Advocates, opposition dig in on plant divestiture bill targeted at PSNH

Consumers would benefit from improved competition in New Hampshire’s retail power market if Public Service of New Hampshire (PSNH) is required to divest its generating facilities, the COMPETE Coalition said in testimony before a state legislative panel.

COMPETE Counsel William Massey, in Feb. 2 testimony before the House Science, Technology and Energy Committee, said that PSNH is an electricity distribution “wires” service provider but also still owns a substantial amount of generation capacity. “As such, the company faces a strong incentive and an ability to favor its own retail generation supply when granting access to its distribution network,” Massey, a former FERC commissioner, said in his prepared testimony. “Favored access can distort competitive outcomes and result in higher costs for New Hampshire consumers and businesses.”

Massey and other stakeholders presented testimony in favor of or in opposition to proposed House Bill 1238, which calls for the divestiture of PSNH’s generation facilities by the end of next year.

The perception of a non-level playing field and discriminatory access to the distribution network keeps competitive suppliers from the market, along with the cost-reducing pressures and innovations such suppliers would bring to the state if allowed to compete fairly, Massey said.

“Divesting the company’s remaining generation assets is a necessary foundation for a competitive retail market and improving customer choice in New Hampshire,” Massey said. “And with greater competition in its electricity market, New Hampshire will help keep electricity cost as low as possible, drive greater innovation in products and services, and produce other benefits for customers while ensuring a reliable supply of electricity.”

In competitive markets investors, not consumers, bear the risk of bad business decisions, Massey added. “Providers of innovative new services are attracted to competitive electricity markets because of the level playing field, low barriers to entry and fair market rules,” he said. “It is clear that competition drives innovative technologies and services. Competition disciplines investment by shifting the risk of poor business decisions from consumers to investors, where it belongs.”

PSNH says bill is a very bad idea

The forced sale of PSNH generation facilities is not in the best interest of PSNH customers, nor the New Hampshire economy, and would threaten hundreds of jobs in the state, PSNH said Feb. 2, testifying in opposition to H.B. 1238.

“Our customers today have the best of both worlds because they can buy from the market when it is cheaper than PSNH energy, and they can buy from PSNH when the market is more expensive,” testified Terry Large, PSNH Director–Business Planning and Customer Support Services. “To be clear: New Hampshire completed electric utility deregulation. The state chose to do it differently than some other states, and PSNH customers have been the beneficiaries.”

The state restructured its electric utility industry in 2002, providing all New Hampshire customers with the opportunity to purchase energy from an independent supplier. Under the New Hampshire model, PSNH still owns its traditional fleet of nine hydroelectric and three fossil plants, and uses the energy they produce to serve customers who have not switched to an independent supplier.

“PSNH customers have saved more than $700 million over the last decade because our energy was priced below the market price for most of that time,” said Large. “A question for the Legislature is: ‘is it in the best interest of consumers to eliminate their ability to choose, and instead rely solely on a market that is driven mainly by a single fuel, natural gas, which historically has experienced significant price volatility?’”

Large also testified the energy market is currently depressed due to the economic recession and abnormally low natural gas prices, which may depress the sale price of the power plants in the near term. A forced sale at this time could also result in significant stranded costs, and the loss of jobs and local taxes if the plants were shut down, said PSNH. “In fact,” said Large, “in one recent sale of a power plant, the purchaser of the AES Thames plant in Connecticut was not a power generator who intended to operate the plant in the future. It was a scrap dealer.”

PSNH’s has 12 facilities, including nine hydro plants, have a total capacity of 1,165 MW, which is 3.4% of the generating capacity in New England and 27% of the capacity in New Hampshire. The Merrimack plant has 445 MW of coal-fired capacity, the Newington plant has 400 MW fired by oil and gas, and the Schiller plant has 150 MW of capacity fueled by coal, oil and wood.

As New England’s fossil-fired and nuclear generation plants age, the region is becoming increasingly dependent on natural gas, said the Large presentation. The majority of the region’s oil-fired plants are more than 30 years old and the future of the Vermont Yankee, Pilgrim, and Indian Point nuclear power plants remain uncertain, While there is over 16,000 MW of proposed new generation in the ISO queue as of May 1, 2011, only about 21% of what has been proposed in the past 15 years has actually been built, the presentation added. Some of the proposed generation comes from intermittent fuel sources like wind and solar, which need to be balanced with other more predictable sources, Large said.

The COMPETE Coalition is made up of more than 600 electricity stakeholders, including customers, suppliers, traditional and clean energy generators, transmission owners, trade associations, technology innovators, environmental organizations and economic development corporations.

PSNH is a subsidiary of Northeast Utilities (NYSE:NU).

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.