Eversource has concern about Trump tariffs, even as it cuts N.H. electric rates

  • Bill Quinlan of Eversource Monitor file

Monitor staff
Tuesday, March 06, 2018

There’s some potential bad news, some definite good news and a lot of very uncertain news out there about electricity rates from Eversource, and to an extent other utilities.

The potential bad news is President Donald Trump’s vague promise to put tariffs on imported steel and aluminum. The move could raise costs for electricity utilities, which buy a lot of aluminum for cables and wires, as well as steel for towers and poles – costs that could be passed directly to ratepayers.

“We’re watching it very closely to see if it becomes a reality, see what effect it will have on markets – not just Eversource, but utilities generally,” said Bill Quinlan, CEO of Eversource New Hampshire, during a Tuesday visit to the editorial board of the Monitor.

Asked about a tariff’s effect on potential costs for the controversial Northern Pass transmission project, which is currently in legal limbo following its rejection by the state’s Site Evaluation Committee, Quinlan said the $1.6 billion price tag assumes certain costs for material.

“We are beginning a review of those contracts to ensure that if these tariffs are imposed, they wouldn’t have a material impact on our bid price. At this point we don’t think that will be the case,” Quinlan said. He said Northern Pass plans to buy about three-quarters of its steel from American manufacturers.

But the good news? That is more straightforward.

Eversource said recently that its energy rate – the portion of the bill designed to pay for obtaining electricity as compared to transmitting it – would decline about 30 percent, to 7.9 cents per kilowatt-hour for residential and small commercial customers.

The reduction is partly offset by an increase in the delivery charge, which covers the cost of transmission. Eversource estimated that the monthly bill for a home using 600 kilowatt-hours monthly would fall $9.30, to $114.34, with the new energy rate.

The drop comes for an unusual reason: This is the first rate request since Eversource sold all its power plants, including Merrimack Station in Bow, and nine hydropower dams, including Eastman Falls in Franklin and Garvins Falls in Bow. Without the need to operate these power plants during the comparatively slow summer period, Eversource said it can buy all its electricity on the open market at a lower cost.

This leads to a question. Eversource’s predecessor, PSNH, was in the process of selling off the power plants as part of an industrywide separation of generation assets from transmission assets in 2003, but problems in California due to divestiture caused the New Hampshire Legislature to halt the process, only starting it again two years ago.

If the power plants and dams had been sold by 2003 as planned, would Eversource’s New Hampshire customers have been seeing lower summer rates for the past decade and a half?

Not necessarily, Quinlan said. He pointed to the impact that huge supplies of natural gas from shale beds in the U.S. have had on energy markets in the past half-dozen years. This has caused summer electricity rates to plummet, because natural gas is cheap and provides half of the state’s power, meaning that the financial benefit may not have existed before then.

Cheap gas is why wholesale electricity prices in 2017 were, on average, the second-lowest since 2003, as reported Tuesday by ISO New England Inc., which operates the region’s wholesale electricity marketplace. Mild weather during much of 2017 contributed to the low cost – as did less congestion on the grid due to upgrades and a yearslong stagnation in the region’s electricity use due to increased efficiency and economic changes.

ISO-NE noted in its report that despite the low annual average, electricity rates are spiking in winter when much of the region’s natural gas is taken up by heating. Those winter spikes make it hard for lower wholesale prices to percolate through to lower retail rates.

Finally comes the uncertainty, which is related to Northern Pass.

Eversource has petitioned the Site Evaluation Committee to reconsider last month’s quick rejection of the 192-mile power transmission line, including putting forward a host of financial proposals that it hopes will placate the committee’s concern about the line’s effect on tourism and property values.

If the committee declines to take up the case again, Quinlan said it is likely but not certain that Eversource would take an appeal to federal court.

Even if it does this and wins the appeal, he said, it would probably push back the timeline for construction by at least a year.

What that would do for its possible participation in the Massachusetts Clean Energy RFP – the Bay State’s drive to buy carbon-free electricity – is unclear. While several other large projects propose to bring Quebec hydropower into Massachusetts in a way that would meet the RFP requirements, they are a year or more behind Northern Pass in terms of obtaining state, federal or Canadian permits. Quinlan said this raises the possibility that even a year’s delay would leave Northern Pass as the front-runner in the Massachusetts RFP race due to timing.

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