New Hampshire Consumer Advocate Recommends Mitigation of Above-Market PSNH Default Service Rates

The New Hampshire Office of the Consumer Advocate has recommended to the PUC that the Commission mitigate Public Service Company of New Hampshire's above-market default service rates, by deferring above-market costs while an adjudicatory proceeding addresses PSNH's continued ownership of generation.

Specifically, OCA proposed that the PUC open an adjudicative docket to answer the question, "Is it in the economic interest of PSNH retail customers for PSNH to divest its generation assets?"

The costs of power from the assets are currently above the wholesale market price of power, leading to an above-market default service rate.

If the Commission accepts this recommendation to open an adjudicative docket, the OCA recommends that the Commission implement an interim solution during the process to provide relief to default service customers, most of which are residential customers.

Specifically, OCA proposes implementing a market based energy procurement process for PSNH default service, similar to that currently in place for Unitil and Granite State Electric Company.

PSNH would retain the revenue from bidding its generation fleet into the market. This market revenue stream likely will be less than its regulated cost of service. The difference between the market based revenue and the regulated revenue stream becomes a regulatory asset. This deferred asset could become a component of stranded cost to be securitized, OCA said.

The OCA said that such a regulatory asset can be created without legislative changes.

OCA's recommendation is notable in that it would mitigate rates before any final adjudication is made on PSNH's generation ownership, or final design of default service. While mitigation of default service rates (or essentially, what will become stranded costs), with recovery from competitive supply customers and default service customers, may be appropriate as a bargain in exchange for a full PSNH exit from generation ownership, OCA's proposal provides immediate rate relief to customers, without any guarantee that those paying for the rate relief receive anything in exchange for the subsidy.

At this stage the OCA recommends deferring the argument regarding recovery or disallowance of the above-market costs until the Commission makes a finding on divestiture.

"Once energy service customers are protected from the effects of migration, stakeholders can propose solutions to address the findings of the Staff Report," OCA said, with potential actions which may include:

1) Divestiture of PSNH generating units via a third party supervised auction process;

2) Identification of necessary legislative changes to implement a long term solution;

3) Quantification of recoverable stranded costs; and

4) Securitization, with non-bypassable stranded cost recovery for all retail load.