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State regulators predict bleak future for PSNH ratepayers

Following a five-month investigation, state utility regulators are recommending Public Service of New Hampshire shed some or all of its power plants to lower high rates and maintain reliable service to customers.

The Public Utilities Commission found that PSNH’s power plants in Bow and elsewhere aren’t competitive with the lower cost of natural gas, and as a result, are costing customers about 15 percent more in rates. Nearly 45,000 customers have left PSNH for another power generator since the drop in natural gas prices, leaving fewer customers to absorb the cost of the company’s power plants.

“The situation looks to worsen, as continuing migration from PSNH’s default service by customers cause an upward trend rate,” read a report issued Friday by the Public Utilities Commission. “We find no supportable basis for optimism that future market conditions will reverse this unsustainable trend, especially in the near term. To the contrary, the PSNH fossil units face uncertainties that combine to create a risk of further potentially substantial increases in costs.”

The PUC undertook its investigation in response to the larger number of customers leaving PSNH, which is the only utility that both generates and distributes its power. In its report, the PUC urged lawmakers and others to undertake the difficult task of deciding whether PSNH can reverse the high rates or whether it should find a way to unload its power plants.

The commission strongly discouraged sticking with the status quo. “Taking no action threatens to leave a dwindling yet still substantial number of the state’s residents and small businesses facing ever higher costs for service relative to market alternatives and could eventually threaten the financial health of PSNH,” the report said.

Michael Skelton, a PSNH spokesman, disputed the report’s findings yesterday and said the company will respond in detail by the June 28 deadline set by the PUC. In the meantime, Skelton said the PUC has miscalculated the value of the company’s power plants by wrongly assuming that natural gas prices, which have been dropping since 2008, will continue to remain low.

Skelton said those plants, which include coal, hydro and bio-mass plants, offer customers a valuable diversity of power generation in the event that natural gas prices climb, as they did this winter. “Our position is the best way to protect against a variety of different scenarios that put customers at risk is through fuel diversity, and that is what our plants provide,” Skelton said.

Skelton said the PUC cannot guarantee that natural gas prices will remain low well into the future. He noted that no regulators or market leaders predicted the deep decline in natural gas prices before they plummeted in 2007. Skelton pointed a reporter to several articles questioning the reliability of low natural gas prices, including one that ran Saturday in the Portland Press Herald.

That paper reported that ISO-New England, which regulates the New England energy grid, was asking oil-fired power plants to stockpile 4.2 million barrels of oil by Dec. 1, in case there was a shortage of natural gas.

In its report, the PUC didn’t see the balance of PSNH’s power plants and last year’s spike in natural gas prices the same. “Even at that level that constraints have occurred recently, their frequency and severity have not served to give PSNH fossil units enough of a boost to overcome their negative value,” the report said.

Other energy providers responded to the report yesterday.

“The continued situation . . . is unsustainable,” said Dan Dolan, president of the New England Power Generator’s Association. “This is now the second time that policymakers have noted the dire need to address this situation. Now is the time to complete restructuring and let consumers enjoy the most competitive rates possible. We agree with the PUC staff report that if PSNH feels so strongly that the assets represent a value that they should put their money where their mouth is and place them in a non-utility subsidiary.”

Dan Allegretti, the New England chairman of the Retail Energy Supply Association, issued a written statement:

“It’s time for PSNH to embrace the long overdue restructuring of New Hampshire’s electricity market,” he said. “Generating facilities that operate in New Hampshire’s competitive wholesale market are more efficient and cost-effective and those savings are passed along to consumers.”

Rep. David Borden, a New Castle Democrat who heads the House Science, Technology and Energy Committee, said PSNH is in a “death spiral” and that he report left him convinced that lawmakers need “to protect ratepayers.”

He said the report showed that PSNH’s power plants, especially the coal plant, have “no value” and instead drive costs up for PSNH customers. Borden said he and other lawmakers will likely further consider the PUC report and recommendations this summer when they meet to consider a state energy policy, as called for in a bill sponsored by members of both chambers.

(Annmarie Timmins can be reached at 369-3323, or on Twitter @annmarietimmins.)

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