UPDATE: Sununu vetoes energy bills; Republican senators seek an override

Monitor staff
Published: 6/19/2018 9:58:06 AM

Republican Gov. Chris Sununu vetoed two energy-related bills Tuesday in a bid to block efforts he says would have cost electric ratepayers about $110 million over three years. But key members of his party are bristling at the move, calling the bills a vital lifeline for the biomass and timber industry in the North Country – and they say they have the votes to override it.

One bill, Senate Bill 365, would require utilities to purchase power from New Hampshire’s six independent biomass power plants. Supporters of the bill said Tuesday it was critical to the survival of the plants and the 900 jobs they support, including one plant in Penacook. But Sununu said Tuesday that the bill amounted to an “immense subsidy” for the companies.

The second bill, Senate Bill 466, would expand net metering, a system that allows smaller power generators to get credits for electricity they send to the grid. In a letter, Sununu said he agreed with the expansion of net metering in concept, but argued that the bill is a handout to large-scale energy developers.

Senate Majority Leader Jeb Bradley, R-Wolfeboro, took issue on both counts.

“I love the governor, he’s a friend of mine, I support him, but I disagree with this veto. There’s bipartisan support for both of these bills,” said Bradley, speaking to a potential veto override. “And we’ll see where it goes.”

At issue is a long-running clash between what have become increasingly competing interests: the effort to bring down New Hampshire’s energy prices – some of the highest in the country – and the effort to diversify the state’s sources of that energy. As natural gas has muscled its way into markets across the U.S., disrupting traditional nuclear, coal and oil industries as a cheap alternative, keeping energy prices down while diversifying sources has grown difficult.

In states like Kentucky, that dynamic stifles coal mines. In the Granite State, the timber industry has borne the brunt. Senate Bill 365 was designed to prop up the six biomass plants, the majority situated in the North Country, all of which have struggled to stay competitive as natural gas has lowered wholesale energy prices and eaten away profits.

Under the bill, electric distribution utilities would be mandated to seek contracts with the plants and buy energy at 80 percent of the default energy rate. Among the recipients of the plan is Wheelabrator Technologies, whose Penacook plant generates electricity from residential waste.

The idea was that the plants, most of which burn wood products, would get the business they need to stay afloat. Meanwhile, the 20 percent reduced purchase price would help offset the cost to ratepayers by purchasing from biomass sources instead of letting the auction market decide.

Without the help, many of the plants would be forced to shut down, their owners testified to legislators. The bill earned bipartisan support, with North Country Sens. Bradley; Bob Giuda, R-Warren; and Senate Democratic Leader Jeff Woodburn, D-Whitefield, leading the charge.

But even with the reduced purchase price, the de facto subsidies to the plants carried their own costs. The state Legislative Budget Assistant estimated that the bill would lead to increased costs of $15 million to $20 million a year for Eversource and $2.7 million for Unitil, which the analysis said would be passed on in higher rates for both businesses and households. Critics seized on the estimates to argue that the bill would be forcing ratepayers to subsidize an industry that couldn’t support itself.

“These bills passing would have unquestionably increased costs,” said Marc Brown, president of the New England Rate Payers Association.

And he said saddling the ratepayers with forced expenses, rather than letting the auction market decide winners and losers, was not the way to support the plants.

“If the General Court decides that they really want to protect those jobs, they should do it in the general fund, not baking it into rates, and expect ratepayers to unknowingly pick up the tab on that,” Brown said.

Bradley sees it differently. He pointed to an analysis by James Ginnetti on behalf of Wheelabrator. Ginnetti calculated that by removing the plants’ combined 100 megawatts from the regional grid, the resulting capacity costs down the line could cost the state $17 million. And he said that the eventual closure of the wood-sourced plants would hurt the state in other ways, impacting revenue from timber and business enterprise taxes and potentially hurting the unemployment trust fund.

“Yes, there’s a cost, but it’s a ‘pay me now or pay me later’ cost,” he said.

For Jason Stock, executive director of the New Hampshire Timberland Owner’s Association, that cost is very real.

Not only would the plants themselves be affected if the veto holds, but the timber industry would also feel the impact. According to state timber harvest data, 40 percent of trees cut and sold commercially in New Hampshire are used as fuel by the state’s biomass plants, Stock said.

“(If) these plants close, this is going to be a huge hole in a $1.4 billion industry,” he said. “The ripple effect of this is going to be big.”

But Joe Doiron, the deputy director of the governor’s Office for Strategic Initiatives, said that hiking rates also carries hidden costs.

“When a business cannot expand because they are concerned about energy costs or when a family has to forgo a purchase because of a high electricity bill, jobs are lost and growth is stunted,” said Doiron, who serves as the state energy program administrator within the office. “Although these losses are not as visible as those from the subsidized industry, they are no less important and no less real.”

Doiron added the governor believes that sustained financial support is not the right approach, reflected in his 10-year energy plan. Instead, Doiron argued, the biomass industry should find new ways to compete.

“There may be times that short-term intervention is warranted and justifiable, but long-term subsidization is unsustainable,” he said. “The 10 Year State Energy Strategy promotes the fundamental belief that competitive market principles work.”

It is unclear whether the Senate or House would have the numbers to overturn a veto. The Senate approved the bill by voice vote, making support lines murky. But Bradley said he thinks his chamber has the votes ahead of the Legislature’s “veto day,” likely to be scheduled in September.

In the meantime, the move will very likely turn into an election issue, with supporters of the governor’s move, who include the powerful Americans for Prosperity, likely to try to pressure senators to sustain the veto, and environmental groups attacking it and pressing for an override. In a statement Tuesday, Democratic gubernatorial candidate Molly Kelly accused the governor of “blocking job creation” and “hurting businesses and municipalities” through the twin vetoes.

Stock said he’s less concerned with the “theoretical exercise” of the bill’s impact, and more with the workers who could be hurt if the plants close. Ahead of September, he said, all parties are lying in wait.

“We’re hoping that they can at least hang on,” Stock said.

(Material from the Associated Press was used in this report.)

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