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March 10. 2012 9:14PM

Rivals: PSNH's survival depends on sale of assets


 

PSNH's generating facilities

Primary generating plants owned and operated by PSNH:

Merrimack Station, Bow: 445 megawatts, coal fired
Newington Station, Newington: 400 MW, gas and oil fired
Schiller Station, Portsmouth: (pictured) 100 MW coal fired, 50 MW biomass (wood chips)
Hydro-electric dams: PSNH owns nine hydro plants producing a total of 65 MW. The largest is Amoskeag Hydro in Manchester, whose three generators produce 16 MW.

PHOTO AND DATA: PSNH

Losing its customer base and seeing its prices climb, Public Service of New Hampshire is in a “death spiral” that can only be stopped if it sells off its power plants and hydroelectric dams, according to supporters of deregulation for New Hampshire's largest electric company.

Deregulation advocates, which include companies that sell power in New Hampshire, have urged lawmakers to force PSNH to divest itself of its power plants.

Utilities across the country have done so, including sister companies of PSNH that are owned by Connecticut-based Northeast Utilities, according to the New England Power Generators Association.

Without divestiture, advocates say, PSNH will continue to lose customers to companies that generate electricity at a lower cost. And remaining fixed costs — including the millions used to install a mercury scrubber at the Merrimack Station coal-burning plant in Bow — will be paid by those customers who remain, the Power Generators Association said.

At this point, those customers are homes and businesses too small to contract with independent power producers, the association says.

That is a “death spiral,'' said Daniel Allegretti, vice president of energy policy for Constellation Energy, a Baltimore-based power producer.

“In a way, we're trying to save them from themselves,” Allegretti said. He predicted a political crisis and potential bankruptcy. “We inevitably see them looking for a bailout.”

When the scrubber comes online next month, PSNH will charge 9.49 cents a kilowatt-hour for energy, according to data supplied by the Power Generators Association.

Other New Hampshire utilities, which divested themselves of power generators in the early 2000s, charge less — 7.75 cents for National Grid and 8.01 cents for Unitil.

PSNH has resisted divestiture of its generation plants, but the New Hampshire House is considering legislation to force it. The House Science, Technology and Energy Committee could vote out the legislation as early as this week.

Advocates for House Bill 1238 said it is time for New Hampshire to finish deregulating the electricity industry, a process it started a decade ago. Forcing Public Service to sell its power plants would level the playing field and spur competition, they claimed.

When the state restructured its electric utility industry in 2002, it separated generation from transmission, which remains a regulated business activity. Deregulation is a process by which governments remove, reduce or simplify restrictions on business.

Higher prices are causing PSNH to lose customers. The Public Utilities Commission shows that 82 percent of large-volume customers no longer purchase their electricity from PSNH. About 60 percent of medium-sized customers have also left the company.

That just throws more fixed costs onto the backs of PSNH customers who remain, divestiture advocates said. The PUC recently rejected efforts by PSNH to force previous customers to help shoulder $40 million in stranded costs.

The Power Generators Association says divestiture would put PSNH on par with all New England utilities except those in Vermont, which has not accepted deregulation. It would shift future risks of capital investment to investors, not consumers, and it would institute a sound market model for power generation.

“I'm happy to compete against Northeast Utilities in the marketplace every day,” Allegretti said.

The current price of power in New England is driven by the cost of natural gas, said Douglas Patch, a former PUC commissioner and lawyer who represents TransCanada.

Public Service now charges about 1.3 cents per kilowatt-hour to cover stranded costs, down from 3.4 cents in 2001. A portion of the costs will be paid off at in April 2013.

Allegretti and Patch said stranded costs would still have to be paid with divestiture.

Sandi Hennequin, vice president of the Power Generators Association, said a divestiture could take between 10 months and a year. She does not call it deregulation because the Federal Energy Regulatory Commission and ISO New England would oversee the sale of the assets.