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

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.