The New Hampshire Public Utilities Commission on July 1 released its order approving a 2015 settlement agreement and a 2016 litigation settlement, clearing the way for the sale of several power plants owned by Public Service Co. of New Hampshire.
The order concludes the commission’s investigation into the question of whether PSNH parent Eversource should divest, or sell, its generation assets. It also concludes the commission’s investigation into the recovery of costs associated with the installation several years of an SO2 scrubber on the coal-fired Merrimack Station of PSNH.
Highlights of the order include:
- Approves a settlement that requires Eversource to divest its generation assets through an auction process overseen by the commission. Projections estimate that divestiture may result in customer savings of $165 million over the first five years following divestiture (2017 to 2021).
- Approves a settlement that requires Eversource to transition to a competitive procurement process for default energy service no more than six months following the final closing on the sale of its generation assets. Transition to a competitive procurement process for default energy service is expected eventually to result in lower energy costs. It also removes operational risks, including the risks of future upswings in capital-expenditure requirements for Eversource’s generation fleet, which should, in the long run, protect ratepayers from costly rate shocks related to environmental-compliance requirements and the ongoing need to replace or upgrade obsolescent equipment.
- Approves use of rate reduction bonds to finance the stranded cost balance at a debt-based interest rate that is expected to be much lower than the return on equity that Eversource would receive if its generation assets were to remain in rate base.
- Approves property tax stabilization payments to be made to host municipalities, those cities and towns where Eversource’s generation plants are located, for Eversource’s generation assets. These payments are designed to protect property tax revenue streams for host municipalities for a short period of time following divestiture.
- Finds the decision to install the scrubber at Merrimack Station was prudent at the time it was made. It allows Eversource to recover prudently incurred costs associated with the installation from customers. The total allowable costs prudently incurred to build the scrubber are $415,511,889.
- Approves $5 million from Eversource shareholders to establish a clean energy fund which will fund clean energy initiatives throughout the state.
In 1996, the New Hampshire Legislature set out general principles for restructuring the electric industry. Since that time, Legislative policy has, for the most part, favored the divestiture of Eversource’s generation assets. A broad array of parties was involved in the development of the 2015 settlement agreement. Those parties represented diverse interests and included Eversource, state agencies, municipalities, the Business and Industry Association, IBEW Local 1387, private sector market participants, and various advocacy organizations.
The 2016 litigation settlement was reached through a collaborative process which also included a broad array of parties. During the settlement hearing held in February of this year, both agreements were subject to scrutiny. The commission found that the two agreements involved a balanced compromise and resolved technically complex issues arising from the divestiture of Eversource’s generation assets. Based upon its review of the evidence presented during the hearings, the commission found that the terms and conditions of the settlement agreements met the public interest standard.
For Eversource default energy service customers, the customer savings analysis presented at the February hearings indicated savings of approximately $165 million in the first five years following divestiture, based on a full sale of Eversource’s generation assets as of January 2017. The evidence presented also indicated positive impacts on the New Hampshire economy resulting from lower Eversource rates.
In 2006, the NH Legislature enacted legislation requiring the owner of Merrimack Station to install pollution control technology. Prior to the filing of the 2015 settlement agreement, the commission conducted extensive hearings on the prudency of Eversource’s management of the scrubber project. The issues raised during those hearings related to whether Eversource should have retired or sold Merrimack Station rather than move forward with construction of the scrubber. Determination of those issues depended on whether an update in 2009 of an economic analysis undertaken by Eversource in 2008 would have resulted in a different decision than to proceed with construction.
The commission said it found that Eversource had a duty to update its economic analysis and evaluate its alternatives in 2009 with regard to such a large capital project as the scrubber. Eversource failed to conduct this analysis, which the commission found not in keeping with good utility practice. However, because an updated analysis would have shown customer benefits from the continued operation of Merrimack Station, Eversource’s decision to move forward with construction of the scrubber was within the bounds of reasonableness and was prudent.
The PSNH power plants subject to this sale process are:
- Merrimack Station, Bow, Coal, 439 MW.
- Newington Station, Newington, oil and/or natural gas, 400 MW.
- Schiller Station, Portsmouth, coal or oil at two units; biomass at one unit, 150 MW total.
Hydroelectric – 69 MW total
- Amoskeag Hydro, Manchester
- Ayers Island, Bristol
- Canaan Hydro, West Stewartstown
- Eastman Falls, Franklin
- Garvins Falls, Bow
- Gorham Hydro, Gorham
- Hooksett Hydro, Hooksett
- Jackman Hydro, Hillsborough
- Smith Hydro, Berlin