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PSNH on defense over scrubber cost 'escalation'

State House Bureau

December 10. 2013 9:57PM

CONCORD — Lawmakers want to know how and why the estimated cost of an air emissions scrubber at Public Service of New Hampshire's Merrimack Station escalated from $250 million to $457 million.

Company officials contend the information is in documents available through state regulators, but several members of the Electric Utility Restructuring Oversight Committee are skeptical.

"We come back to the same thing: How do you go from $250 million to $422 million," said Senate Majority Leader Jeb Bradley, R-Wolfeboro. "When you get a $40 million (annual) return on investment and fight for every last dollar at the Supreme Court, the public deserves some answers, but I'm not sure the public is getting them."

The Public Utilities Commission is deciding how much of the scrubber's $422 million cost PSNH can recover from ratepayers. The utility is collecting almost a cent a kilowatt hour for the cost of the scrubber, but the cost is projected to increase once regulators make a decision.

When lawmakers approved a bill calling for the scrubber as part of a program to reduce mercury emissions in 2006, the company said the project would cost $250 million, but the estimate grew to $457 million two years later. When finished, the scrubber's cost was $422 million.

Company officials told the committee the lower figure was "a general cost estimate" from a national engineering firm, but the price escalated when design and engineering work began on the site, which is on the Merrimack River in Bow.

Bill Smagula, PSNH's vice president for generation, said the price increase was also a surprise to the company. The jump in price caused the company to review the project and look at other options, but decided to go ahead with the scrubber because it would serve the company's customers, he said.

"I'm staggered how we got to the point we've gotten to," said Bradley. "I'm staggered you would bring a general cost estimate to the Legislature in 2006 and now think you deserve every dollar (of the $422 million) and a $40 million return. I'm just staggered by it."

Hopkinton attorney Arthur Cunningham, who represented the Sierra Club in several cases before the Public Utilities Commission and Air Resources Council regarding Merrimack Station, had an explanation for the increased cost.

Cunningham said that work to increase power output and to prolong the plant's life escalated the scrubber's price. However, the company did not seek approval for the expanded work, he said.

"You don't take a 1990 Ford Taurus and put a $3,000 muffler on it," Cunningham said.

Smagula said Cunningham's allegations had no basis in fact.

"This is categorically false," said Smagula. "We work in a world of facts. There is no validity to (Cunningham's) statement."

Smagula and Tom Frantz, PUC electricity division director, said the allegation over increasing generating capacity by installing a larger turbine was litigated before the PUC. The 2009 decision said replacing the turbine was separate from the scrubber project, and the costs were handled separately, Frantz said.

Cunningham contends the company and PUC "sequestered" documents that could prove the company included the generation and life-extension work so they are not publicly available. He said the company insists on confidentiality agreements to view the information.

But Smagula said, "We are an open book."

He was largely backed by PUC officials who said much of the information is available, but only the parties involved may view some of it.

One consultant copyrighted its report and wanted to charge the PUC every time someone viewed the document online, according to Anne Ross, PUC general counsel. This type of arrangement is becoming more commonplace she noted.

"I'm not saying it's pretty or the ideal, but that is the world out there right now," Ross said.

Smagula said many of PSNH's equipment and design suppliers insist on confidentiality so competitors do not have access to their proprietary information.

Several committee members noted that much of the information is really not publicly available, with some suggesting the committee become interveners in the scrubber case, something the members eventually decided against.

Committee Chairman Rep. David Borden, D-New Castle, asked PSNH to develop a time line showing who knew what and when about the scrubber's cost escalation. And he asked Cunningham for a list of the documents he sought that were not available.

The PUC is accepting written testimony on the scrubber's costs until Dec. 23, and public hearings will be held in March.

Last month, the Supreme Court refused to hear PSNH's appeal to limit the PUC investigation.

The oversight committee meets again Jan. 7 to continue its discussion.

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