June 26. 2018 11:23AM

About that electric rate hike: Why bills are going up so much

By DAVE SOLOMON
New Hampshire Union Leader


MANCHESTER — Last week’s announcement that regulators had approved a new energy supply rate for Eversource customers marks a major shift for the state’s largest utility, as the company once known as Public Service of New Hampshire completes the process of selling off its power plants and prices its power accordingly.

The company announced on Friday that the current energy supply rate of 7.9 cents per kilowatt hour will be going up to 9.4 cents per kwh for the six months starting on Aug. 1.

That means the average residential customer using 600 kwh per month, with a current monthly bill of $114, will see an increase to $123, or about 7 percent, according to Eversource spokesman Martin Murray.

The increase in the energy supply charge by itself is higher than 7 percent, but the energy supply charge accounts for only half the total electric bill, with other charges for services like transmission and delivery. Increases in the energy supply charge are often offset by decreases in other parts of the bill. The energy supply charge alone is going up about 19 percent.

But any comparison between the current rate and the new six-month rate that takes effect on Aug. 1 is apples and oranges, according to the advocate appointed by the state to represent consumers on utility issues.

“It’s almost impossible to compare this rate to anything that came before it, because there are so many changes that have occurred in the past year,” says consumer advocate Don Kreis, referring to the complicated process by which Eversource agreed to sell off all its power plants and become a pure distribution and transmission company like the other regulated utilities — Unitil, Liberty and the New Hampshire Electric Coop.

Going to market pricing

Like those companies, Eversource no longer owns power plants whose costs and benefits can be worked into its rates. It now reaches out to the wholesale electricity market and buys power six months at a time to transmit and distribute across its franchise territory.

“This is the first six-month energy price that has been fixed since we went to market pricing,” says Murray. If not for the transition to market pricing, Eversource would still be charging the winter rate that was approved for the six months starting Jan. 1, 2018, at 11.25 cents per kwh.

“We went to market pricing on April 1 because of the sale of our power plants,” says Murray, “but the contract period was only a four-month period to get us to Aug. 1.”

Eversource was ready to start market pricing on April 1, but its new six-month pricing period didn’t start until Aug. 1, so the company was able to acquire a four-month supply contract at a low rate that reflected supply and demand in the April 1 to July 30 time frame.

“That four-month period has basically some of the lowest priced months of the year, and that’s a big reason we are seeing such a difference between our current price and the price that will begin on Aug. 1,” said Murray. “Unlike the current period, that next six months is going to include some of the cold winter months.”

Seasonal variations

Electricity in New England is more expensive in the winter because most of the natural gas that fuels the region’s power plants is being used for heating. Electricity usage is higher in the summer, but natural gas is more readily available for generation.

Now that its buying power is under the same terms as other utilities and independent suppliers, Eversource rates more closely parallel those offered by others.

Liberty Utilities, which serves about 6 percent of the retail customers in the state, is currently charging an energy supply rate of 8.9 cents per kwh; Unitil, the distribution company serving the Seacoast area, is currently at 8.2 cents; and the N.H. Electric Coop, a member-owned distribution company serving 84,000 customers in the central part of the state, is at 7.4 cents.

Among the independent suppliers, rates are fairly consistent as well, with ENH Power offering 9.90 cents per kwh on a six-month contract and North American Power offering 9.99 cents on a 12-month contract.

Market realities

In order to get its rates approved by the Public Utilities Commission, Eversource like all the other utilities had to prove it got the best bargain it could on the wholesale market, and is passing only those costs along to the consumer.

There is no mark-up on the cost of power. The utilities make return for their shareholders on new construction and other capital investments, not the sale of power.

The average retail price for electricity in New Hampshire with all costs accounted for is about 15.66 cents per kwh. New England energy prices are the highest in the nation given the fact that we are at the end of the energy pipeline, with high transmission and distribution costs.

The PUC signed off on the recent Eversource rate request as “market-based, just and reasonable,” as did the consumer advocate. “It reflects the current market realities in wholesale electricity,” said Kreis.

dsolomon@unionleader.com