New Hampshire Opens Investigation of Impacts of PSNH Generation Ownership on Default Service

The New Hampshire PUC has opened an investigation into the market conditions affecting the default service of Public Service Company of New Hampshire in the near term and how PSNH proposes to maintain safe and reliable service to its default service customers at just and reasonable rates in light of those market conditions, and to explore the impact, if any, of PSNH's continued ownership and operation of generation facilities on the competitive electric market in New Hampshire.

The PUC said that this investigation is not an adjudication pursuant to RSA 369-B:3-a and, "it will not undertake to determine whether continued ownership and operation of generation is in PSNH's retail customers' economic interest."

"Rather, this is an inquiry to be conducted by Commission Staff to explore the market conditions facing PSNH in the near term, PSNH's proposals to maintain default service at just and reasonable rates in light of those market conditions, and the impact, if any, of continued ownership and operation on the competitive electric market," the PUC said.

The PUC said that the investigation was prompted by several market changes. The decrease in gas prices, "has resulted in a large decrease in wholesale electric prices causing many generators that rely on other fuels (such as Merrimack Station and Schiller Station Units 4 and 6), or use natural gas but are not combined cycle units (such as Newington Station), to run at much lower capacity factors," the PUC noted.

"In addition, laws have since been enacted with respect to renewable energy resources, environmental and emissions requirements (see, for example, RSA 362-F and RSA 125-0), as well as amendments to RSA 374-F, that have had differing impacts on the costs of owning and operating electric generation facilities in New Hampshire and on PSNH's default service rates. Further, ISO-New England's proposed changes to the forward capacity market will put less value on fuel diversity than in the past and instead will reward generating units strictly based on their performance. Finally, competitive energy service is now available through multiple suppliers to residential, as well and [sic] commercial and industrial customers, and the rate at which customers are choosing these alternative suppliers is increasing," the PUC said.

The PUC noted that it is often less expensive for PSNH to buy power in the wholesale market than to generate it at its fossil fueled facilities. "The fixed costs associated with the generation assets are, however, included in the calculation of PSNH's default service rate even when PSNH buys power in the wholesale market at prices lower than it costs to generate it at its own facilities. The combination of wholesale market costs plus the fixed costs associated with the generation assets are both included in default service rates, putting upward pressure on those rates which, in turn, encourages more of PSNH's default service customers to migrate to less expensive competitive supply options, leaving the fixed costs of maintaining generation to fall on a smaller pool of default service customers. All else being equal, this causes higher default service rates, which can lead to further migration," the PUC said.

Docket DE 13-020