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PSNH president: NH electricity rates on seasonal roller coaster

Last modified: 11/20/2014 1:34:17 AM
Until the Northeast builds out its energy infrastructure, New Hampshire ratepayers will continue to face rising electricity costs, Public Service of New Hampshire President William Quinlan predicts.

“The next winter or two, unfortunately . . . we’re going to see high prices in the market,” Quinlan told the Monitor in a recent interview, which focused on the state’s energy outlook. “The good thing is, I think this is a solvable challenge.”

Quinlan became the head of PSNH – the state’s largest utility – last year, in the midst of a critical period that he likens to an energy revolution, which is driven in large part by natural gas.

The fuel is widely available at a low cost and is cleaner to burn than coal. It’s also the source of New England’s increasing electric costs.

Nearly half of the region’s electricity is now generated by burning natural gas, compared with just 15 percent in 2000. But the pipeline capacity needed to funnel the fuel from shale fields in Pennsylvania to New England doesn’t match the growing need.

The problems arise in the wintertime when both natural gas distributors that sell the product as a home heating fuel and power plants, which burn natural gas to create electricity, are vying for the fuel. When demand peaks among home heating customers, little fuel is left for generators to buy and prices rise.

Consumers are beginning to see those higher costs with two major utilities, Liberty and Unitil, which have had rate increases of about 50 percent approved by the state Public Utilities Commission.

PSNH has yet to officially file with the PUC for a winter rate change that would take effect Jan. 1 and last until June. PSNH will file in mid-December.

Some, like Quinlan, say market trends will remain volatile until the region invests in more pipeline capacity or develops new infrastructure.

“Rising electricity rates are starting to become a top-of-the-mind issue for our customers,” Quinlan said.

Quinlan said he expects PSNH’s rates to remain competitive in the current market and credits the price stability to the company’s power plants.

PSNH is the only utility in the state to operate its own electric-generating fleet, which includes coal-burning Merrimack Station in Bow and Schiller Station in Portsmouth. Those power plants protect PSNH customers from volatility in the natural gas market, Quinlan said, and will continue to do so unless the region constructs new infrastructure.

“They are the reason why PSNH rates are low, because we have those plants to fall back on,” he said. “My opinion is PSNH customers will have among the lowest rates in New England.”

That outlook could change. PSNH faces several challenges before the PUC that focus on the company’s power plants.

The commission recently finished hearing a case on a mercury scrubber PSNH installed at Merrimack Station. At issue is how much of the scrubber’s $422 million cost PSNH can recover from its customers. The company currently collects less than 1 cent per kilowatt-hour from customers to cover the cost. If PSNH can recover the scrubber’s entire cost, rates would increase.

The PUC will soon begin a review – initiated by the state Legislature – to determine whether it’s in the best interest of New Hampshire ratepayers for PSNH to sell off its power plants.

Supporters of a bill, which passed during the most recent legislative session, argued that selling the plants would benefit ratepayers because the rising costs of maintenance and operation is driving customers away. That trend, they said, is unsustainable because as customers migrate away from PSNH, the rising costs get spread out among a smaller rate base.

Quinlan said the current up-and-down market conditions render the power plants critical.

“For the near term, we need those assets to remain operating to basically keep the lights on to keep prices low,” he said. “At least until this infrastructure begins to become a reality, those assets will continue to deliver those benefits.”

Looking ahead, Quinlan envisions new infrastructure development that includes interstate natural gas pipeline expansion, transmission line construction and investments in renewable energy, such as solar and wind power. PSNH’s parent company, Northeast Utilities, has proposed several options.

Northeast Utilities teamed up with Spectra Energy to propose a natural gas pipeline expansion project. The team announced the project in September.

Northern Pass is another collaboration, between PSNH, Northeast Utilities and Hydro-Quebec. That 1,200-megawatt project aims to bring hydropower across the border into the New England power grid through a 187-mile transmission line that would cross New Hampshire. Both of those projects wouldn’t come online until 2018.

Alternative energy is an important part of the energy equation, Quinlan said. But, he added, solar or wind projects need to have a base-load supply to back them up – a power generator that is available all the time.

(Allie Morris can be reached at 369-3307 or amorris@cmonitor.com.)


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