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.
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.