A $19M Question: Is competitive electric supply a ripoff in NH?

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D. Maurice Kreis, New Hampshire Consumer Advocate

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.

By D. MAURICE KREIS, Power to the People

You don’t have to be a ratepayer advocate to sit up and take notice when someone claims that Eversource’s electric customers in New Hampshire overpaid more than $19 million dollars last year.

Sit up and take notice I did, especially because the claim came from Eversource itself – indeed, from the utility’s top-ranking executive in New Hampshire, Joseph Purington, president of Eversource subsidiary Public Service Company of New Hampshire.

Purington and two colleagues – Director of Regulatory Affairs Kerry Britland and Director of Electric Service Support & Distributed Generation Warren Boutin – provided that figure last month to the Residential Ratepayers Advisory Board (RRAB).

The RRAB is the public body that advises my agency, the Office of the Consumer Advocate (OCA).  Which means that the three Eversource executives were speaking publicly and on the record.  They also reported that, of the $19.4 million in overpayments last year, fully $16.1 million of that came from the residential sector whose interests the OCA represents.

So I really sat up and took notice.  Of course context is everything, so it’s appropriate to tease out the basis of Eversource’s claim. 

Since 2002, every electric customer in New Hampshire has enjoyed the right to stop buying electricity from their local utility and purchase energy instead from a so-called competitive supplier.  “Competitive supplier” in this context simply means a firm that buys energy at wholesale, sells it at retail, but is not a regulated utility like Eversource, Liberty, or Unitil.

Nobody is required to use a competitive supplier.  Instead, you can purchase so-called “default energy service” from your utility – which, of course, you still have to pay to connect you to the grid in any event since the poles and wires are still considered a regulated monopoly. 

(The pending Eversource rate case over which I have spilled so much ink in this column lately concerns the non-bypassable “distribution” charges for use of those poles and wires.)

So, when Eversource says customers overpaid $19.4 million in 2019, it means:  Customers who used competitive suppliers in 2019 paid $19.4 million more than they would have paid if they had simply purchased default energy service from Eversource.

Oh, and did I mention how things look so far in 2020, with the state in a pandemic-induced economic miasma?  Again according to Eversource, in the first half of the year its New Hampshire customers have overpaid to the tune of $12.1 million.  Fully $9.9 million of that is attributed to residential customers.

Here are some fun facts about default energy service.  All three of New Hampshire’s investor-owned electric utilities acquire the wholesale electricity they need to supply this service the same way:  they conduct a competitive solicitation every six months.

Back in June, the Public Utilities Commission (PUC) approved the results of Eversource’s latest competitive solicitation, which produced wholesale supply contracts with Consolidated Edison and Next Era for service to small customers (i.e., residences and small businesses).  The astute among you will note that both Con Ed and Next Era are regulated utilities from, respectively, New York and Florida.  But in this instance we are talking about their unregulated, competitive affiliates.

And, yes, NextEra is indeed the outfit that owns and operates the Seabrook nuclear power plant.

As a result of this PUC-approved solicitation, the rate charged by Eversource for default energy service went down to 7.068 cents per kilowatt-hour for residential customers as of August 1.  The comparable rate for Liberty is 6.825 cents and for Unitil it’s 6.987 cents.  In other words, they are all in the same ballpark.

When allegations have arisen in the past that customers are better off on default energy service, competitive suppliers have argued that the playing field is not level – basically, that default energy rates are artificially low.  They kinda sorta have a point.

In the case of Eversource, for example, customers are paying off most of the $425 million Eversource spent on a high-tech mercury scrubber a decade ago for the coal-burning Merrimack Station.  Eversource sold Merrimack Station in 2018, thus getting out of the generation business a full 22 years after the passage of the state’s restructuring law.

The scrubber was a waste of money; Merrimack Station hardly ever runs and subsists largely on capacity payments.  That’s money for merely being available to generate – and it’s embedded, by the way, in everyone’s energy rates thanks to regional wholesale market overseer ISO New England.

Here, the point isn’t to argue about coal power, mercury scrubbers, or capacity payments.  The point is that the costs of the scrubber are paid via the non-bypassable “stranded cost recovery charge” and not the default energy service charge.  To the extent competitive suppliers incur similar costs for bad investments, they must either swallow them or include the costs in their retail rates.

Some argue that retail choice for residential customers is simply a bad deal and everyone should be forced back onto default energy service.  That’s the position taken by Attorney General Maura Healy in Massachusetts, who is responsible for ratepayer advocacy to our immediate south.

Healy commissioned three independent studies, by consultant Susan Baldwin, about how residential customers fare in Massachusetts.  Baldwin found that residential customers in the Bay State overpaid by $340 million from July 2015 to June 2019, with low-income customers particularly hard hit.

Here in New Hampshire, something that might just save restructuring from the kind of oblivion Healy favors is Community Power Aggregation.  As of last year, any New Hampshire municipality can now legally procure wholesale electricity on behalf of its residents, except for those who opt out.  (Previously, this was stymied by a requirement that customers affirmatively opt in.)

A consortium of municipalities, notably including Lebanon, Hanover and Nashua, is forming Community Power New Hampshire – a so-called “joint action authority.”  When it launches as planned next year, Community Power New Hampshire will likely eclipse the default energy service load of Liberty and might even give Unitil a run for its money.

In other words, Community Power New Hampshire seems destined to become one of the state’s major load-serving entities – a significant player in the electric sector and one that is truly publicly accountable.  Can it outperform the utilities in the wholesale market while avoiding the slimy tactics Maura Healy attributes to competitive suppliers?

I don’t know.  But I can’t wait to find out.

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