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
Imagine trying to fill a bathtub with hot water. What’s the best way to do it?
You could crank up the hot water and run it into the tub faster than it runs out. Eventually the tub would fill. Or, as Amory Lovins suggested more than four decades ago, you could invest in a plug.
Lovins, who is perhaps the planet’s most renowned exponent of getting more work out of every unit of energy consumed, was at Dartmouth College’s Irving Institute on October 28 to give a talk entitled “Radical Energy Efficiency, Integrative Design, and Applied Hope.” Applied hope, according to Lovins, is the “pragmatic and grounded conviction that starting with hope and acting out of hope can cultivate a different kind of world.”
How fortunate that Lovins did not hang around New Hampshire long enough to read the November 30 order of the Public Utilities Commission (PUC) on the subject of ratepayer-funded energy efficiency. There is not a drop of hope to be found there and, indeed, the PUC’s order could fairly be characterized as an exercise in applied cynicism.
Yes, the PUC is allowing the three-year, $254 million energy efficiency plan proposed by the state’s electric and gas utilities to go into effect as proposed. Yes, that means $30 million more for the NHSaves programs than we are spending in the current triennium, which ends on December 31.
But if you think this means the PUC has seen the light about energy efficiency, and has abandoned its hostility, as evidenced by its order two years ago that sought to eviscerate NHSaves, you are mistaken.
The latest order, signed by PUC Chairman Daniel Goldner and PUC Commissioner Pradip Chattopadhyay, made clear they consider themselves painted into a corner, legally speaking, by the General Court.
In February 2022, the Legislature passed and the Governor signed House Bill 549, in response to the PUC’s previous repudiation of NHSaves. This time, the PUC correctly concluded that it had no choice, in light of the bill, other than to okay the utilities’ modest set of proposed changes to the current energy efficiency programs, including a legislatively mandated inflation adjustment.
However, Goldner and Chattopadhyay pointedly refused to approve the Triennial Plan as a whole. To drive their point home, they added: “If the applicable legal standard were interpreted differently to require the Commission’s approval of the Plan based on New Hampshire’s general statutory standards and policy priorities, we may have reached a different result.”
May have? The November 30 order features page after page of analysis from Goldner and Chattopadhyay, setting forth their objections to the Triennial Plan’s central tenets, “for the benefit of the joint utilities, interested parties, and policymakers only.”
Before dissecting those objections, allow me to put on my law professor hat and sound an alarm about how misguided this is as an approach to utility regulation in general. The PUC is supposed to be an adjudicator – a specialized court, essentially.
Two years ago, the General Court spun off most of the PUC’s staff and used it to create the heart of a brand new state Department of Energy. The Department is supposed to be the policy oracle and the PUC is supposed to decide cases.
Courts do not issue advisory opinions. Under the utility regulation rubric adopted in New Hampshire in 2021, neither should the PUC.
The kind of ‘raised eyebrow’ regulation reflected in such an advisory opinion is problematic for two related reasons. Utilities, including the ones that deliver the NHSaves programs, don’t want to be at odds with their regulator and are thus likely to follow the agency’s advice. But because the advice isn’t legally binding, it is beyond scrutiny.
In other words, nobody can pursue an appeal of the November 30 order to the New Hampshire Supreme Court. Unlike our PUC, that tribunal is disciplined and steadfast in refusing to issue advisory opinions about existing law.
As for what Goldner and Chattopadhyay dislike about the Triennial Plan they declined to approve, it’s mainly about how the benefits of ratepayer-funded energy efficiency are calculated and then compared to costs.
At the heart of their objection lies the Granite State Test, developed by a stakeholder group in 2019 operating under the aegis of a PUC with different commissioners than we have today. The idea was to tailor the assessment of energy efficiency’s benefits to the specific conditions and public policy of New Hampshire.
The PUC ridiculed the Granite State Test two years ago, only to be explicitly overridden by the General Court in 2022. The agency’s focus now is on the discount rate at the heart of the test.
Fellow ratepayers: Write off the phrase “discount rate” as arcane economics minutia at your peril. The question is how to value future benefits, such as 30 years of energy savings from a home weatherization project, to compare them fairly to costs – particularly those costs supported by all ratepayers via NHSaves.
The PUC’s order dives deep into how – and at what point in time — the utilities apply the prime rate, and the inflation rate, to figure out how much to discount future energy savings. This obscures a fundamental reality: the choice of a discount rate in this context is entirely subjective.
If you like ratepayer-funded energy efficiency, you apply a low discount rate. If you are skeptical, you apply a high one that makes most ratepayer-funded energy efficiency look too expensive to justify.
Were the utilities themselves investing in energy efficiency, recourse to elaborate economic analysis would be appropriate. But this is all ratepayer money; the utilities do not invest a dime in energy efficiency. So, here we are talking about a so-called social discount rate – basically, how we, collectively as a society, value future benefits.
What is the community’s tolerance for delayed gratification? Nobody – certainly not the Public Utilities Commission – can say for sure.
This specific conversation now moves to the State House. Representative Michael Harrington (R-Strafford) is introducing House Bill 1036, which would eliminate the requirement to use the Granite State Test.
To the extent the PUC’s order is properly regarded as an elaborate letter to the Legislature, take note that the missive contains the signature of just two of the Commission’s three members. The third, Carlton Simpson, dissented.
Dissents by PUC commissioners are rare and this one is emphatically worded. Simpson, the only attorney on the PUC, castigated his colleagues for refusing to approve the three-year energy efficiency plan and declared: “I fear that the majority decision creates uncertainty and sends the wrong message to the parties and the public.”
Simpson is right about this being the wrong message. The foes of NHSaves, both on and off the PUC, are determined to pull the plug and let the benefits of energy efficiency go right down the drain.
