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Electricity market continues surging

New Hampshire Union Leader

April 14. 2013 12:59AM

As electricity consumers began switching from Public Service of New Hampshire to competitive suppliers last October, Bart Fromuth, managing director with Resident Power, made a bold prediction.

"I believe by the end of 2013 you'll see at least 40,000 and perhaps as many as 70,000 making the switch," he said at the time. Fromuth also predicted that an additional 10 to 15 competitors would enter the residential market.

As it turns out, he was too conservative.

Competition in the state's electricity market just keeps getting hotter, as more companies file applications with the Public Utilities Commission to become competitive electric suppliers and consumers rush to take advantage of the savings.

Four companies have filed new applications with the PUC since January, including Gulf Oil, which proposes to market electricity through its chain of Cumberland Farm stores. That's in addition to the 13 companies that have been selling electricity to New Hampshire consumers since late 2012. All of the competitive suppliers currently licensed are listed on the PUC website.

The number of households that have left PSNH default service to sign up with a competitor continues to grow. The PUC reports that 47,191 of the 400,000 residential customers in the state have made the switch, already exceeding Fromuth's prediction for the entire year. Those estimates are likely out of date, according to competitive suppliers.

ENH Power, one of the earliest entrants into the market, claims to have more than 52,000 customers, while North American Power, which began signing up customers in December, says it has more than 30,000.

The state's regulated electric utilities - Public Service of New Hampshire and three smaller companies - deliver the electricity, but consumers are free to buy the power from any authorized supplier, thanks to the deregulation of the state's electricity market more than 10 years ago.

For most of those 10 years, competitors focused on large commercial customers, offering competitive rates based on volume but ignoring the residential market. Then natural gas prices fell with the advent of technology to extract natural gas from shale, known as hydraulic fracturing, or "fracking."

Competitors could undercut the PSNH rate for electricity and began doing so. The default in March of Power New England (PNE), which delivered electricity to 8,000 Resident Power customers, turned out to be nothing more than a speed bump in the road toward a more competitive market for electricity.

"Competition in New Hampshire's electricity market is growing by leaps and bounds every day," said Melissa Lauderdale, president of the Retail Energy Supply Association, a competitive supplier trade group.

Passing along costs

The state has four regulated electric utilities, but only PSNH is losing customers to competitors at a significant rate because of its energy charge. PSNH retained its power plants and has to pass along the cost of operating those plants to consumers.

Granite State Electric, a regulated utility serving 43,000 residential customers in the southern and western parts of the state, sold off its power plants at the advent of deregulation and purchases power on the open market for its default customers. The company's current default electric service charge is 7.52 cents per kilowatt hour.

The PSNH default charge is currently set at 9.54 cents per kwh, with competitors such as ENH Power offering 7.28 cents per kwh guaranteed through Nov. 30.

"Our company does not make any money from the power supply portion of the bill," said William Sherry, vice president of customer care for Liberty Utilities, which owns Granite State Electric. "So the more suppliers who enter the state just provide more options and better prices for our customers."

Granite State has filed a petition for an 18 percent increase in its distribution rates, claiming it has held the rate steady for the past 10 years as part of the deregulation process.

The other regulated utilities, or distribution companies, in the state are Unitil and the New Hampshire Electric Cooperative.

But PSNH accounts for 80 percent of the market, and its loss of customers has raised concerns at the PUC. If too many PSNH customers chose competitors for electric service, the rate burden on the shrinking PSNH customer base would become unsustainable.

Regulators investigating

The PUC is conducting an investigation with a long-winded title that sums up the issue: "Investigation into Market Conditions Affecting PSNH and its Default Service Customers and the Impact of PSNH's Ownership of Generation on the Competitive Electric Market."

On Monday, the commission authorized an "alternative default rate" for PSNH customers who come back to the regulated utility from a competitive energy supplier.

Those customers will get a lower, competitive rate for a year, while PSNH customers who stayed with the company will continue at the higher rate. Commissioner Michael Harrington, in his dissent, said the move protects PSNH while damaging the competitive market that has lowered rates for consumers.

A spokesman for Gov. Maggie Hassan said it would be premature to comment on a PUC decision that is not yet final, since PSNH has to propose a rate and have it approved. The governor's director of energy and planning, Meredith Hatfield, declined to comment for the same reasons.

Bryan Lee, spokesman for the Retail Energy Supply Association, said the PUC has taken an important step in ordering the investigation, which his group hopes will lead to a call for PSNH to divest itself of its power plants.

Officials at PSNH argue that consumers had benefited from lower rates because of those plants until the decline in natural gas prices, which could rise again. The independent operator of the New England power grid, however, is predicting that low natural gas prices, except for some peak periods in winter and summer, are going to be a long-term reality.

"New Hampshire has no time to lose in completing the transition to a fully competitive market," said Dan Dolan, president of the New England Power Generators Association.

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