Power to the People: The Public Utilities Commission goes rogue

From DONALD M. KREIS, Power to the People, InDepth NH

Imagine someone walking by and offering you a seven cent per kilowatt hour discount on your electricity bill.

Seven cents doesn’t sound like a lot, but it adds up. If you use at least 600 kilowatt-hours a month, as many New Hampshire families do, your monthly bill would drop by $42.

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In round numbers, that’s the difference between using Eversource’s standard power service and buying “Co-op Power” from the New Hampshire Electric Cooperative. In either case, we’re talking about the energy service you get when you don’t spurn the utility’s power and instead buy it from an unregulated competitor.

The standard energy service rates currently charged by Liberty and Unitil are even worse. Rounded to the nearest cent, that is 22 or 26 cents.

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This is not Eversource, Liberty or Unitil’s fault. Long ago required by the state’s Electricity Restructuring Act to sell its generating assets, each of these investor-owned utilities purchases standard utility power from the wholesale market using a process imposed on them by the Public Utilities Commission (PUC) in quieter times.

This is how it works. Every six months, the utility publishes a request for quotation and the price depends on the random offers that come in.

The wholesale electricity market in New England is volatile – because the market for natural gas is volatile. If you issue your RFP on a good week you will get a good price and if you issue it on a bad week you will get a bad price (as apparently happened with Unitil).

In contrast, the New Hampshire Electric Cooperative is free to actively manage its Co-op Power portfolio as its tariffs are not regulated by the PUC. The co-op isn’t just throwing its entire standard energy service load into the wholesale market twice a year and hoping for the best.

Shouldn’t the PUC direct the IOUs (investor-owned utilities) to behave like the cooperative? The PUC launched a formal investigation to investigate such issues last September.

The PUC held a ‘pre-hearing conference’ in October – odd given that it is a pre-trial and there will be no hearing. A few days later, the PUC issued a series of written questions to the utilities, which they answered.

Nothing has happened since the utilities submitted their responses in November. Meanwhile, standard prices for energy services have remained stratospheric (although, in fairness, Eversource’s prices are down two cents).

What is the PUC up to? What could be more important for state regulators than figuring out how to get a better grip on the price of standard energy services?

On January 13th we found out.

At that time, the PUC published a remarkable 28-page document entitled “Report on Energy Efficiency Planning, Programming and Evaluation”. It’s a full frontal assault on the state’s tariffpayer-funded energy efficiency programs offered by utilities under the NHSaves banner.

For example, the PUC report concludes: “The statutory tests used to determine the cost-effectiveness of EE programming in New Hampshire are unique to the state, appear inconsistent with industry norms in terms of balancing costs and benefits and based primarily on predictions, not observational data.”

Yes, it looks like small things, but the key cost-benefit test, developed specifically for New Hampshire and blessed by the PUC in late 2019, is at the heart of the NHSaves program. That is probably why the court enshrined the “Granite State Test” in law almost a year ago.

The PUC report claims New Hampshire disagrees with the rest of the country on the discount rate to be applied to savings realized through taxpayer-funded energy efficiency measures. “Discount rate” is business jargon, but you don’t need a PhD to understand what’s going on.

Apply a really high discount rate (which adjusts the value of future benefits to their present value) and nothing or almost nothing is cost effective. The PUC report claims that most states use their utilities’ “weighted average cost of capital,” a total of typically around 7 percent per year.

The discount rate currently used by NHSaves is far lower. We favor two percent.

Unitil recently attempted to quantify the indirect economic benefits of the 4.99-megawatt solar farm it plans to build in Kingston. Their advisers — Daymark Energy Advisors — used a discount rate of 2.39 percent because that’s the yield on general notes issued by the state last year.

That, according to the experts, “corresponds most closely to the state’s social discount rate”. In other words, I asked her the other day, Daymark just made up a number, right? “It’s an art,” replied co-author Kevin Pierce of Daymark.

Unlike Daymark’s report for Unitil, the PUC report does not include the name of a single human. It fell to Councilor Cinde Warmington to polish up some details at the Executive Council meeting on January 18, when the PUC happened to be on the agenda and PUC Chairman Daniel Goldner happened to be present.

“The commission, including the three commissioners, were all involved in writing the report,” Goldner said when Warmington asked about the authors. He also said the PUC had help from their own outside consulting firm, which he identified as “Zellem LLC.”

The Executive Council approved the PUC’s contract with Zellem LLC last September. The director of Zellem LLC is Michael R. “Mac” Zellem, former Treasurer for Governor Sununu.

Let’s get the obvious question out of the way first. There is absolutely no evidence that Governor Sununu is involved in any of this. Like everyone else in the state government, the governor faces high staff turnover. What his former employees do is beyond his control.

However, the problem is the process used by the PUC. It stinks.

Especially since the creation of the Department of Energy in 2021, the PUC has one job: to decide, much like a court. By signing thezellem report, the three PUC commissioners have now fatally compromised their impartiality and must, I respectfully suggest, exclude themselves from deciding on the three-year energy efficiency plan that utilities are due to submit in July.

All of this could have been avoided if the PUC had instead focused on the ongoing crisis known as Standard Energy Service. Utility rate payers — even utility shareholders — deserve better.

Power to the People is a column by Donald M. Kreis, the New Hampshire consumer advocate. Kreis and his four associates represent the interests of private utility customers before the NH Public Utilities Commission and elsewhere.

This story was originally published by InDepth NH.