Subsidy Season at State House For Wood-Burning Plants?

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D. Maurice Kreis, NH Consumer Advocate

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By D. Maurice Kreis, Power to the People

CONCORD, NH — Along the road to safe and reliable electricity for residential customers in New Hampshire, at the lowest possible cost, lie the remains of at least one consumer advocate who spoke out against using electric rates to subsidize jobs in the North Country.

Your current consumer advocate, tasked like his predecessors with representing the interests of residential utility customers, will not die on that particular hill.  Here’s why.

Nine hundred good jobs are at stake, co-sponsors told the House Committee on Science, Technology and Energy Committee last Wednesday at the hearing on Senate Bill 446.  Representative Herb Richardson (R- Lancaster) thinks the total is more like 1,500.

They’re talking about employment that can be attributed to the generation facilities in New Hampshire that burn low-grade wood for fuel.  SB 446 would shore some of them up by allowing the first five megawatts of their output to participate in net metering, much as owners of rooftop or backyard solar panels can.  The plan is nested in a measure to expand the maximum size of net metering projects and it enjoys bipartisan support.

The details of such a plan will be haggled over, but it comes down this:  higher rates for electric customers, paid to five wood-burning plants, in the form of a subsidy.  The S-word.

“It’s not a four-letter word,” said the lead sponsor, Senator Jeb Bradley (R-Wolfeboro).  “It’s a word that keeps 900 people working in our state.”

As the Senate Majority Leader, Bradley has a lot of influence.  So it is not shocking that SB 446 sailed through the Senate on a 12-4 vote.  As an energy policymaker, no one in the General Court knows more than Bradley; he was one of the architects of the 1996 Restructuring Act.  So his candor at the hearing on the House side was both refreshing and useful.

Bradley confessed that last year’s wood-burner subsidy measure – Senate Bill  129 – did not achieve its desired effect of shoring up these plants via the state’s Renewable Porfolio Standard (RPS).  The RPS requires electricity providers to purchase Renewable Energy Credits (RECs); SB 129 increased the maximum price for RECs produced by the five biomass plants.

But since RECs trade on an open market, increasing the maximum price does nothing when prices stay low.  Which is exactly what happened.  “The REC prices have not increased as they thought they might,” Bradley testified, “so no cost to ratepayers from that.”

No subsidy to the five wood-burners either, he added.  So, Bradley warned, “absent action by the end of the session, all five of the wood plants will close soon.”

SB 446 is not the only biomass subsidy bill working its way toward Governor Sununu’s desk.  Senate Bill 365 would require Eversource, Liberty Utilities and Unitil to purchase some of their default service – the energy they provide to customers not choosing a competitive supplier – from the same five wood-burning plants.

This will make default service more expensive; those who think otherwise are dreaming.  The Senate approved the bill on March 21.

And of course there is Senate Bill 577, which instructs the Public Utilities Commission to expand subsidies to the Burgess BioPower plant, located on the site of what was once the paper mill in Berlin.

Burgess BioPower is different than the five wood-burners that would benefit from the other bills.  At 75 megawatts, it’s three times bigger than the largest of the five.  And Burgess is the beneficiary of a 20-year contract with Eversource approved by the PUC in 2011 over the fervent objections of then-Consumer Advocate Meredith Hatfield.

The purpose of the contract is to provide a steady revenue stream to Burgess BioPower as opposed to leaving it to the vicissitudes of the wholesale electricity markets.  Eversource must purchase energy, capacity and RECs from Burgess at robust prices.  What was then described as a “risk” has proven to be a certainty:  a market premium,  due and payable on a nonbypassable basis from Eversource’s customers throughout New Hampshire.

But there is a limit: $100 million.  Under the terms of the PUC’s 2011 order, once Burgess BioPower has recovered that amount in payments above prevailing market prices, the spigot closes.  At last count, the plant is more than halfway there.  So, SB 577 would require the PUC to revisit that $100 million limitation.

“The commission shall consider the impact the potential closing of, or the reduced capacity at, Burgess BioPower could have upon jobs at the plant and in the first products industry, property tax and other impacts on the city of Berlin, renewable energy resources in New Hampshire, the impact on Eversource ratepayers, and other such factors as the commission deems appropriate,” the bill declares.

Back in 2011 there was still an argument that ratepayers could benefit from deals like these.  Now, given how markets have evolved and the fact that Eversource is completing the sale of its generation fleet, there’s no longer any pretense.  These bills address laudable public policy goals – particularly the economic well-being of the North Country – at ratepayer expense.

There is little a ratepayer advocate can say about this that would be useful.   My job is to rein in the profit-maximizing instincts of investor-owned utilities and to channel in useful ways their zeal to buy big toys and get them into rates.  It is above my pay grade to figure out whether concerns exogenous to the real cost of electric service should find their way into rates.

That’s why we have legislators, who are directly accountable to the people.  “My constituents in Portsmouth would be willing to pay the small subsidy,” said Democratic Rep. Peter Sommsich at the SB 446 hearing. I believe him, but I lack any basis for making the same representation on behalf of every residential utility customer in New Hampshire.

One question remains, and kudos to Representative Herbert Vadney (R-Meredith) for asking it at the hearing.

Vadney listened patiently to Senator Bradley warn of biomass plant closures in Bethlehem, Bridgewater, Springfield,Tamworth and Whitefield — and wondered about the veracity of the claim that these facilities, which unlike public utilities are unregulated, cannot survive without financial aid.  “Would you support opening their books?” Vadney asked.

“I have no problem with that,” Bradley replied.

Neither do I.

Power to the People is a column by D. Maurice Kreis, New Hampshire’s Consumer Advocate. Kreis and his staff of four represent the interests of residential utility customers before the NH Public Utilities Commission and elsewhere. It is co-published by Manchester Ink Link and InDepthNH.org.

 

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