N.H. PUC Approves Nonbypassable Recovery for PSNH Contracts

The New Hampshire PUC has approved the nonbypassable recovery of certain supply costs related to PPAs that Public Service Company of New Hampshire will execute with several wood-burning generators (DE 11-184).

As first reported by Matters, the PPAs, signed to ensure the continued viability of the generators, are expected to be about $25 million above market (see 8/24)

Power from the PPAs will be used to serve PSNH's default service customers.

The PUC approved the PPAs, and essentially ordered them to be treated similar to pre-restructuring above market contracts.

Under this approach, default service customers will be charged the equivalent of market costs for power under the PPAs, with above-market costs paid by all distribution customers on a nonbypassable basis. The PUC said that nonbypassable cost recovery, for the above-market portion of costs only, is appropriate given the economic development benefits accruing to all customers under the PPAs.

Under the PUC's ordered cost recovery method, the default service rate will be the same as it would have been had PSNH used market purchases, rather than the PPAs, to fill supplemental power needs.

Notably, the PUC rejected PSNH's original proposal which would have placed the above-market costs of the PPAs in default service rates, but, to prevent default service rates from increasing, would have simultaneously removed $8.5 million in uncollectible and regulatory assessment costs from default service rates, with such costs re-assigned to all customers in distribution rates.

However, the PUC still stated that PSNH's original proposal is within the Commission's authority, though the PUC chose not to adopt it.

The PUC said that its use of a nonbypassable charge for above-market costs, "does not run contrary to the Commission's decision in Docket No. DE 10-160, Order No. 25,256 (July 26, 2011) relative to PSNH customer migration."

"In that case, it was determined that imposing a non-bypassable charge to pay a portion of PSNH's fixed generation costs would constitute unfair cost shifting to customers that have taken advantage of competitive supply. This case is distinguishable in that the costs that are being recovered from all customers, which are non-bypassable, are costs associated with public benefits that accrue to all PSNH customers, whether they take default energy service or competitive supply. Thus, there is no unfair cost shifting to customers who have taken advantage of competitive supply," the PUC said.

The PUC noted that the nonbypassable recovery of above-market costs for the wood PPAs, "is a temporary measure that will terminate without further action by the Commission upon full recovery of the PPA costs."

Under this method, there will be no deferrals and no carrying charges that would accrue on a deferral, the PUC added.