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Judge sides with Eversource on value of Bow power plant

  • The Merrimack Station power plant in Bow releases a cloud of steam while operating on Friday. GEOFF FORESTER / Monitor staff



Monitor staff
Saturday, December 17, 2016

The town of Bow is appealing a judge’s ruling that sharply cuts the assessed value of the Merrimack Station power plant, a decision that could remove as much as 8 percent from the town’s total tax base.

The ruling from Superior Court Judge Richard McNamara, following a six-day trial last spring, was handed down in October and unsealed last week. It sets the value of all Eversource property related to the plant at $66.6 million in 2012 and $67.4 million in 2013, about 42 percent of the $159 million valuation used by the town when it sent the company a tax bill.

The ruling does not directly affect tax payments in other years, but since Merrimack Station makes up about 13.6 percent of all taxable property in Bow, it has the potential to reduce the town’s total tax base by around 8 percent, which could force property tax rates to rise to cover the decline.

“We’re disappointed with the judge’s decision. We believe he misunderstood a major part of our expert’s testimony and has excluded significant assets that we believe will continue to be in service after the auction is completed,” said Harry Judd, chairman of the town’s select board.

Bow has filed a notice of appeal to the state Supreme Court.

Martin Murray, spokesman for Eversource, said the company was satisfied with the ruling.

“We know the property tax issue is an important one. We are the largest payer of property taxes in the state of New Hampshire, but ultimately it is customers who pay those costs. As a regulated utility, we have a duty to dispute assessments that are outliers,” Murray said. “We paid the town what we were billed, more than $9 million for a total of two years, but indicated that we would appeal.”

While disagreements between Bow and its biggest property tax payer are not uncommon, they grew in 2012 as changes to energy markets upset many long-standing assumptions about Merrimack Station’s value.

Merrimack Station is the largest coal-fired power plant in New Hampshire, with a rated output of 439 megawatts, about one-third the output of Seabrook Station nuclear plant. A megawatt can supply between 750 and 1,000 homes.

The value of Eversource Energy is selling Merrimack Station and two other fossil-fuel plants in New Hampshire, plus its nine hydropower facilities, under a settlement agreement reached in 2014 to complete deregulation of the power industry. That auction is expected to take place by summer.

Determining assessed value of commercial property is often subject to dispute, but the situation is more complicated when properties are owned by a regulated utility such as Eversource, because future income and thus property value depends partly on regulations and government policy.

The situation is even more complicated with Merrimack Station because of the uncertain future of coal as a fuel. Due to pollution and cost, burning coal to create electricity has plummeted in the U.S. in the past two decades: Merrimack Station, for example, once ran about 70 percent of the time, but in recent years has run only about 30 percent of the time.

The only two coal-fired power plants in New England bigger than Merrimack Station – Brayton Point in Massachusetts and Bridgeport Harbor in Connecticut – plan to shut down due to cost.

The complexity is reflected in debating analyses given by two engineers: George Sansoucy, who was hired by the town, and John Kelly of the firm Centronics. In his ruling, Judge McNamara came down on the side of Eversource’s expert in most disagreements.

“Differeing interpretations of energy market changes and the effect of deregulation on the valuation of the subject property explain much of the disagreement between Kelly and Sansoucy,” he wrote. “The court believes that Mr. Kelly’s analysis is more credible than Mr. Sancoucy’s.”

The value of Merrimack Station includes not just the power plant but a pair of combustion turbines – often called “jet engines,” which can be turned on and off very quickly to provide power in emergencies but which are very expensive to operate – as well as transmission equipment, land, rights of way and material associated with the Garvin Falls hydropower dam.

Because there have been very few sales of coal-fired power plants in New England to help judge the market value of Merrimack Station, the engineers’ analysis involved a number indirect measurements. These included such things as a “inutility penalty” to estimate economic obsolescence; predictions of the forward capacity market, which pays power plants to stay available for emergencies even if they don’t operate; the tax status of the $430 million “scrubber” that removes mercury from the chimney emissions; and the ratio of revenue requirements to book value.

Even though Merrimack Station’s use has declined sharply in recent years it still has a role, as was reflected during Friday’s cold snap. The plant was running full bore to help provide power as much of the natural gas in the region was being used for heating and on Friday morning, according to ISO-New England, which runs the power grid, about 14 percent of the electricity in New Hampshire came from coal – more than from wind, biomass and solar combined.

(David Brooks can be reached at 369-3313 or dbrooks@cmonitor.com or on Twitter @GraniteGeek.)