PUC Rejects Utility's Contingency Default Service Proposal

The New Hampshire PUC has rejected a contingency proposal from Liberty Utilities (Granite State Electric) addressing situations in which there is insufficient response to a default service procurement, finding that Liberty Utilities' proposal is inconsistent with statute.

Liberty Utilities' contingency plan proposed to procure power from ISO-NE, but notably relied on Liberty forecasts of ISO-NE market prices to set fixed retail default service prices, with a reconciliation (including a potential nonbypassable reconciliation) addressing any differences in costs versus revenues from the forecast-based retail prices.

"We find that this proposal is inconsistent with the restructuring principle of RSA 374-F:3, V(e), which requires that alternative means of providing default service not unduly harm competitive markets. Consequently, we do not find it in the public interest for Liberty to procure electricity supply directly through the ISO-NE in the first instance, after a failed RFP," the PUC said.

"Liberty proposes to set customer rates based on forecasts, not actual market prices, and to reconcile actual costs with revenues as necessary. In addition, if significant customer migration to competitive suppliers occurs during the default service period addressed by the contingency plan, Liberty proposes to implement a temporary, non-bypassable charge to recover costs from the customer group affected by the plan. We also find those provisions to be inconsistent with the principles of RSA 374-F:3," the PUC said.

"First, customer rates should be based on actual costs, not on estimated costs, to give clear price signals to customers who may wish to seek energy service from a competitive supplier. Second, the proposal to recover new deferred costs, namely significant under-collections, is also contrary to the principles of restructuring. See RSA 374-F:3, V(e)," the PUC said.

The PUC denied Liberty's request for approval of its contingency plan, and directed Liberty to develop a contingency plan that contains market-based options

"[O]ne step Liberty could take is to build time into its solicitation process to re-issue a failed RFP before taking any other course of action," the PUC said.

In contrast, while not formally ruling on the process at this time, the PUC generally found that a contingency proposal from Unitil was consistent with statute.

Unitil's contingency plan includes conducting additional RFPs after a failed procurement, including RFPs for different product terms and types. As a last resort, Unitil would rely on ISO-NE purchases for supply, but, in contrast to Liberty's proposal, Unitil would set prices based on actual ISO-NE costs.

Dockets DE 14-061 and DE 14-211