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PUC: Why are utility bills so big in NH?

By DAVE SOLOMON
New Hampshire Union Leader

April 21. 2015 10:18PM


CONCORD — The Public Utilities Commission has ordered an investigation into the high winter electric rates and the “price volatility” affecting energy markets in New Hampshire.

In an order released on Tuesday, the commission called on PUC staff and representatives of the regulated utilities to work with a consulting firm and other stakeholders to “ensure that the rates and charges assessed by the electric distribution utilities are just and reasonable.”

With this investigation, the PUC wades into the debate over whether the region is facing an energy crisis, whether a new natural gas pipeline in Southern New Hampshire is really needed, and if the regulated utilities should look at new models for purchasing their energy on the wholesale market.

The action comes after a costly winter in New Hampshire when it comes to electric prices.

“Overall, the average retail price of electricity in New England is the highest in the continental United States, posing a threat to our region’s economic competitiveness,” states the order, echoing a theme sounded repeatedly by business leaders in the past six months.

According to the latest data from the U.S. Energy Information Administration, the average cost of electricity delivered to consumers in New England in January was 19.75 cents a kilowatt-hour, compared to rates that range from 10.07 cents to 15.64 cents in other regions.

The average New Hampshire residential rate was 19.15 cents, including energy supply, distribution, transmission and all other charges on the consumer bill. The highest average rate in New England was in Massachusetts, at 20.8 cents. The U.S. average was 12.10 cents.

The order cites warnings by the regional grid operator, ISO-NE, about New England’s increasing reliance on natural gas-fueled power plants, as aging coal, oil and nuclear plants have been retired.

“During recent winters, significant constraints on natural gas resources have emerged in New England, despite abundant natural gas production in the Mid-Atlantic states and elsewhere,” according to the order. “These constraints have led to extreme price volatility in gas markets in the winter months in our region, which in turn have resulted in sharply higher wholesale electricity prices ... The commission has a fundamental duty to ensure that the rates and charges assessed are just and reasonable.”

PUC Executive Director Debra Howland was unavailable for comment on the order. Sen. Jeb Bradley, R-Wolfeboro, one of the legislative leaders on energy issues, said he welcomed the investigation.

“I was not aware of the order,” he said on Tuesday morning, “But it makes sense that they (the PUC) would do so. If there’s some sort of market fixing, that would be one thing an investigation would show. It could also show if the pipeline constraints are real, which I suspect they are, but this is what regulators can and should do.”

Wild price swings

Michael Harrington, a former PUC commissioner and now an independent energy consultant, said the wild price swings between the summer and winter may have also helped trigger the investigation. Retail prices for last winter were significantly higher than wholesale prices on the spot market at the time.

That was due in large part to the fact that estimates used to set pricing on six-month utility contracts failed to anticipate the positive impact of ISO-NE programs implemented after the difficult winter of 2013. “I think they (the PUC) are trying to find out why the estimates were so wrong,” Harrington said.

As recently as 2012, New Hampshire was in the middle of the pack nationally when it came to electricity prices, which were lower in the winter because people use more electricity in the summer (think air conditioning). Now the dynamic is reversed and the variation is more severe.

“Without question, the seasonal swings now are larger than they were three years ago, because of the natural gas issue,” said Alec O’Meara, a spokesperson for Unitil, one of the regulated utilities that will participate in the investigation. “You would see a fluctuation of maybe a cent or two per kilowatt-hour; now it’s seven cents or more.”

Spokesmen for all three utilities said their organizations are ready and willing to participate in the PUC probe.

“We will be an active participant in the proceeding,” said John Shore of Liberty Utilities. “Our goal is the same as the PUC’s — to figure out a way to reduce the high winter supply prices.”

The order sets a May 12 date for a public stakeholders meeting at PUC offices, and a Sept. 15 deadline for the investigative report.

dsolomon@unionleader.com


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