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State's Energy Dept. Recommends "Self-Correcting Adder" Should Be Applied To Proxy Price Used In Setting Default Service Rates
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The New Hampshire Department of Energy (DOE) has proposed implementation of a "self-correcting adder" that would be added to the current estimated proxy price used in setting default service rates for the portion of default service served under "self-supply" (in which the utility purchases directly from the ISO-NE markets, not wholesale suppliers)
In New Hampshire, 50% of residential and small commercial default service at the investor-owned electric utilities is procured via the ISO-NE markets under self-supply
Currently, the utilities determine the proxy price needed to set fixed retail default service rates (due to the ultimate cost of the self-supplied load being unknown at the time of retail rate setting) by averaging a futures price and a four-year weighted average.
The current proxy price mechanism has typically resulted in an under-collection of default service costs, creating large reconciliation balances
DOE in testimony presented an analysis of various proxy price methodologies -- the current approach, the use of only a two-years futures price, and the use of a bid price from the full requirements RFP (either lowest bid or first rejected bid) -- and found that the "next best block bid" and "lowest block bid" proxy prices typically resulted in the highest collections (and the most over-collections), while the current method and the two-years futures price consistently resulted in the lowest amount of overall collections (and the most under-collections)
DOE concluded that, "variability between the proxy price and actual price is unavoidable[.]"
In light of such conclusion, DOE said that the PUC should focus on limiting reconciliations
DOE stated, "the Department would support a methodology that slightly over collects as that better meets the goals of rate stability and affordability. Over collections should be limited, however, even at the risk of occasional net under collections over a one-year period."
To minimize reconciliations, DOE designed two versions of a "self-correcting" adder -- one that is weighted by actual monthly load requirements, and one that is not -- to be added to the proxy price resulting from the current proxy price methodology used by the utilities
The adders would be based on data from the previous year, where the average difference between the original proxy price methodology and the actual cost for electricity becomes the adder.
"For example, if the original approach underestimated the proxy price on average by $14.56 per MWh, then $14.56 per MWh would be added to the proxy price determined using the current, original approach for the current year’s default service proxy prices," DOE said
"With the adder, the amount of over and under collections should come close to cancelling each other out over the course of a full year, absent any unusual market volatility," DOE said
DOE said that its proposed weighted adder offers a slightly more nuanced version of the adder, where the difference between the original approach’s proxy price and the actual price is weighted more heavily in months with larger loads and less heavily in months with lower loads.
Of the two adders, DOE recommends that the PUC adopt the weighted 1-year self-correcting adder methodology.
DOE said that default service reconciliations should occur every 12 months if the adder approach is used to set the proxy price
If one of the other approaches described above is used to set the proxy price, DOE recommended that a 6-month reconciliation schedule be used for default service
DOE also urged the PUC to collect more data about the self-supply results, so as to better evaluate whether self-supply for default service provides customers with rates that are stable and affordable over time.
Docket 26-017, 26-023, 26-024
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September 14, 2026
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Copyright 2026 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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