“Free and fair competition in the trades and industries is an inherent and essential right
of the people and should be protected against all monopolies and conspiracies which
tend to hinder or destroy it.” So reads the lofty rhetoric in Part II, Article 83 of our state
Constitution, which also talks about limiting “the size and functions of all corporations.”
It’s music to my ears as New Hampshire’s Consumer Advocate, tasked with protecting
the interests of the state’s residential utility customers. But it is cold comfort when it
comes to electricity.
Though electricity is a vital public service and an export commodity for our state,
we have long since surrendered our electric sovereignty to an obscure Delaware
corporation, headquartered in western Massachusetts, called ISO New England.
Known in the parlance of the Federal Energy Regulatory Commission (FERC) as a “regional transmission organization,” ISO New England is a nonprofit corporation. In other words, it has no shareholders. Its job is threefold: run the electricity grid for all six New England states from its control room in Holyoke, oversee the build-out of the region’s bulk power transmission system by which we move electricity around at high voltage, and run the markets by which electricity is bought and sold at wholesale.
Once upon a time we had vertically integrated electric utilities to take care of stuff like that. A utility like Public Service Company of New Hampshire owned a fleet of generation facilities and needed permission from state regulators to build new ones.
That was then. This is now: the era of electric industry restructuring.
Beginning in 1996, we required the utilities to sell off their generation assets and told ISO New England to take care of what is known as “resource adequacy” – making sure there’s enough juice to avoid a massive failure of the grid. This effectively abolished New Hampshire as a distinct entity or authority for purposes of transmission and wholesale electricity – collectively, a whopping big percentage of your monthly bill.
FERC has blessed the necessary arrangements with the region’s transmission-owning utilities. They are found in a set of FERC filings that is so complicated that the chart laying them out looks like Pablo Picasso’s famous painting “Guernica.”
Last year the General Court passed a bill directing the state’s Department of Energy to conduct a study of whether New Hampshire should back out of these arrangements and quit ISO-New England. The result is a report issued on July 15 from the consulting firm London Economics International.
Here is the TLDR version of what London Economics said: Yes, New Hampshire could force the owners of the state’s transmission assets (mainly Eversource and National Grid) to withdraw from ISO New England. But it would be expensive and spawn lots of litigation.
What does “expensive” mean? About $148 million a year, just in higher transmission and energy supply costs. Legal fees, any “exit fees” imposed by FERC, and the cost of replicating ISO New England facilities and systems here would be extra.
Now I have to confess my buyer’s remorse, as someone who was an outspoken supporter of the bill requiring this investigation of ISO New England withdrawal. Knowing that outright withdrawal was highly unlikely – and undesirable – I persuaded legislators to add an additional query to the bill.
That query reads: “Is the governance of ISO New England, including its board of directors as well as its stakeholder advisory body . . . sufficiently accountable to the public and adequate to assure that ISO New England is operated in the public interest?” On this question, London Economics punted. Totally.
The report simply summarizes the existing governance arrangements – various advisory bodies with acronyms like NEPOOL and NESCOE – and notes that FERC has found these arrangements to be consistent with “independence” requirements, “specifically because any single state’s influence is indirect and shared with other states and market participants.”
Where London Economics saw “independence,” others might diagnose unaccountability. To the extent the ISO New England board is not self-perpetuating, the nominating process is dominated by the big generation owners and transmission utilities.
Worse, under Delaware law – remember, ISO New England is incorporated in Delaware – the only people with legal rights are the members of the board themselves, because ISO New England has no shareholders. Delaware law treats the board members like owners.
As it happens, Delaware is in the territory of PJM – the nation’s biggest regional transmission organization, serving all or part of 13 states. PJM’s governance arrangements strongly resemble those of ISO New England.
PJM is in a state of crisis right now. Laura Swett, FERC’s chairman, summoned PJM’s leaders to a public “technical conference” on July 23 and delivered a stark warning: Fix your governance by the end of September or we’ll do it for you.
Why no similar crisis of stakeholder confidence at ISO New England? I think it’s mainly because ISO New England’s transmission grid is much smaller than PJM’s.
And maybe, just maybe, it’s because too many New Englanders have looked the other way as we pay the highest transmission charges in the country. With FERC’s blessing, the average cost of transmission in our region was 3.7 cents per kilowatt-hour last year, compared to just 1.9 cents for people in the PJM region, according to the Lawrence Bereley National Laboratory.
The London Economics study was a missed opportunity to remind ISO New England and our transmission-owning utilities that, yes, New Hampshire still exists. I hope we find other ways to do that.
Attorney Donald M. Kreis is the state’s Consumer Advocate, representing the interests of residential utility customers.