Electricity:  Sometimes Too Cheap NOT to Meter!

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Power to the People is a column by Donald M. 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.

By DONALD M. KREIS, Power to the People

Barbenheimer – the summer movie craze involving the blockbuster films Barbie and Oppenheimer – has, among other things, plucked the late Lewis Strauss from obscurity.  If you’ve seen Oppenheimer you will recall that Strauss was the federal bureaucrat who red-baited the brilliant nuclear scientist Robert Oppenheimer out of government – all after Oppenheimer led the Manhattan Project and thus played a pivotal role in bringing World War II to a close.

Nineteen Fifties political machinations and the moral implications of nuclear weaponry notwithstanding, people like me have long remembered Strauss for something else he did.  Or, rather, it was something he said, in 1954 in his capacity as chairman of the federal Atomic Energy Commission (which later morphed into today’s Nuclear Regulatory Commission).

Strauss famously proclaimed, in a 1954 speech, that — thanks to nuclear power — electricity would become “too cheap to meter.”

It didn’t happen.  New Hampshire was ground zero when it came to blowing up that idea, since delays and vast cost overruns at the Seabrook nuclear power plant made Public Service Company of New Hampshire (PSNH), in 1988, the first electric utility to declare bankruptcy since the Great Depression.

That’s old news.  There is no need to rehash the tale of a nuclear plant that was originally supposed to cost less than a billion dollars, and include two units with a collective 2,400 megawatts of capacity, only to have one of the units cancelled and the other one completed more than a decade late at a pricetag of $7 billion.

But here’s some new news.  Unit 3 at the Vogtle nuclear plant in Georgia – the first electricity-generating nuclear reactor to be built at utility scale in the U.S. in four decades – finally achieved commercial operation on July 31.  The project was seven years late and $17 billion over budget, according to Associated Press.

Georgia ratepayers have been paying, for years, the costs of Vogtle Unit 3 – as well as Unit 4, still under construction.  That’s because George allows utilities to put projects like that into rates while still under construction.  New Hampshire passed a statute explicitly prohibiting that in 1979, which is what landed PSNH in bankruptcy.

I’m not trashing nuclear power.  We’ve come a long way since the 1950s, when the idea was to use uranium to produce electricity and then reprocess the spent fuel into bombs.  Today, our Legislature is again studying nuclear power and we rightly see the potential of the technology as a source of electricity that emits little if any carbon pollution into the atmosphere.

But we are still figuring out how to make new nuclear plants affordable.  And the electricity – whether nuclear or otherwise — is most assuredly not too cheap to meter.

Indeed, sometimes electricity is too cheap NOT to meter!  Sunday, July 27, for example, was sunny and relatively cool – which is why, in the mid-afternoon, the spot price of wholesale electricity in New Hampshire hit negative 25 dollars per megawatt-hour.

That’s right.  Electricity was so plentiful that the generators were actually paying wholesale buyers to take the energy, at a whopping big price that equals 25 cents per kilowatt-hour (kwh).  (For comparison purposes, note that our utilities are currently offering electricity in the range of 12 to 13 cents per kwh.)

I could not help myself when I saw that negative wholesale price.  Via the social media platform formerly known as Twitter, I sarcastically proclaimed:  “Do your patriotic duty and fire up your dryer!”  Which prompted this snarky reply from one @NFGiM, based in a neighboring state:  “So the utilities will be paying us, right?”

Wrong.  Of course.

Sarcasm aside, it’s worth thinking through the implications of those negative wholesale prices, and why our electric providers aren’t paying us to take their service.  We’ve come a long way from the days of Lewis Strauss at the helm of the Atomic Energy Commission.

In 1954, we had vertically integrated electric utilities – they owned everything, from the big generators like Seabrook right down to the meter on the side of your house.  Today, in every New England state except Vermont, the utilities no longer own generation and these companies, while maintaining their poles and wires monopoly, are not the only available source of retail electricity.

To help make all of that work, we have wholesale electricity markets – operated by our regional transmission organization, ISO New England.  On the afternoon of July 27, a seemingly interminable heatwave broke, demand was lower than projected, and suddenly there was literally too much electricity to go around.

Why not just back off the generation when something like that happens?  Because these are, mostly, big machines.  You can’t just flip a switch and turn a nuclear power plant, a big natural gas generator, or the turbines at a huge hydroelectric dam, on and off.

In reality, relatively little electricity changed hands at that negative $25 price.  That’s because players in the wholesale market – not just generation companies, but load-serving entities like our utilities as well as our community power aggregation programs – hedge their bets.  They enter into longterm fixed-price contracts.

Your bets, as retail electricity customers, are likewise hedged.  For example, the new (and lower) default energy services prices from the utilities, which went into effect on August 1, are good until January 31, 2024.  Community Power Aggregation programs, and even competitive electricity suppliers, also have rate plans of similar durations.

Sure, that means you don’t see the benefit of negative $25 dollar prices on the wholesale market.  But neither were you exposed on Christmas Eve, when the spot price of electricity hit a positive $2,000 per megawatt-hour thanks to a series of unfortunate events and incorrectly predicted weather.

Recently the Public Utilities Commission asked our utilities to consider exposing their default energy service customers, at least a bit, to the volatile prices on the spot wholesale market.  That seems mighty scary to me, as one whose job is to stick up for retail customers – who like price certainty.

Why do I hold that view?  Because electricity will never be too cheap to meter, and the energy industry looks a lot more like the grim realities one sees in Oppenheimer than the fantasy world of Greta Gerwig’s Barbieland.

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