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Eversource deal signals end to coal power in NH

New Hampshire Union Leader

July 04. 2016 8:41PM
The largest power plant in Eversource's stable is Merrimack Station in Bow. (Courtesy)

Environmental groups are cheering the end of coal-fired power generation in New Hampshire, which is expected to be one of the most significant results of a wide-ranging settlement between the state’s largest utility and regulators.

The long-awaited order by the Public Utilities Commission, handed down late Friday on the eve of a holiday weekend, sets the stage for Eversource to sell off its power plants. Regulators and lawmakers hope that will lower electricity prices in the long run by completing the deregulation of the market that began 20 years ago.

The largest power plant owned by the utility, Merrimack Station in Bow, generates 439 megawatts of electricity by burning coal.

The second largest, Newington Station in Newington, can burn oil or natural gas, to generate 400 megawatts, while Schiller Station in Portsmouth burns coal in two units and biomass in one for 150 megawatts.

Merrimack Station and Schiller Station have long been the target of environmental groups, including the Conservation Law Foundation, which has consistently listed the plants among the so-called “Dirty Dozen” of New England polluters.

“Merrimack Station and Schiller Station power plants earn the award for the millions of pounds of toxic air pollution and greenhouse gases released by the plants,” according to the CLF.

No one knows for sure how much the power plants will fetch at auction, or if there will even be buyers. But one thing is certain; their coal-burning days are numbered. Coal-fired plants are retiring across the country, and new ones are not being built.

Most experts agree the coal-fired plants, if purchased, will be refitted to burn natural gas or a combination of natural gas and oil. If not purchased, there is a process in place through the settlement to have them decommissioned.

“This settlement allows for a competitive marketplace in which outdated fossil fuel plants will be up against the burgeoning clean energy industry,” said Tom Irwin, director of the New Hampshire Advocacy Center for the CLF, which was a party to the settlement.

“When the dirty fuels of yesterday are put into competition with the renewable alternatives of tomorrow, it’s a win-win for our economy and our environment,” he said. “While there’s still a long way to go, today we took a big step down the path toward achieving a clean energy economy for New Hampshire.”

Environmental groups are also cheering the $5 million dollar clean energy fund to promote energy efficiency and renewables that Eversource will create as part of the settlement agreement.

Coal disappearing

New England’s largest coal-fired plant, Brayton Point in Somerset, Mass., has been bought and is scheduled to be shut down next year.

That leaves Merrimack, Schiller and Bridgeport Harbor in Connecticut as the only three coal-fired plants left in the region. Bridgeport Harbor owners announced in February that plant will be converted to natural gas by 2019.

The closure or conversion of New Hampshire’s two coal-burning plants will mark the end of coal-burning for electricity in New England. Coal produced 18 percent of the region’s power in 2000, but now accounts for less than 5 percent, according to grid operator ISO-NE.

During a mild winter, the coal-fired plants are rarely called upon at all.

Natural gas prices are at historic lows, demand is down and environmental regulations have made it harder for coal plants to survive economically.

Given all those factors, and with 20-20 hindsight, some New Hampshire ratepayers might ask why Eversource invested $422 million in 2009 on environmental improvements designed to prolong the life of Merrimack Station.

Recouping that $422 million — or at least most of it — from ratepayers, is at the heart of the settlement announced on Friday. The state and Eversource could have ended up in a costly court battle over cost-recovery for the so-called “scrubber” at Merrimack Station, which is now likely to be disassembled.

Scrubber called 'prudent'

The consumer advocate at the PUC had argued that, when the cost of the scrubber was projected to increase to $457 million (although it was built for $422 million), Eversource had an obligation to inform public officials about the relationship between gas and coal prices in determining the economics of the project, but failed to do so.

The state could have argued in court that lack of candor and a failure of good utility management by Eversource absolved ratepayers of liability for the scrubber cost, or at least for a major portion.

But lawmakers concluded that would be a long shot, especially since the Legislature voted to approve the scrubber, and to allow Eversource, then PSNH, to retain ownership of power plants long after all the other utilities in the state had been forced to sell theirs.

The staff at the PUC, and the three commissioners, concluded that it was “prudent” for Eversource to build the scrubber based on the information at the time.

In the end, Eversource agreed to write off $25 million and recover the rest, with about 50 percent coming from residential customers and the other 50 percent from various categories of business users.

Source of savings

Most of the savings touted by supporters of the settlement come from comparing the choices that were confronting Eversource customers: Take our chances in court, and end up paying the full $422 million in our electric bills over 15 to 20 years with a return of 9 to 10 percent guaranteed the utility; or borrow at 3 percent given today’s low interest rates (known as securitization) to pay off a negotiated lower amount.

The real savings may come later, when, free of the costs associated with coal-fired power plants, Eversource can consistently offer rates as low as the other regulated utilities and competitive suppliers.

“We cannot predict the future, and we cannot guarantee that the projected savings and economic development promised by divestiture and securitization will actually occur,” the three PUC commissioners write in their order. “The record before us, however, demonstrates that customers of Eversource and the economy of the state will likely benefit.”

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