efficiency goals and policies, including legislation for consideration in 2015, and encourages state government to increase its own efficiency efforts. House Bill 532 provides a major boost to privately funded energy efficiency projects using the property assessment financing known as C-PACE, substantially raising the former cap on such projects. A third bill, Senate Bill 268, helps channel funds available for energy efficiency to proven programs that were at risk of shutting down and to municipal energy efficiency projects, many of which are shovel-ready. As CLF has pointed out, New Hampshire is lagging the rest of New England in energy efficiency, and these new laws are important steps along the road to changing that.

Senate Bill 245: CLF summarized this major bipartisan reform of the state’s energy facility siting law after it passed the Senate in March. Under the leadership of Representative Amanda Merrill and others, the House made many technical improvements to the bill, through a process that continued to be an unusual example of collaboration and compromise among very diverse stakeholders, including CLF. Despite the changes, its core remained: the addition of non-agency members and a professional staff to the committee charged with reviewing projects, a reduction in the committee’s overall size, increased opportunities for public participation, and the requirement that all large energy projects affirmatively “serve the public interest.” For wind farm projects, the legislature—in a section of the PSNH divestiture bill—offered a strong endorsement of their potential role in the state’s future energy portfolio and provided some clarity on the issues that must be considered by the siting committee when it sets rules for such projects.

Other bills: In House Bill 1540, the legislature approved changes to the statute governing utility long-range planning to modernize the requirements and ensure full consideration of energy efficiency, grid modernization, and distributed generation. And in House Bills 1224 and 1376 and Senate Bill 325, the legislature focused on addressing the risks of transporting fossil fuels by pipeline and rail, through increased state regulatory oversight over oil pipelines and initiating a full legislative review of the safety requirements for oil and gas transportation.

The State House isn’t the only place we’re seeing progress. The New Hampshire Office of Energy and Planning and a council of state officials are working on a state energy strategy that, judging from the draft released in May, is likely to prioritize local, small-scale, and climate-friendly energy solutions. And the state’s Public Utilities Commission (“PUC”) is finalizing regulations that should help kick-start adoption of group net metering, a way for communities and other groups to invest in clean, distributed energy projects that would be too large for a single individual or business to take on. The PUC also is working to develop a framework for advancing an Energy Efficiency Resource Standard, which will help chart the course for the stakeholder process under House Bill 1129 and eventual adoption of a strong energy efficiency goal.

What these efforts have in common is that they together set the table for the bold actions that will be necessary for New Hampshire to live up to our aspirations to become a real leader in clean energy innovation and energy conservation and to mount a meaningful response to climate change. It will be up to everyone—from lawmakers and regulators to advocates, businesses, and ordinary homeowners—to take our seats and engage together in the hard work to make a thriving clean energy future a reality for the Granite State.

New Hampshire’s Biggest Clean Energy Opportunity: PSNH Divestiture Bill Heads to Governor’s Desk

Jun 6, 2014 by  | Bio |  1 Comment »

Just a year ago, the headline would have been hard to imagine in a New Hampshire newspaper. Yesterday’s Concord Monitor reported, “House, Senate Approve PSNH Divestiture Bill.” The state is now on a path that will likely lead to the sale of power plants owned by Public Service Company of New Hampshire, New Hampshire’s largest electric utility, including the state’s two coal-fired power plants—two of the last three surviving coal plants in New England.

Such a sale would put to an end the state’s crazy practice of subsidizing those decades-old plants’ operation to the tune of hundreds of millions of dollars, a giveaway to PSNH that far exceeds the state’s modest investments in the clean energy of the future and that has left hundreds of thousands of New Hampshire households with rising rates and the dirtiest energy mix in New England.

The legislation (House Bill 1602) passed both houses of the New Hampshire legislature in big bipartisan votes. Under the legislation, the state’s Public Utilities Commission (“PUC”) will open a legal proceeding by the beginning of next year to decide whether PSNH’s ownership of power plants is in the “economic interest” of PSNH customers. While the bill that just passed the Legislature does not order an immediate sale of PSNH’s plants, it does mean that the rigorous review of PSNH’s power plants that CLF has been advocating (and the PUC has been reluctant to undertake) will now proceed. During that review, PSNH’s misleading talking points about the supposed insurance value of its coal plants will finally be put to the test.

If the PUC determines that the risk of operating PSNH’s power plants should not fall on its shrinking customer base, as it does today, but on the shareholders of power plant owners, as is the case for all other power plants in New England and in many other markets throughout the country, PSNH’s plants will be sold to one or more other companies. As a part of that process, the PUC will decide whether, which, and how much customers should pay for “stranded costs,” that is, the difference between the sales price of the plants and the value of the plants on PSNH’s books (which the PUC staff has estimated at roughly $400 million). PSNH has several hydro facilities and contracts that may have value in the marketplace and, when sold, could help reduce stranded costs.

As the PUC’s staff has concluded in two damning analytical reports last June and this April, PSNH’s fossil fuel plants provide no net benefits to PSNH customers and are in fact poised to lose hundreds of millions of customer dollars in the coming years.

Case in point: the coal boilers at Schiller Station in Portsmouth, which went into service in 1952 and 1957. They are among the least efficient fossil fuel power plants in the country and—even during a time when PSNH claims they have great value to customers—they now operate less than a third of the year. According to an updated analysis by Synapse Energy Economics that CLF presented to the Legislature, this is what the cash flow of Schiller’s coal units will look like in the coming years, taking into account the plant’s fixed costs, PSNH’s guaranteed profits, and the market revenues from feeding the plant’s power and other services to the grid, across a range of scenarios. Red as far as the eye can see.

clean-energy-opportunity

Present Value of Net Losses at Schiller Coal Units (source: Synapse Energy Economics)

In short, there is no prospect of the plant providing a net benefit to customers, even if natural gas prices go much higher or the plant is free of any new environmental requirements. Indeed, next month PSNH’s energy service rate is slated to rise to about 10 cents/kwh, its highest-ever level and far exceeding the rates of other utilities and competitive suppliers in New Hampshire, even without fully including the cost of the $422 million Merrimack Station scrubber project.

After a sale, the owners will have to operate the plants in the region’s competitive marketplace, where—it could not be plainer—inefficient, dirty coal plants cannot compete with other power plants. Without PSNH’s guaranteed profits and its perverse protection from market forces, new owners will have every incentive to repower the plants with cleaner or renewable fuels or use the sites for other purposes.

Remarkably, the bill that passed the Legislature earlier this week earned support from nearly all quarters, including PSNH itself, the state’s business community, other New England power generators, competitive energy suppliers, and environmental and consumer advocates. It’s a stark contrast to the icy reception that greeted the last PSNH divestiture bill, which was filed and quickly killed in 2012. CLF and EmpowerNH—the coalition CLF helped create to promote retail energy competition in New Hampshire—testified in favor of the bill in both the House and Senate, building on comprehensive input provided last August to the joint House-Senate committee overseeing electric utilities. CLF emphasized the risks of inaction:

As New Hampshire is developing an energy strategy for the next decade that prioritizes efficiency and cost-effectiveness, sending massive amounts of ratepayer money to PSNH, [Northeast Utilities], and its shareholders to keep uneconomic fossil plants running is unquestionably a tremendous policy failure…. [The plants] are losing millions of dollars per year, and even the most favorable possible forecast shows that the losses will continue to mount. Much damage has been done already. Absent divestiture, all of these future losses will be borne by PSNH default service ratepayers. It is time for the Legislature and then the Commission to act.

In its testimony, EmpowerNH highlighted how divestiture would promote competition:

EmpowerNH believes that the energy generating market place should be open, and that to create a level playing field, PSNH should… not [be] in the energy generation business…. The New Hampshire energy market should be a competitive market place. The coalition supports any solution that clearly preserves and promotes a competitive marketplace. HB1602 opens the door for that process. New Hampshire consumers are benefitting from a very competitive market, and the benefits are circular. More competition leads to cheaper electric bills over the long run which leads to less energy coming from polluting coal plants. It’s a win-win-win for NH residents, our economy and the environment, and the more people who exercise their power to choose, the stronger the circle will be.

Congratulations to the Legislature for recognizing, at long last, the writing on the wall for PSNH’s plants and taking an important step toward to overcoming New Hampshire’s twisted system that subsidizes coal—the state’s most glaring obstacle to clean energy progress and to bringing the benefits of a truly competitive market to all of the state’s electric customers.

This Holiday, New Hampshire Will Buy a $128 Million Lump of Coal

Dec 18, 2012 by  | Bio |  Leave a Comment

photo credit: TimothyJ/flickr

Today, the New Hampshire Public Utilities Commission takes up PSNH’s request to charge its customers 9.54 cents per kilowatt hour for electric energy service in 2013. In a op-ed published this week, long-time CLF friends Ken Colburn and Rick Russman explain why New Hampshire’s crisis of escalating PSNH rates – and how New Hampshire policymakers resolve it – may be the defining economic issue for New Hampshire’s new class of leaders next year.

With PSNH’s rates to be by far the highest in the state and almost three cents higher than those of its sister utility NSTAR in Massachusetts, New Hampshire is dealing with an untenable situation: small businesses and residents are subsidizing PSNH’s above-market costs to operate and maintain dirty, inefficient, and uneconomic coal plants, to the tune of $128 million.* The average residential customer will pay $212 extra in 2013 for the dirtiest energy in the region.

To put $128 million in perspective, in 2011 New Hampshire invested less than a seventh of that amount, a mere $17.6 million, in electric energy efficiency programs – an energy solution that is lowering rates, reducing pollution, avoiding expensive new transmission projects, and creating jobs.

New Hampshire energy users are in effect giving this money away to keep alive New Hampshire’s biggest sources of toxic and greenhouse gas pollution (even though PSNH projects they will only operate at around 25% of their capacity in 2013) and to pay dividends to PSNH’s owner, New England mega-utility Northeast Utilities. And the situation will only get worse with time as PSNH customers join the thousands who have already picked an alternative energy supplier, leaving a shrinking base of customers to bear the heavy costs of PSNH’s coal fleet. (If you’re still a PSNH customer, you should definitely make the switch before the new year begins and PSNH’s new rates kick in.)

The blame for this economic and environmental travesty lies squarely with PSNH’s self-serving failure to plan for the future.

Yet PSNH is already trying to make the case that it needs a “fix” from the New Hampshire legislature to protect its coal plants, its 10% profit margin guarantee, and its protection from cleaner, cheaper competition. What’s even more bizarre – and indicative of its refusal to approach these issues honestly – is that PSNH is pinning its skyrocketing rates on the very factors that have reduced electric rates for everyone else in New England – namely, investments in energy efficiency and environmental protection and the increasing use of natural gas and competitive renewable energy sources. PSNH’s foolhardy but lucrative investments in its outdated power plants – for which it fought tooth and nail over the last decade – are the culprit, not environmental requirements that apply to all power plants in New Hampshire and across the region.

Please take a moment to read the op-ed and share widely with friends, neighbors, and especially your new representatives in Concord. For the good of the state’s economic and environmental health, they need to hear from you!

*  The math: PSNH customers will pay a 2.85 cent “premium” for every kilowatt hour over and above PSNH affiliate NSTAR’s market-based rates, and PSNH is projecting that it will sell more than 4 billion kilowatt hours of power to its remaining customers in 2013. The average household in New Hampshire uses 7,428 kilowatt hours per year.

PSNH's Merrimack Station

PSNH: Bad Planning and Old Power Plants Taking Their Toll on New Hampshire

Jul 2, 2012 by  | Bio |  1 Comment »

As the nation continues to move beyond coal as a fuel for electricity generation, PSNH continues to cling to its obsolete, uneconomic coal plants that need massive subsidies from ratepayers to operate. Conservation Law Foundation recently filed a brief with the New Hampshire Public Utilities Commission that blows the whistle on PSNH’s failure to meet its obligations under New Hampshire law to engage in responsible – or in some cases any — planning regarding the future operation of these plants.

New Hampshire requires that every electric utility file a biannual “least cost integrated resource plan,” which demonstrates that the utility has assessed its supply options and analyzed both the long and short term environmental, economic, and energy impacts it will have on the State. Instead, PSNH has filed a deficient plan that, by its own admission, has “very limited value” for decision-making purposes (Pg 115-116). CLF’s full brief in PDF format can be downloaded here. An excerpt:

PSNH’s business model is broken. PSNH’s energy supply cost structure is rapidly exceeding the ability and means of its ratepayers to pay, in what is now an intractable death spiral as customers migrate to competitive suppliers. The company over-relies on and has over invested in aging and uneconomic generating facilities at the expense of ratepayers and the environment. PSNH energy service customers are paying 40% or more above prevailing retail rates of other New Hampshire utility providers and the discrepancy is growing. The consequence is that hundreds of millions of dollars in above market payments are being extracted from New Hampshire ratepayers, while PSNH and its shareholders continue to benefit as if they are a low cost supplier, which the company clearly is not. The question before the Commission is whether the excessive costs being imposed by PSNH on its ratepayers and New Hampshire reflect, in some measure, the quality of PSNH’s 2010 least cost integrated resource plan (the “Plan”) and thus inform the adequacy of such planning as required by [New Hampshire law]. The Commission must decide whether lapses in PSNH’s planning materially contributed to adverse and avoidable ratepayer outcomes and the unsustainable rate spiral which will apparently require legislatively mandated cost shifting and/or lead to PSNH’s bankruptcy.

The evidence in this proceeding unequivocally demonstrates that PSNH’s planning failed to consider a multitude of material planning elements that are crucial to least cost planning. Without limitation, these include: 1) the Plan’s failure to include or consider forward price curves for natural gas which would dictate projected economic dispatch and margins; 2) the Plan’s failure to forecast customer migration which substantially informs the need for and cost-effectiveness of PSNH’s owned generation and entitlements; 3) the Plan’s failure to address or consider future environmental costs for PSNH’s generation fleet; and 4) the Plan’s failure to project forward energy service rates during the five year planning period. At the core of these planning lapses lies the question of whether and the extent to which it is in the ratepayers’ interests for PSNH to continue to own or operate its aging fossil fuel generation fleet, including the 1950’s vintage, small uneconomic coal units at Schiller Station. PSNH’s planning completely ignored the market trends which, beginning in 2008, reduced the capacity factors of Merrimack and Schiller Station to the point of being coal-fired peakers, notwithstanding the Plan’s assertion that they will remain baseload generators.

PSNH is continuing to ignore market realities, which is reflected by their failure to adequately plan for the future costs of continuing to operate its fleet of antiquated power plants. As we noted earlier this month, PSNH ratepayers are stuck subsidizing these uneconomic and dirty power plants through above-market energy costs.

Schiller Station, in Portsmouth, NH (photo credit: flickr/Jim Richmond)

If you’re looking for the most egregious example of PSNH’s poor planning, look no further than the continued operation of the two coal units at Schiller Station in Portsmouth. These two 1950’s era units operated at a loss of over $40 million between 2009 and 2010. An analysis conducted by the consulting firm Synapse Energy Economics predicted that this grim trend will only continue, and likely worsen, in the foreseeable future. These units are operating less each year, yet the cost to PSNH customers for the limited power they do produce is increasing. The report concluded that the continued operation of these units will result in future net losses and PSNH ratepayers should not be forced to pay for these shortfalls. PSNH needs to engage in a rigorous review of continuing to operate the coal-fired units at Schiller Station, as “given their age, operating costs, low reliability, and high heat rates, there is not likely to be any economic future for these units” (Pg 14).  Similarly, Connecticut’s integrated resource plan has predicted that the Schiller coal units should retire by 2015 for economic reasons (Pg B-21). Furthermore ISO-NE, the regional energy overseer, is also planning for the retirement of antiquated coal power plants, noting that these resources are facing economic challenges (Pg 9-10).

The operation of uneconomic units, coupled with PSNH’s ongoing attempt to recoup the cost of installing a $422 million scrubber at its half-century-old coal-fired Merrimack Station, boils down to increasing the energy rates for PSNH customers – already the highest in New Hampshire. This cost recovery charge, along with charges for above-market supply contracts, has led PSNH to propose a rate structure that will exceed 10 cents per kWh! As other companies enter New Hampshire to provide lower cost alternatives, the migration away from PSNH’s above-market rates has continued, worsening PSNH’s economic “death spiral.”

Why is PSNH acting this way? It’s pretty clear – like other dinosaur fossil fuel companies that have failed to anticipate the contours of a clean energy future, PSNH wants to preserve its subsidies to boost near-term corporate profits, virtually all of which are the above-market costs of PSNH power plants (including the 10% rate of return that New Hampshire guarantees). The New Hampshire Public Utilities Commission is taking note.  On June 27 it ordered PSNH “to undertake a systematic review of operation, materials and capital costs, including personnel costs, associated with the operations of its fossil fuel plants given the low capacity factors of these units.”

CLF is calling for PSNH to conduct a rigorous planning analysis to investigate whether continued operation of its antiquated coal units is in the best interests of New Hampshire. All the evidence suggests that, if credible, any such analysis would show, unequivocally, that it is (long past) time for PSNH to stop asking ratepayers to subsidize uneconomic and dirty coal power.

The Writing Is on the Wall for Coal. Will New Hampshire Notice?

May 10, 2012 by  | Bio |  1 Comment »

We are in the midst of a massive, historic retreat in the nation’s use of coal to produce electricity, which began in 2008. This ongoing shift away from our dirtiest fuel has made news around the country. The primary reason: coal-fired power plants – expensive new facilities and decades-old dinosaurs alike – can’t compete in today’s marketplace. Investors and customers are moving toward cleaner, cheaper alternatives, principally natural gas but also renewables (especially wind) and high-tech ways of reducing energy use.

The national trend is occurring here in New Hampshire and throughout New England. This week, New Hampshire learned that PSNH is not operating its flagship coal plant, Merrimack Station in Bow, and that its economic prospects are not good. In fact, the plant will sit completely idle for six months of 2012, prompting the Manchester Union Leader to run the headline, “PSNH’s Bow power plant shuts down.” (The word “temporarily” was later added to the online story.) The two coal boilers at PSNH’s Schiller Station in Portsmouth will operate even less. (The Nashua Telegraph also took note.) This is welcome and long overdue relief for New Hampshire from New England’s top toxic polluter, and it would not have happened without legal pressure from CLF and others. More on our work in a moment.

Across the region, coal use has been collapsing for some time — and this was not unpredicted, as PSNH is claiming. PSNH’s claims to the contrary convey its willfully myopic planning perspective – a direct result of its expectation that ratepayers will cover its costs with a handsome profit irrespective of how utterly unsuccessful its investment decisions have been.

Coal-fired power plants’ “capacity factors” – their actual power output as a percentage of their theoretical maximum output at full power, running 24/7 – are intended to be very high; these plants were designed to run at close to full power day and night as “baseload” power for the electric grid. Not anymore:

In 2012, the trend is accelerating. Nationally, the U.S. Energy Information Administration reports that, in the first quarter, coal power accounted for only 36% of total generation – the smallest role for coal in a generation and down almost 9% from the first quarter of 2011. Regionally, a new milestone came in April, when the regional electric grid announced that, during the previous month, it didn’t dispatch any power from New England coal plants to meet the region’s electric demand.

For public health, air quality, the environment, the climate, and the communities where these plants are located, these trend lines are all in the right direction. For years, CLF’s Coal-Free New England 2020 campaign has fought to speed this progress and to make it permanent, by holding plant operators accountable for violating environmental laws (including at Merrimack Station), securing final and binding agreements to guarantee closure, and working in coalition with local residents to plan for responsible redevelopment and reuse of the plants’ sites.

In New Hampshire, with the complicity of state regulators, PSNH made big bets that the market for its coal-fired power will exist for years to come. One such spectacularly bad gamble was PSNH’s investment – over vigorous opposition from CLF, ratepayer advocates, and others – in a life extension project for Merrimack Station, including air pollution controls that address only some of the plant’s toxic and harmful emissions, to the tune of $422 million, plus a 10% guaranteed profit, money it now wants back from New Hampshire residents and small businesses through the regulator-approved rates it charges. Given coal’s collapse, which CLF and ratepayer advocates predicted at the time, this investment looks absurd and unwise, except of course to PSNH and its parent company Northeast Utilities, which has repeatedly reassured shareholders it is entitled to get back the full value of the upgrade, even if the plant barely runs.

Why has PSNH been so richly rewarded for such terrible economic decisions? Put simply, New Hampshire’s backward relic of a regulatory system is still protecting PSNH and its coal plants from the market. Remarkably, ratepayers continue to pay for upkeep and staffing at PSNH’s power plants, even when they sit idle, and also pay that same 10% profit on the value of all PSNH assets, including its quiet coal piles – and that’s whatever book value PSNH assigns, not market value.

PSNH has fought tooth and nail to protect its special treatment. Earlier this year, PSNH pulled out all the stops to kill a bill that would have directed state regulators to investigate whether PSNH’s ownership of power plants, including Merrimack and Schiller Stations, is in the best interest of ratepayers. After PSNH’s full-court press of lobbying, editorial board visits, and pressure from PSNH employees as well as PSNH-allied unions, politicians, and chambers of commerce, the House tabled the bill.

In the meantime, PSNH remains in an economic “death spiral” with very few large business customers to cover its costs. As a result, its remaining customers – homeowners and small businesses – are now paying as much as 50% more for power (8.75 cents per kilowatt-hour) than are customers of other utilities – which do not own power plants and get all their power from the competitive market (around 6 cents per kilowatt-hour). And the Legislature continues to seek the rollback of New Hampshire clean energy laws under the guise of easing ratepayer burdens, mistaking small trees for the forest of PSNH’s above-market rates, which include the costs of both PSNH’s idle fleet and buying power from more efficient plants.

What is CLF doing about it? Against the odds, we’re succeeding at forcing New Hampshire regulators to scrutinize PSNH’s costs, and the fact that PSNH’s coal plants are now sitting idle and the corresponding benefits to public health and the climate are a product of that scrutiny and a testament to CLF’s advocacy. And we’re pushing for regulators to do much more to hold PSNH accountable for its abysmal planning and force PSNH’s shareholder Northeast Utilities – and not suffering PSNH ratepayers, who are paying among the nation’s highest electric rates – to bear the downside of PSNH’s bad bets on coal. The last thing we should be doing with our energy dollars is subsidizing dirty power that can’t compete.

The market is providing an unprecedented opportunity to make that Union Leader headline from this week – and headlines like it for every other coal plant in the region – an enduring reality as New England transitions to a clean energy future. New Hampshire and the rest of New England should seize it.

A dispatch from the future? Manchester Union Leader headline, May 8, 2012

It’s Time to Stop Subsidizing PSNH’s Dirty Power

Feb 1, 2012 by  | Bio |  1 Comment »

Outlook with your head in the sand? Pretty dark, even when the future around you is bright. (photo credit: flickr/tropical.pete)

In a public hearing tomorrow, a legislative committee of the New Hampshire House will take up a proposal – House Bill 1238 – to force Public Service of New Hampshire’s dirty, costly power plants to confront the realities of the electric marketplace. The bill would require PSNH to sell (“divest”) its plants by the end of next year. Tomorrow’s hearing on House Bill 1238 is scheduled for 8:30 am in Representatives Hall under the dome of the New Hampshire State House, on North Main Street in Concord.

The debate is long overdue and comes at a critical time. Over the last several years, New England’s restructured electric market has overwhelmingly turned away from uneconomic facilities like PSNH’s coal and oil-fired power plants and toward less-polluting alternatives, especially natural gas. For most New England customers, this technology transition has resulted in lower electric bills, and we have all benefited from cleaner air. In the next few years, well-managed competitive markets are positioned to help us move to a real clean energy future that increases our use of energy efficiency, renewable resources, demand response, and innovative storage technologies.

CLF has played a key role in this process by, among other things, ensuring that coal plants are held accountable for their disastrous impacts on public health and the environment. As highlighted in an excellent op-ed in the Concord Monitor this week, CLF’s work includes our federal court case against PSNH’s Merrimack Station, New Hampshire’s biggest source of toxic and greenhouse gas emissions, which has repeatedly violated the Clean Air Act by failing to get permits for major changes to the plant.

Meanwhile, like the proverbial ostrich, PSNH gets to ignore what the market is saying. PSNH’s state-protected business model is a relic that has become a major drag on the pocketbooks of New Hampshire ratepayers and New Hampshire’s economy. Current law protects PSNH from market forces because it guarantees PSNH and its Connecticut-based corporate parent Northeast Utilities a profit on investments in PSNH’s power plants, whether or not they operate and whether or not they actually make enough money to cover their operating costs – an astounding rule for the small-government Granite State, to be sure.

The costs of this guarantee fall on the backs of New Hampshire residents and small business people, who effectively have no choice but to pay for PSNH’s expensive power. For their part, larger businesses have fled PSNH in droves, for cheaper, better managed suppliers. This has shrunk the group of ratepayers who are responsible for the burden of PSNH’s high costs, translating into even higher rates for residents and small businesses.

PSNH customers face the worst of both worlds – electric rates that are among the highest in the nation and a fleet of aging, inefficient, and dirty power plants that would never survive in the competitive market.

It is by now beyond dispute that these plants are abysmal performers. Last year, CLF and Synapse Energy Economics presented an analysis to New Hampshire regulators showing that the coal-fired units at PSNH’s Schiller Station in Portsmouth will lose at least $10 million per year over the next ten years, for a total negative cash flow of $147 million. The analysis did not depend on natural gas prices remaining as low as they are now or any new environmental costs; because it is old and inefficient, Schiller will lose money even if gas prices go up and it doesn’t need any upgrades. According to information provided by PSNH to regulators last week, PSNH’s supposed workhorse Merrimack Station will not even operate for five months this year because it would be uneconomic compared to power available in the New England market. Nonetheless, PSNH ratepayers will be paying for the plant even when it does not run.

It will only get worse: PSNH’s rates could skyrocket later this year if New Hampshire regulators pass on the bill for PSNH’s $422 million investment in a scrubber for Merrimack Station to ratepayers, and other costly upgrades of PSNH’s fleet may be necessary to comply with environmental and operational requirements in the future. And the PSNH-favored Northern Pass project, if it ever gets built, would only exacerbate the situation for PSNH ratepayers by making PSNH power even less competitive and reducing the value of PSNH power plants.

PSNH is hitting back against House Bill 1238 with its typical full-court press of lobbying and PR, and we can expect a packed house of PSNH apologists at tomorrow’s hearing. PSNH has even resorted to starting a Facebook page – “Save PSNH Plants” – where you can see PSNH’s tired arguments for preserving the current system plants as a “safety net” that protects PSNH employee jobs and a hedge against unforeseen changes in the energy market. The pitch is a little like saying that we should pay Ford and its workers to make Edsels half a century later, just in case the price of Prius batteries goes through the roof. Make no mistake: PSNH is asking for the continuation of what amounts to a massive ratepayer subsidy for as far as the eye can see.

Public investments have gotten a bad name lately, but it is at least clear that sound commitments of public dollars to energy should be targeted, strategic, and forward-thinking. They should help move us, in concert with the much larger capital decisions of the private sector, toward a cleaner energy future. Instead, PSNH is fighting for New Hampshire to keep pouring its citizens’ hard-earned money, year after year, into dinosaur power plants. That’s a terrible deal for New Hampshire, and CLF welcomes the House’s effort to open a discussion on how to get us out of it.