High Electrical Energy Costs: How Did We Get Here? Answer: Where do I start? I suppose we could go all the way back to the 70’s and Seabrook, but today that would actually be unfair to Eversource in particular. Most of all the nuke “stranded costs” were subsequently paid out by PSNH/Eversource ratepayers over the past 25 years. If it was just them, their rates would be dramatically higher than the other three in-state franchises (sometimes they are due to energy market fluctuations) all the time. However, when the New England energy supply/demand curve is not in the consumer’s favor …. there is not a huge difference where your business is located. For arguments sake, let’s just assume that Eversource is usually the highest of the four utilities, sometimes by a (relatively) small amount. With the future divestiture of their electrical generating plants, they will look more like the other three wires companies, but a with another bag of “stranded costs” included in the rates for years to come. It’s fair to say that, at least for the next decade or more, they will continue to have the highest rates of the four in-state electrical utilities. The most important factor for all of them is location, location, location! The chart below from the Forward//NH Plan (future discussion) offers a snapshot of the top 10 highest rates in the country. Please note that all six New England states are in the top 10, and when you add in our big neighbor to the west (New York), it is 7 out of 10. The high costs for isolated grid systems in Alaska and Hawaii are quite obvious, and then throw in the socialist country of California and you are now 10 out of 10. So size doesn’t matter (in this case), but location and natural resources sure do. Even Alaska, with all its crude oil resources can’t convert them into low electrical energy costs. Yes, you can move your business or family to another state with lower energy costs, but why do that when you can avail yourself of technology to mitigate it? For the same reason I won’t move to Florida or South Carolina, I love where I am (new Hampshire) for everything it has to offer, and I am willing to invest in technology to mitigate the energy stuff…….. and make a reasonable financial investment at the same time.\
New Hampshire (and New England) has no coal; no oil; no natural gas; no propane production plants; and basically we are at the end of all the delivery lines (pipelines, rail lines, highways and ports) to bring us fossil fuel energy, to either generate power or fuel our heating & cooling equipment. It is significant that, due to recent spikes in winter natural gas prices, new supplies of LNG now come into Boston ……. so that helps to mitigate that winter spike situation, but it doesn’t undercut the generally higher pipeline supplied gas prices the rest of the year. So please note that on a regional basis, barring the introduction of some breakthrough technology, our region will always have high fuel prices and high electricity prices. We do have our own indigenous renewable supplies of sun, wind, water and geothermal energy, but even on those fronts, other parts of the country (and Canada) have them in more abundance than we do and that’s where you see large utility scale power plants built to take advantage of those resources. Yes we have wood, but that has proven to be a much more cost effective distributed fuel source (cord wood or wood pellets) for making heat than for making electricity, although biomass fuel is a likely CHP and large boiler system candidate for on-site industrial and campus applications in New Hampshire. Our older biomass fired electrical plants built in the 1980’s have proven not to be competitive cost alternatives to building natural gas fired plants today. We have limited amounts of methane gas (from landfills) to burn for making electricity and we have municipal waste-to-energy plants that have far more to do with the cost of disposing of waste than the economy of making electricity, not that they shouldn’t count too. Let’s also not forget that we still have some existing nuclear plants that are important parts of the Northeast electrical energy supply, but some (like Seabrook) are going to price their output to the marketplace (like other commodities) so their output and pricing is already baked into the current cake.
Major new supplies of either electricity or fuel from outside the region (future topic) will require major new transmission lines and pipelines to bring it to the ISO-NE market. These types of energy infrastructure projects are big, long term and expensive …….and involve both private and public property. Some electric utilities even want you to pay utility rates in advance so they can reserve capacity in fuel pipelines in order to generate future electricity. That’s where the discussions about public benefit, costs and risks come into play ….. versus choosing an alternative way to accomplish the same goal of having affordable (relative term) and readily available energy supplies. Any discussion about dramatically lowering energy costs in New Hampshire or New England (barring that new, yet to be revealed or discovered cost effective technology) is pure fiction IMO. I guess today we would call it “fake news”. The real story is to trying to stabilize rates or have some impact on bending the costs curve down on expected future increases ….. but nothing is projected to actually LOWER electric rates or fuel costs from current levels. Fuel is priced and sold as a world wide commodity and New Hampshire is located at the tail end of the fuel/power supply highway …….unless we are talking about Northern Pass, where we would be just one skinny little (10%) 1-lane south bound exit ramp along its way to Boston….. but that topic comes later in Vol 4. Eversource Energy recently reported in their Q3 2016 Earnings Call, that their “primary driver of the earnings growth is a higher transmission rate base” which accounted for a total of $271 M of their $713 M earnings year to date ( approx 38%). Its difficult to bring down the total cost of electrical energy when so much capital is flowing into transmission investments, even during the current period of low fuel prices.