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
Circle February 1 on your calendar if you are an electricity customer in New Hampshire. The price of electricity is changing and many Granite Staters risk losing out on the best possible price. Beware!
Let me be clear at the outset that what we are talking about here is the price of electricity itself – not the transmission and distribution charges (essentially, the cost of the poles and wires) that everyone pays to their friendly neighborhood utility.
Transmission and distribution rates, alas, are eternally nudging upward at a rate higher than inflation. New Englanders pay the highest transmission costs in the country, which pay for the interstate high-voltage system. As far as the distribution system goes – the lines that run down our streets and connect our homes to the grid – well, Eversource is seeking to increase those rates by 48 percent in a rate case the Public Utilities Commission will decide this spring.
Meanwhile, though, prices for the electricity itself are taking an interesting and potentially consequential turn on February 1. The heart of the story is default energy service.
Default energy service is what you get, from the local utility, if you don’t buy your power from some other source. Originally intended as a kind of backstop service for those who don’t take advantage of competitive offerings, default energy has long dominated the residential market in New Hampshire.
At the biggest utility in the state, Eversource, the price of default energy service will be 8.929 cents per kilowatt-hour as of February 1, almost a penny and a half cheaper than the current rate. The other utilities are even cheaper!
Liberty’s new default energy service rate falls to 8.4 cents, Unitil’s will be 8.3 cents, and the New Hampshire Electric Cooperative has everyone beat. The price of Co-op Power (what the Co-op calls its default energy service) is declining to slightly more than 8.1 cents.
But there’s a catch: community power aggregation, which has exploded across New Hampshire since the PUC approved the applicable rules in 2022. Under community power aggregation, individual towns and cities can decide, in effect, to become their community’s provider of basic electricity service – though individual customers can still opt out of participating.
The Community Power Coalition of New Hampshire (CPCNH) – with more than 60 member municipalities and four whole counties (Belknap, Cheshire, Merrimack, Sullivan) participating – is on its way to becoming the biggest load-serving entity in the state. Or at least it was headed in that direction, until the CPCNH announced its new default energy service rate for effect on February 1.
With a new basic rate of 8.9 cents, the CPCNH is still cheaper than Eversource – though only slightly – but is, otherwise, more expensive than what the other utilities have on offer for the first time. CPCNH communities with customers in the service territory of the New Hampshire Electric Cooperative are especially freaked out by these developments.
There are roughly 15 towns in the Co-op territory that either recently launched aggregation programs with the CPCNH or are about to do so. As in most cities and towns that have opted for community power aggregation, leaders in those places sold the idea based on an assumption that the CPCNH power would be cheaper than what the local utility could offer.
Oops. That was never the right promise to make, either directly or by implication.
Now the question becomes whether these communities will have the fortitude to stick with community power aggregation. I hope they do, in part because customers will always have the right to opt back into the utility-provided default service.
Meanwhile, trouble in default energy service land looms. The source of that trouble is the Public Utilities Commission (PUC).
The main reason that utility-provided default energy service has become more competitive, versus its alternatives, is that the PUC has been gradually forcing the utilities to buy more and more wholesale power on the open “spot” market. Previously, the utilities bought their default energy service power by signing six-month contracts.
Signing those contracts meant, in effect, that the utility was transferring the risk of wholesale price volatility from their customers to their wholesale suppliers. Not surprisingly, the suppliers were charging a hefty “risk premium” to compensate them for exposure to what can be pretty wild price fluctuations.
For example, on a recent sunny January afternoon the “spot” wholesale price in New Hampshire was less than 2 cents. A couple of days later, it maxed out at 19 cents. The PUC thinks you are willing to be exposed to fluctuations like that, betting you’ll save money.
Of course the default energy service rates for Eversource, Liberty and Unitil are fixed for a full six months, at the rates quoted above, no matter what happens to the spot market in which the utilities are now partially playing. So what happens if the rates are not sufficient to recover the costs the utilities incur in buying power at wholesale?
Spoiler alert: The owners of the utilities do not take the hit. Ratepayers will foot the bill.
With respect to what is known in the trade as “default energy service under-recoveries,” via its recent orders the PUC has been signaling that it would like to spread any such costs among all customers. That’s deeply troubling from a residential ratepayer perspective.
For one thing, ratepayers should not have to pay twice for the same thing. If you decide to buy your power from an aggregation program or a competitive supplier, you’re already covering whatever risks the providers of that power undertake. You should not also have to backstop the risks undertaken by other customers.
For another, what the PUC proposes is grossly unfair to non-utility energy suppliers of all types. Nothing would prevent the utilities from scheming to beat the aggregators and competitive suppliers on price, knowing that all ratepayers would be there to make up any shortfalls.
Problem number three is the idea that residential customers would make up deficiencies caused by big commercial users of electricity. Those big commercial users have benefited mightily, for years, from retail electric choice. They don’t need welfare from residential customers.
And finally there’s the problem of retroactive ratemaking. It’s not just bad public policy to force tomorrow’s utility customers to pay costs associated with today’s utility service. It’s actually prohibited by the New Hampshire Constitution, per the state supreme court.
The Legislature will soon get to weigh in on this problem, thanks to a bill sponsored by Rep. Tom Cormen (D-Lebanon). Meanwhile, your job is to check out the electricity prices available to you on February 1 and choose the best one.
