New power-buying rules can trim electric rates but poses more risk to ratepayers

This set of power lines crosses Route 9/202 in Hopkinton, N.H., near Whittier Pond. (Concord Monitor - Geoff Forester)

This set of power lines crosses Route 9/202 in Hopkinton, N.H., near Whittier Pond. (Concord Monitor - Geoff Forester)

By DAVID BROOKS

Monitor staff

Published: 01-21-2025 5:48 PM

Electric utilities in New Hampshire are changing the way they buy the power that they sell to us, raising the possibility that ratepayers can save money but also the possibility they’ll face big, unexpected bills.

For a long time the state’s three investor-owned utilities – Eversource, Unitil and Liberty – have bought power twice a year, signing a six-month contract with one or more electric wholesalers. They pass that cost through to customers without taking a profit.

Recently, however, the PUC has told the utilities to start buying some power on the day-to-day open market. Regulators hope this can save money partly because six-month power purchase contracts include a charge known as a risk premium, to compensate wholesalers for the worry that power prices might spike during that six months.

Buying power on the open market can sidestep a risk premium and is part of the reason that the upcoming utility supply rates are quite low.

However, says Consumer Advocate Don Kreis, this change to policy also shifts the risk of price spikes from wholesalers onto the utilities, who will then pass it on to ratepayers.

“It’s happy and great when the markets are in stable shape, but when something goes crazy in the market, customers will take a real hit,” he said.

In recent years the market has occasionally gone crazy during long cold spells when most of New England’s natural gas is used for home heating, leaving less of it to run power plants. That sends electric wholesale prices soaring.

In the current cold wave, for example, the region’s real-time price for electricity, officially called LMP, has varied from less than zero on sunny weekend mornings, when there’s lots of free solar power but little demand, to more than $300 per megawatt when it’s cloudy midweek. That price is well over three times the usual cost of electricity on the open market.

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“My phone pings me when it goes over $200 and it’s been pinging a lot,” Kreis said.

Customers don’t have to pay those short-term rates (unlike in free-for-all Texas, where humongous residential bills followed one cold snap) because the electric rates for residences and small businesses are still being set in six-month increments. The so-called winter rate starts Feb. 1.

“It is still set the old-fashioned way no matter what the market says,” Kreis said. But this raises a problem: “If (the six-month price) is not adequate to cover the cost of power bought at wholesale, the utility bleeds red ink. Then the question is, what do you do?”

Kreis said it’s not clear how the PUC will deal with that situation if it comes up but that other rulings make it seem likely regulators would allow utilities to recover such losses from all of its customers, even if those customers don’t buy their electricity from the utility.

If so, that would be a big blow to community power programs, which have become increasingly popular.

Community power programs buy their customers’ electricity on the open market rather than through the utility. But its customers still have to pay their local utility for distribution and transmission costs, which make up roughly half the typical residential bill.

If the PUC lets utilities put electricity cost overruns on the distribution and transmission side of the bill then community power customers would have to help make up the loss.

“That would give the utilities an unfair advantage. If the community power coalition makes a mistake like that … they have to make up the difference from their customers, period – they can’t go and recover the deficiency from everybody. But the utilities may be able to do that,” Kreis said.

Compounding the issue is that utilities have also been seeking to boost the transmission and distribution side of the bill, which requires PUC permission in specific rate cases: Eversource, for example, is seeking a whopping 48% increase in that rate.

They say major investments in wires, poles, transformers and other equipment is needed to keep the grid operating, especially since electrification and new uses like data centers mean demand is expected to grow.

Increasing the costs that no customer can avoid undermines any benefit for community power.

David Brooks can be reached at dbrooks@cmonitor.com