Ratepayers Subsidizing PSNH’s Addiction to Coal


This Sunday, an Op-ed of mine appeared in The Portsmouth Herald. Below find a copy of the original text. You can find a copy of the original story here.

The nation and New Hampshire are relying less and less on coal — our dirtiest, least efficient fuel — to meet our electric power needs. PSNH recently announced it is not operating its flagship coal plant, Merrimack Station in Bow; the plant will sit completely idle for six months of 2012. The two coal boilers at PSNH’s Schiller Station in Portsmouth will operate even less. Yet, PSNH customers continue to pay a premium to keep PSNH’s coal plants on life support, thanks to a regulatory system that protects PSNH’s interests over those of ratepayers.

Coal-fired power plants — expensive new facilities and decades-old dinosaurs like PSNH’s plants 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. Northeast Utilities — PSNH’s parent company — admits that this reality is not going away anytime soon.

Indeed, the trend is accelerating. In the first quarter of 2012, coal power accounted for only 36 percent of the nation’s total electric output — the smallest role for coal in a generation and down almost 9 percent from the first quarter of 2011. Regionally, a new milestone came in April, when the New England regional electric grid operator announced that, during the previous month, the entire New England coal fleet was uneconomic — meaning there was not a single hour when a coal plant was able to compete with other energy sources. Despite coal’s downward trajectory, PSNH made big bets that the market for coal-fired power will exist for years to come. Exhibit A: PSNH’s investment — over vigorous opposition from the Conservation Law Foundation, ratepayer advocates and others — in a $422 million life extension project for Merrimack Station. If PSNH gets its way, ratepayers will foot the whole bill, plus a 10 percent guaranteed profit for PSNH’s sole shareholder, Northeast Utilities.

Why has PSNH been so richly rewarded for bad economic decisions? Put simply, New Hampshire’s relic of a regulatory system still protects PSNH and its coal plants from the market. Remarkably, ratepayers continue to pay for upkeep and staffing at PSNH power plants, even when they sit idle, and also pay that same 10 percent profit on the book value of all PSNH assets. No other power plant owner in New England gets such special treatment. Yet PSNH continues to sidestep scrutiny.

Earlier this year, following a massive lobbying effort orchestrated by PSNH, the New Hampshire House voted to table a bill that would have forced a hard look at PSNH’s continued ownership of these obsolete power plants.

In the meantime, PSNH remains in an economic “death spiral” with few large business customers to cover its costs and its remaining customers — homeowners and small businesses — now paying as much as 50 percent more for power than customers of other utilities, which get their power from the competitive market. Under the status quo, PSNH will siphon more than a $100 million in above-market costs out of the New Hampshire economy this year.

For the environment, the climate, and the long-term public and fiscal health of the communities surrounding these plants, coal’s demise is encouraging news. The market is providing an unprecedented opportunity to relegate coal power to the history books for good. New Hampshire should seize it.

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