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2017 NH Business Energy Education Series: Vol 24 – A Final Word on the Albatross that is Northern Pass

As our 2017 Business Energy Education Series draws to a close here in December, I can’t help but take a few parting shots at the Albatross we call Northern Pass.  Reporter Garry Rayno just recently offered up his view HERE in this piece for InDepth NH .  Another report by Rayno at a recent NH Site Evaluation Committee (SEC) hearing offers further insight into the depth of opposition to the project.  Despite the fact that the project has not been approved by the SEC, job fairs are already underway.  Simply Google ” northern pass opposition” and be prepared to spend hours upon hours of reading.

I have only lived in New Hampshire for 40 years, so I can’t claim to be a “native” like my wife.  However, I have been around long enough to see how some things get done and other things don’t.  If you asked my opinion today, I would have to opine that I believe the Northern Pass will get approved by the SEC and will get built, despite the strong opposition to its proposed construction.  That doesn’t exclude the possibility of some external “fatal flaw” scenario somehow torpedoing the project before construction, but that’s my view on where this all winds up.

Do I like the project? – NO

Do I think the project benefits outweigh the costs?- NO

Do we need the project in NH?- NO

Do I think NH residents will embrace the project after it is built?- NO

Do I think NH voters will remember who the political “backers” are for the project and retaliate later?- YES

I have already previously expressed my technical/financial arguments against Northern Pass in Vol#3 back in February of this year. No need to repeat all of that, you can read it HERE if you like.  What I will say is that the the economics I expounded on back then, before the SEC hearings, proved to be correct during the hearings.  If you believe the applicant’s own numbers, the average 300 kwh residential customer would see a $1.50/month savings at most from this project. I could argue how that could ultimately also be zero.

I especially “feel” for the residents of our “North Country”.  The temporary disruptions and the permanent changes for them will be horrendous.  Once you take the Genie out of the bottle, you can’t put it back.  If you are simply a “fan” or “user” of the North Country, like myself, you should already be feeling the potential loss of what we once had.  Mother nature decided to finally take away part of our identity when the Old Man-in the-Mountain fell of the face of the earth.  However, Northern Pass was entirely preventable.

Mind you now, this is simply my opinion. But since you are reading our blog, that’s the way I see it.  The part that really grinds my cookies is the fact that this is an example of corporate cronyism at it worst, at least on a NH scale.  I have already been witness to how this all goes down in the swamp (Washington D.C.), its just sad to see more of the same in New Hampshire, as I was hoping we were better than this.  I am not shocked …… money can move mountains. The biggest surprise to surface, since publishing Vol#3 back in February of this year, is the gas pipeline controversy that now overshadows the whole premise of building new merchant transmission lines to Canada.  There is already a class action law suite filed, and maybe in another 3 to 5 years we find out truth…….. good or bad, about the origins and motivations behind Northern Pass.

I also published another  short related “piece” outside of this blog in April 2017 titled “The GOP’s dangerous dependence on Northern Pass” which was published by the NH Business Review that you can read HERE

The “long form” of that same piece, published in March 2017, is titled  “What Will The 2017 Version of The NH Republican Energy Agenda yield in 2020”  and you can read it HERE.

In the end, the people responsible for getting Northern Pass built in New Hampshire will have to live with their actions.  Here’s hoping that the money they reaped in the process gives them little comfort in life!  For the rest of you, I mourn for your loss.

If you bothered to read some of our blog posts for 2017, thank you for your “engagement” in this one-off series.  I hope you were able to take something away that may help you in the future.   Thanks again to our “guest bloggers” who participated with their time and insights into many areas!!

Carry-on,

Harold

2017 NH Business Energy Education Series: Vol 23 – Why All NH Energy Stakeholders should support Sen Innis’s proposed bill that keeps NH’s small power output inside NH (LSR 18-2720.0 )

Here is  the “nut shell” version of why we should support LSR 18-2720.0 legislative proposal for 2018 submitted by Sen Dan Innis:

The bill, proposed by Sen Innis , would direct the NHPUC to require local distribution companies to once again offer power purchase contracts to existing New Hampshire small power generators (<25MW ) ………..similar to, but not the same as what was originally ordered under PURPA  in 1983 and still applicable after the 2005 power act.  However, these contracts would be handled as “short term contract rates” for the supply of Default Service energy at a reduced rate, not as “PURPA” contracts.  It would be at the option of the small generator to enter into a contract at these rates.  Currently, approximately 50% of all residential ratepayers choose to stay on “default service”.

The actual energy rate paid to the generator would be set each time (typically every 6 months) the local distribution company goes out to the market to purchase their larger “default service” power supplies that they make available to all connected customers. The small generator would be required to stay under contract for the same duration as the local distribution company’s contract for their 3rd party energy supplier.

The small generator would receive only 90% of the “default service” rate, the difference going to reduce ratepayer costs. That rate would increase to 95% if the small power generator could offer firm fixed power by buying a “hedge” instrument that would continue to supply power if their plant went off-line for any reason.

The reasons why this bill can work:

No new state taxes, fees, funds or agencies would be created, and it is rare to have an opportunity to create actual NH electrical ratepayer savings while strengthening our economy at the same time.

The money paid to NH small generators will stay in the NH economy, whereas now that money is paid to out of state energy re-sellers through ISO-NE or other 3rd party contracts. Currently, there are numerous projects (<25MW) living on the marginal edge of operating, as evidenced by the recent shutdown of the Indeck Energy Project (biomass) in Alexandria. We especially see this bill having a very positive economic effect on our wood industry and the NH North Country.

Electric customers will see zero increase in rates as a result of this change.   They will still pay the same “default service” rate (or less*) if they stay on default service.  (*-less due to less Capacity & Transmission charges to the distribution company – (see below), as well as the 10% energy discount coming from the small NH generators portion of default service)

The total output from all the existing small power projects in the state < 25MW is a relatively small amount (estimated at less than 10%) of the total KWHs sold in the state per year, hence this bill doesn’t somehow change how our electric utility “system” operates in any meaningful way and it is no economic threat to any 3rd party. Local distribution companies will simply continue to contract for their 3rd party default service supplies required as they did before……… minus that portion which is provided by this new class of in-state existing small power generators.

Buying NH small generator power, as part of our default service supply requirements, will eliminate the Transmission Charges that would have been included on all other Default Service Suppliers for that same amount of power………thereby saving (transmission) costs for all ratepayers of all classes as well as a portion of the utility’s capacity costs allocated by ISO-NE. (Ex- if 10% of total power came from “load reducing” NH small generators, the total transmission costs each month for the utility would drop by 10%)

LET’S DRILL DOWN ON THIS PROPOSAL FURTHER FOR  A BETTER UNDERSTANDING:

Q – What is the significance of the current NHPUC practice of shipping New Hampshire small producer power out to ISO-NE?

Ans: Due to an agreement (not a law) made between our NH electric utilities and the NH Public Utilities Commission (NHPUC) during the deregulation of the electrical industry circa 2000, small generator facilities were no longer offered new power purchase contracts with their local utility once their original contract expired.  The utilities only had to “wheel” (on paper only, the electrons actually stay in the local distribution system) the power to ISO-NE as wholesale energy supplies.  The small generator then received the same day (spot market) wholesale clearing price, the lowest compensation that ISO-NE offers to producers.

Because of this agreement, NH consumers lose any benefits that could have been accrued to them if the power was purchased by the utilities and remained in the local distribution system. Not only did consumers lose the ability to benefit from lower cost power entering into the “default service” power supplies, they also lost out on savings from lines losses; savings on capacity costs; and savings on transmission costs due to power having to come back into NH from ISO-NE.  The New Hampshire economy also lost out on tens of millions of “energy dollars” every year that could have remained in New Hampshire.

Now with the divestiture of the PSNH generating assets, we estimate that without the passage of this bill, over $65 million electrical energy dollars will needlessly flow outside of the New Hampshire economy annually from existing in-state small projects alone, and some of these projects will stop operating due to insufficient revenues coming from ISO-NE.

 Q– How would this proposed rate structure differ from the old long term contracts offered in the 1980’s?

Ans:  After the original passage of PURPA in 1983, long term contracts in the range of 15 to 30 years were offered to small generators in New Hampshire.  Rates were based upon the long term avoided costs determined by the connected utility, and approved by the NHPUC.  Often these rates were written as “levelized” or constant rate contracts, where it was anticipated that these rates would be higher than avoided costs in the early years, and lower in the out years.  Sometimes, the utilities and regulators got it wrong, and these long term rates were overstated in the ‘80’s………..costing consumers millions in over market contracts.  This problem was clearly present when the projected higher costs were  to coincide with the anticipated higher nuclear energy plant costs at that time.

Under this new proposal for short term small power rates, there is no possibility to create over-market contract pricing, as the “standard offer” rate available to all existing in-state small generators  would be determined every 6 months based upon the distribution company’s actual bidding of its “default service” supplies. Small generators choosing to sell under these tariffs would be required to remain under “contract” for the full 6 month term, and would have no hand in determining the actual rates paid to them.

Q– How much power do we already have in the state from existing independent small power or ex-utility owned small power projects that would now be used to decrease purchases through ISO-NE? 

Ans: We have approximately 100 MW of wood fired projects, 50 MW of independent small hydropower projects (like the City of Nashua’s projects) and another 66 MW of small hydro now owned by PSNH but soon to be owned by the winning bidder of their auction, Hull Street Energy LLC  (if they are included).  We also have one 14MW waste-to-energy project in Concord that will be added in 2018.

The combination of these existing projects alone are capable of generating about 10% of the kwhs typically purchased by NH customers on an annual basis.  NH electricity consumers have already paid for the majority of the costs for the original construction of these assets.  In the case of the former PSNH assets, it was paid for through the normal utility rate base process (costs plus a guaranteed R.O.I). In the case of the PURPA created wood, hydro, and trash projects, it was through their original long term power supply contracts.

All of these existing projects can serve to be  NH’s “behind-the meter” projects or “load reducer” projects from a utility grid perspective, to keep our own energy and energy dollars inside of New Hampshire ………….if our laws allowed it.  They already are built and are fully interconnected to our distribution systems …………..and currently sending their power outside NH ………… because no current law automatically allows them to sell it inside of NH unless they are < 1MW in size and can serve as a group net metering host.  To keep that power in New Hampshire now, one of our four electric  utility distribution companies would have to voluntarily “choose” to purchase it as part of their default service power mix.  Only the NH Electric Co-op currently  has “chosen” to do so.  As a co-operative utility whose default service is not approved by the NHPUC, they are exempted from this bill.

Indeck Energy Biomass Plant   Alexandria, NH – 16 MW

 

Concord Waste-to-Energy Plant   Concord, NH – 14 MW

 

 

Minnewawa Hydro (under repair)   Marlborough, NH – 930 KW

 

 

 

 

 

 

 

Lower Village Hydro  Claremont, NH – 1.35 MW

 

Q– What would be the construction cost be to replace these existing small power projects in-kind with new ones today?

It’s safe to say that it would be somewhere between 2.5 to 4 times their current values.

 Q – Who currently gets to use the power generated by these NH small power generators now, and how would that change under this bill?

Ans: The generator themselves can use all the power they need behind the meter. It is only the power that flows out the meter to the grid that currently gets “wheeled” (on paper only, the electrons actually stay in the local distribution system) to ISO-NE as wholesale energy supplies.  The small power generator currently receives the same day (spot market) wholesale clearing price, the lowest compensation that ISO-NE offers to producers.

Under this proposed bill, their power could instead be sold to their local distribution company to be used as part of their “default service” retail energy supply for their own retail customers, not to ISO-NE.

 Q- Will this new rate structure serve to increase supply competition and lower prices for consumers?

Ans: Yes.  Electrical energy was once only provided by a monopoly utility provider, but today we currently have retail options from multiple 3rd party providers.  However, these 3rd party re-sellers are still very large national companies or simply “middle men” that stand between the producers and the consumer (much like we see in healthcare).  Our existing Net Metering sales eliminate the out-of-sate middle men “re-sellers”, so that consumers can access better pricing and longer terms options for electricity directly from our own smaller in-state producers.  However, this (net metering) option is limited under NH RSA 362-A to only 1 MW or less projects.  Efforts are under way to increase this figure to 5 MW in 2018.  However, there would still remain over 120 MW of in-state existing small power resources that would be excluded from selling on the retail market even with the proposed increase to a 5 MW net-metering project limit.  The only outlet (currently by law) for this remaining large block of existing small power is to send it out to ISO-NE and lose all the benefits that could accrue to New Hampshire, which is why this legislation is needed.  That figure would grow by at least another 100 MW if we fail to raise the net metering cap from 1 to 5 MW in 2018.

Q- How does this change also benefit consumers who decide not to buy this power under the distribution company’s “default service” rates?

Ans: This change helps to open the bandwidth of competition in the retail supply marketplace.  Long term, we hope to see it create new in-state supplies as well. Short term, we expect that even this small (<10%) amount of in-state power sales from existing projects will help to lower the pricing curve for all retail customers by introducing greater competition in New Hampshire.  Additionally, these in-state supplies will reduce line losses and reduce existing and future increases in Transmission charges & Capacity charges ….. all associated with purchases that come from ISO-NE, thereby helping all consumers.  Expanding in-state power sources in this way (on the distributions systems) is one of the few actions New Hampshire can take to help New Hampshire consumers and our New Hampshire economy.

 Q – How does this change benefit New Hampshire’s general economy?

Ans: By now, nearly every consumer understands that the Northeast region of the country,  and New Hampshire in particular, has high electricity and fuel costs. Additionally, in many other parts of the country, the electrical grid is changing rapidly.  Consumers are looking for more choices and large centralized power plants are no longer being constructed with the deregulation of both wholesale and retail energy supplies.  Even though fuel prices are relatively low today in the country due to expanded sources of oil and natural gas, NH consumers have not experienced corresponding reductions in their electrical rates.  With the final deregulation of PSNH and sale of their generating assets, there is now the opportunity for NH to manage itself in a new way to control some of its costs; use existing in-state resources differently; and keep more of its energy dollars in the state.

Changing our current practices as to how NH distribution companies use our in-state small generation, with direct benefits to NH, is another good step to the future.  It is one more part of how we can lower costs through competition and keep tens of millions of our energy dollars in the state every year.

Q – Would this change help reduce Transmission and Capacity costs being paid to ISO-NE?

Ans: Yes, every KWH we can generate by in-state small power “load reduction” facilities on the distribution system, that stays on the distribution, directly avoids some of the higher Capacity and Transmission costs coming to us from ISO-NE.

 Q – Would this change help reduce Transmission and Distribution System line losses?

Ans: Yes, we lose around 5% of our electrical energy on the grid due to extensive Transmission and Distribution line distances from large central power plants.  Small power  projects are referred to as DER (Distributed Energy Resources) supplies because they are smaller and scattered throughout the distribution systems of each electric utility.

Q- Are there other tangible benefits for NH in doing his?

Ans: Yes, more competition attracts more entrepreneurs and investors for new clean energy projects.  Investing capital and growing jobs in NH is good for our economy. Clean energy projects also attract younger workers who have grown up in the more recent solar and wind power era. Access to lower cost energy supplies will specifically help our industrial base and assist NH companies to retain jobs and grow jobs in NH.

Q – How does this change benefit a municipality like the City of Nashua?

Ans: The City of Nashua owns two small hydro facilities, one of which is small enough (under 1MW) to participate in Net Metering, but the other is not at 3+ MW.  They can’t presently net meter their own power to themselves on the second project or sell it to their local distribution company, they can only sell it to ISO-NE,  or some other 3rd party who wants it.

Jackson Mills Hydro – Nashua – 1 MW

 

Mines Falls Hydro – Nashua – 3 MW

Q- How does this change benefit other municipalities that don’t own projects themselves?

Ans: Our municipalities are large purchasers of electricity.  They have the scale to leverage their buying opportunities on bulk commodities. Net Metering projects are not structured to sell to small purchasers on a retail level like homeowners, as their primary operation is to manufacture goods or produce power.  Net Metering projects will seek out large buyers like municipalities.  However, there is a limited amount of net metering projects available, even if the size limit increases to 5MW.  The option to purchase more competitive “default service” energy, with less Capacity and Transmission charges coming from ISO-NE, is still a financial benefit to all municipalities.

Q– How does this change benefit our manufacturing base in particular?

Ans: Our manufacturing base represents our largest buyers of electricity on a single site basis.  They also have the scale to leverage their buying opportunities on bulk commodities.   Any increased access to lower cost energy supplies, along with any decreases in Capacity and Transmission charges, will specifically help our industrial base and assist NH companies to retain jobs and grow jobs in NH.

 

ReVision Energy – Wirebelt Company

Q- Is there a good reason for not making this change now?

Ans: No, making this change now at the same time as the liquidation of the PSNH generation assets, is the perfect time.  New Hampshire needs the courage to stand up for New Hampshire’s own economic interests while still being part of the regional ISO-NE  Other states (like MA) are already shifting ISO-NE costs to New Hampshire through the implementation of their “plans”.  Doing nothing is simply not an option.

So, let’s get this done now; save all existing New Hampshire small power generators for own use; keep more of our energy dollars inside New Hampshire; reduce Transmission and Capacity costs coming from ISO-NE and help all NH electric customers lower their costs. We can do this in 2018 in New Hampshire!

2017 NH Business Energy Education Series: Vol 22 – “NH’s Energy Future is Now”: What did we learn?

 

Earlier this year, a consortium of clean energy interest groups issued a report under the “NH’s Energy Future is Now – Listening to New Hampshire” title ( see NHEnergyFuture.org).  Although I doubt that many NH businesses actually saw or read the print version of this report, several prominent NH businesses were featured in it including: Cranmore Mountain Resort; Hypertherm; Red Hook Brewery; and Worthern Industries.  For businesses operating in New Hampshire who have a keen interest in lowering their annual energy costs, this report together with the associated UNH reports referred to below, are worth reading to get a better perspective on the realities of energy choices in New Hampshire.  There is also more on YouTube.

Red Hook Brewery

 

Here are a few of my takeaways from this effort, that also relate to previous positions put forward in our 2017 NH Business Energy Education Series include:

 

A – Rates v. Costs

 Although we constantly hear about energy Rates, what consumers really pay are energy Costs.

Our actual costs = rates x quantities used

We have had, and will continue to have, high energy rates for energy commodities in New Hampshire compared to many other parts of the country.  High electricity and fuel rates in New Hampshire have been discussed in many of our prior posts.

Recent studies by the UNH Carsey School of Public Policy show that New Hampshire consumers actually pay equal to or less than national average monthly  Costs for energy.  Why? ……..because we use less, not because our rates are low.  In regions of the country where rates are lower, state policies and consumer demands have not pushed for adoption of efficiency strategies to lower consumption.  No matter what the rates are, find ways to use less ………and then you always pay less. You can use less of their stuff (commodities) by employing energy efficiency and self-generation alternatives.

FROM THE CARSEY SCHOOL OF PUBLIC POLICY: “Cost of Electrical Power in New Hampshire In 2015, electricity accounted for approximately 25 percent ($1.7 billion) of all energy expenditures in New Hampshire, and average retail electricity prices in the state, at 18.5 cents per kilowatt hour, were the eighth highest in the country and 47 percent higher than the U.S. average . The latter is also the case for New England as a whole. But despite these higher rates, the average monthly New Hampshire residential electricity bill was $115, similar to the U.S. monthly average of $114.6 New Hampshire residents pay 5.5 percent of their income for overall household energy-related expenses, similar to the overall U.S. resident portion of expenditures at 5.6 percent. In terms of commercial use, the average monthly New Hampshire electric utility bill in 2015 was actually lower than the U.S. average commercial bill, at $529 versus $671.“

 

B – Consumer Risks: Energy Efficiency & Distributed Renewables v. Big Central Utility Projects

As a consumer, if you are taking the capital risk of paying for large, long term energy solutions from a utility, its time to think twice about what technologies may impact that decision in the future.  Low cost energy efficiency measures and small distributed generation projects using renewable resources are far lower risk options than building large gas pipelines or long distance transmission lines.  New gas from fracking is here now, but there are no guarantees that long term, the current economics will hold up.  Technology disruptions happen all the time now, so let’s not bet the farm and take the risk on one or two BIG long term low tech options.

FROM THE CARSEY SCHOOL OF PUBLIC POLICY: Our findings suggest that there is no immediate need for New Hampshire to expand natural gas pipeline infrastructure. If the state wishes to intervene in the market by obligating ratepayer funds to reduce wholesale electricity costs, additional public investment in major pipeline infrastructure should wait until a rigorous study has been completed that models system wide natural gas flows and prices. This study should lead to an improved understanding of the difference between the technical and economic capacity of the existing system and explore opportunities to access more of the technical pipeline capacity in cost-effective ways. To date, no study of which we are aware has performed the level of rigorous analysis required to justify a major multidecadal contract obligating ratepayers, and moving ahead without such a study would essentially make ratepayers energy market speculators. Policy makers also may want to consider other options that carry less risk and a better return on investment, including better utilization of existing infrastructure and increased investment in energy efficiency and renewable energy.”

 

C – Growth in New Hampshire’s Economy is no longer tied to Energy use.

Notwithstanding the opinion that New Hampshire’s manufacturing base is worthy of some form of energy costs relief, our general economy is not failing.

FROM THE CARSEY SCHOOL OF PUBLIC POLICY: “New England has adapted to higher prices through energy efficiency and other energy management investments even as the combined gross domestic product (GDP) for all six New England states increased by 9.7 percent from 2005 to 2015, overall energy use declined by 9.6 percent”

 As I have stated many times in past blog posts, our efforts to help businesses reduce their energy costs should be targeted to our manufacturing base where it really matters the most for our job retention and job growth.

Cheers!

 SEE: https://youtu.be/aHhLcyKIrhg

 

 

 

 

 

 

 

 

 

 

2017 NH Business Energy Education Series: Vol 21 – It’s Time to Raise the Net Metering Project Size Limit to 5 MW

Concord – 13.8KW Residential Net Metering Solar Array

 

Most people, who already know something about “net metering”, are those homewowners or businesses who have put solar panels on their roofs.  Now it’s time for you to look at net metering in an entirely different way ……….even if you do know something about it.  It’s time to think BIGGER! Not so much because we expect to see thousands of new small power plants bigger than 1 MW springing up all over the state ………but because we already have over 200 MW of these plants > 1 MW sitting in the state being wasted (economically speaking)  by having to send their power out of state ………especially when we (the ratepayers) already spent most of the money to see them built in the first place years ago.  How is that possible you say?  Let me tell you the rest of the story:

 

Q1 – What is Net Metering?

Ans: It’s the ability to generate some or all of your own electricity and remain connected to the utility grid.  At times when you produce more energy that you are using (in real time), the excess flows back to the grid, is accounted for by your distribution company, and a credit is applied to your monthly bill.  For larger projects that are intended to generate much more power than they require, the energy can also be sold to other retail customers who contract with you to purchase your excess power.  These larger projects are commonly referred to as “group net metering” projects and sales occur between a willing buyer and a willing seller.

 

Q2 – What is the significance of the current 1MW size limit as it relates to 362-A, part of the LEEPA statute that allows for retail sales through Group Net Metering?

Ans: It is an arbitrary number.  It is not a number that otherwise is used in 362-A anywhere else.  Many years ago when net metering was first created in 362-A, the limit was 100kw and then later amended to 1000 Kw (or 1MW).

 

Q3 – What would be the significance of the proposed 5MW size limit as it relates to 362-A?

Ans: First, it brings the size limit at 5 MW, in line with all the other provisions under the original bill of 1978.

Second, on the heels of this year’s rule making by the NHPUC on Net Metering (call it NM 2.0), combined with the sale of the PSNH generation assets,  there is no reason to artificially constrain competition in the electrical generation marketplace, which only serves to keep prices higher.  For projects larger than 100Kw, there never was any possible “cross-subsidy” issue between Net Metering and Non-Net Metering customers, as the distribution companies already received their FULL payments for Transmission, Delivery, and all other costs ……….everything but retail energy services. There is no good justification for continuing to limit the Net Metering section of the NH LEEPA regulations to <1 MW, as it only harms producers and consumers (and our state economy) by restraining in-state commerce that could otherwise occur.

 

Q4 – Who gets to simply use the power generated by a Net Metering producer that is greater than 100kw in size……..and who gets to purchase power from them?

 

Ans: The generator themselves can use all the power they need behind the meter.  It is only the power that flows out the meter to the grid that can then be purchased by others:

Option #1-Directly by the host distribution company at the same cost (annual blended number) as what they pay their 3rd party supplier for “default” energy supply service for projects between 100 KW and 1000 KW (1 MW).  Excess power (going to the host distribution company) from the larger projects between 1 MW and 5 MW would be paid the value equal to the utility’s avoided costs for energy and capacity to provide default service as determined by the NHPUC in accordance with Puc 903.o2 (i).

Option #2- For projects that are certified for “group net metering”, the power can also be sold to other retail customers on the same distribution system, much like what you see from signing up for power by other 3rd party retail suppliers like…….. Direct Energy or others.

 

Q5 – How much power do we already have in the state from existing PURPA or Utility owned projects that would now be included in the 5MW proposal?

Ans: We have approximately 100 MW of wood fired projects, 50 MW of independent small hydropower projects (like Nashua’s) and another 66 MW of small hydro now owned by PSNH but soon to be owned by the winning bidder of their auction, Hull Street Energy LLC , who will fall into the same “bucket” as the other independent hydros.  All these projects are larger than 1MW and are not currently eligible to participate in net metering sales in NH. I don’t have a figure on our existing solar, but it is small compared to the other two groups.  Likewise, I don’t have a figure for wind projects that would be eligible, but again that would be small compared to the wood and hydro projects.

The combination of the existing wood and hydro projects alone are capable of generating about 10% of the kwhs typically purchased by NH customers on an annual basis.  NH electricity consumers have already paid for the majority of the costs for the original construction of these assets.  In the case of the former PSNH assets, it was paid for through the normal utility rate base process (costs plus a guaranteed R.O.I). In the case of the PURPA created wood and hydros, it was through their original long term power supply contracts of 15-20 years reflecting the utilities “avoided costs”, largely issued in the 1980’s, with no guaranteed R.O.I. or firm capacity payments.

All of these projects can serve to be “behind-the meter” projects or “load reducer” projects from a utility grid perspective, to keep our own energy and energy dollars inside of New Hampshire ………….if our laws allowed it.  They already are fully interconnected to our distribution systems …………..and currently sending their power outside NH ………… because no law automatically allows them to sell it inside of NH.  One of our four utility company companies currently would have to “choose” to purchase it as part of their default service power mix.  Only the NH Electric Co-op currently “chooses” to do so.

 

Ex.-Biomass Generator

Ex.-Hydropower Generator

Q6- What would be the construction cost be to replace these existing QF projects in-kind with new ones today?

I can’t give you an exact figure as they vary so much project to project, but it’s safe to say that it would be somewhere between 2.5 to 4 times their current values.

 

Q7- Will this change serve to increase supply competition and lower prices for consumers?

Ans: Yes, if you believe in the basic principles of supply and demand.  Electrical energy was once only provided by a monopoly utility provider, but today we currently have retail options from multiple 3rd party providers.  However, these 3rd party re-sellers are still very large national companies or simply “middle men” that stand between the producers and the consumer (much like we see in healthcare).  Net Metering sales eliminate the out-of-sate middle men “re-sellers”, so that consumers can access better pricing and longer terms options for electricity directly from our own smaller in-state producers.

 

Q8- How does this change benefit consumers who decide not to buy this power?

Ans: This change opens the bandwidth of competition in the retail marketplace.  Long term, we expect to see it create new supplies as well. Short term, we expect that even this small (<10%) amount of in-state power sales from existing projects will help to lower the pricing curve for all retail customers by introducing greater competition.  Additionally, these in-state purchases will reduce line losses and reduce existing and future increases in Transmission charges & Capacity charges ….. all associated with purchases that come from ISO-NE, thereby helping all consumers.  Expanding in-state power sources in this way is one of the few actions New Hampshire can take just for New Hampshire consumers and our New Hampshire economy.

 

Q9 – How does this change benefit the producers?

Ans: Based upon an agreement struck between the NHPUC and our electrical utilities during the deregulation of the electrical industry almost 20 years ago, the utilities were no longer required to purchase power from QF facilities after their contracts expired.  The utilities were only required to “wheel” the power out-of- state to ISO-NE.  The producers received the same day (spot market) wholesale rates, the lowest that ISO-NE has. Many producers view this as a violation of Federal PURPA law, but the cost of challenging PSNH at the NHPUC or the FERC was astronomical.  As net metering has evolved over this same period of time, first up to a 100kw size cap and presently at a 1MW limit, selling QF power under New Hampshire’s Net Metering laws became far more practical and accepted by the public.  This final change from 1 to 5 MW allows all of the QF generators in the state to sell some or all of their power (depending on their size) directly to retail customers in NH on a willing buyer-willing seller basis. There are no mandated prices under a net metering generator – net metering customer agreement.  This simply both have to be on the same distribution system.

 

Q10 – How does this change benefit someone like the City of Nashua, who owns two small hydropower projects?

Ans: The City of Nashua owns two QF hydro facilities, one of which is small enough (under 1MW) to participate in Net Metering and does now, but the other is not currently eligible at 3 MW.  They can’t presently net meter their own power to themselves on the 3 MW project, they can only sell it to the grid (ISO-NE) or to another 3rd party willing to offer them a contract, as they currently do now with the NH Electric Co-op until 2024.

Jackson Mills Hydro – Nashua – 1 MW

Mines Falls Hydro – Nashua – 3 MW

 

Q11- How does this change benefit other municipalities that don’t own projects themselves?

Ans: Our municipalities are large purchasers of electricity.  They have the scale to leverage their buying opportunities on bulk commodities. Net Metering projects are not structured to sell to small purchasers on a retail level like homeowners, as their primary operation is to manufacture goods or produce power.  Net Metering projects will seek out large buyers like municipalities.

 

Q12 – How does this change benefit New Hampshire’s general economy?

Ans: By now, nearly every consumer understands that the Northeast region of the country,  and New Hampshire in particular, has high electricity and fuel costs. Additionally, in many other parts of the country, the electrical grid is changing rapidly.  Consumers are looking for more choices and large centralized power plants are no longer being constructed with the deregulation of both wholesale and retail energy supplies.  Even though fuel prices are relatively low today in the country due to expanded sources of oil and natural gas, NH consumers have not experienced corresponding reductions in their electrical rates.  With the final deregulation of PSNH and sale of their generating assets, there is now the opportunity for NH to manage itself in a new way to control some of its costs; use existing in-state resources differently; and keep more of its energy dollars in the state.

Changing our net metering regulations from 1 to 5 MW is a good first step to the future.  It is one part of how we can lower costs through competition and keep tens of millions of our energy dollars in the state every year.

 

Q13 – How does this change benefit our manufacturing base in particular?

Ans: Our manufacturing base represents our largest buyers of electricity on a single site basis.  They have the scale to leverage their buying opportunities on bulk commodities. Net Metering supply projects are not structured to sell to small purchasers on a retail level like homeowners, as their primary operation is to manufacture goods or produce power.  Net Metering projects will seek out large buyers like manufacturers.

Additionally, NH manufacturers are well positioned to take advantage of the higher size limit to undertake or expand their own projects to become net metering generators using a more diverse set of technological options, including solar; co-generation; and some limited hydro opportunities.

 

ReVision Energy – Wirebelt Company

 

Q14 – Would this change help to attract more companies (ex.- Amazon) to New Hampshire?

Ans: Yes, providing large companies more choices as to how they purchase and/or produce their electricity is very important.  There any many national and international brands that already have their own sustainability energy programs in place that guide their operations at every location. This change would fit into their needs and improve our recruitment chances.

 

Q15 – Would this change help reduce Transmission and Distribution System line losses?

Ans: Yes, we lose around 5% of our electrical energy on the grid due to extensive Transmission and Distribution line distances from large central power plants.  Net Metering projects are referred to as DER (Distributed Energy Resources) supplies because they are smaller and scattered throughout the distribution systems of each electric utility.

 

Q16 – How can Net Metering projects offer customers longer term fixed price power rates?

For the most part, most QF projects don’t use fuel at all (ex.- solar, wind, and hydro) or are using non-traditional fuels with some built in price stability.  Wood fired projects burn wood chips, but they are locally sourced and have better opportunities to stabilized prices because wood chips are not a worldwide commodity driven by supply and demand. Co-generation projects burn fuels, but they typically are dual fuel capable and can fuel switch over to other on-site stored fuel supplies during peak use periods in the winter when fuel prices can spike due to extreme weather and/or supply constraints.  Trash-to-Energy projects are stabilized by their long term trash hauling contracts. Methane (landfill) projects burn existing on-site fuels.

 

Q17- Are there other tangible benefits for NH in doing his?

Ans: Yes, more competition attracts more entrepreneurs and investors for new clean energy projects.  Investing capital and growing jobs in NH is good for our economy. Clean energy projects also attract younger workers who have grown up in the more recent solar and wind power era. Access to lower cost and longer term electricity will specifically help our industrial base and assist NH companies to retain jobs and grow jobs in NH.  The ability of our municipalities to invest in their own projects, or simply buy lower cost power from other projects, serve to lower taxes burdens for all members of those communities.

 

Q18- Is there a good reason for not making this change now?

Ans: No, making this change now at the same time as the liquidation of the PSNH generation assets, is the perfect time.  New Hampshire needs the courage to stand up for New Hampshire’s economic interests.  Other states (like MA) are already shifting ISO-NE costs to New Hampshire through the implementation of their “plans”.  Doing nothing is not an option.

 

Now, none of this prevents a business or municipality from deciding to build a new power project to become a stand alone net metering municipal or industrial project…… or a group net metering project.  In fact it serves to improve their chances of sizing a project appropriate to their chosen technology and/or power needs.  However, their pricing point for any excess energy they sell back to their utility or to a group net metering customer is very competitively priced, at or below, the default service energy price.  But this is New Hampshire, and in our quest to lower energy prices for all customers, new projects will have to be configured in such a way as to be fair to all customers whether they choose to participate in net metering or not. So, let’s get this done now and open up the bandwidth of energy competition to, in one form or another, help all NH electric customers lower their costs. We can do this New Hampshire!

2017 NH Business Energy Education Series: Vol 20 – It’s Lonely in Hearing Room A Guest Blog by D. Maurice (“Don”) Kreis, NH Consumer Advocate

It’s Lonely in Hearing Room A

Guest Blog by D. Maurice (“Don”) Kreis  Consumer Advocate, NH Office of the Consumer Advocate

Think of this as an on-line personal ad, or maybe an OK Cupid profile.

Handsome, articulate, charming and principled fellow (please excuse the self-aggrandizement; the genre requires it) seeks partner of either gender, with similar qualities, to share intrigue and adventure in pleasant, naturally lit setting on Fruit Street in Concord.  Frequent jaunts to historic downtown setting also required, plus occasional interludes at hotels.

The “pleasant setting” is Hearing Room A at the Public Utilities Commission (PUC).  By “historic downtown setting” I mean the State House. The reference to hotels is an allusion to the fact that meetings of key regional bodies like the New England Power Pool and ISO New England tend to take place in windowless ballrooms in generic hostelries in Massachusetts. There’s no point in sugar-coating this; as anyone who has ever experienced online matchmaking can testify, the truth comes out sooner or later.

So, you may be wondering, why am I trolling for partners on this blog in my capacity as New Hampshire’s Consumer Advocate, tasked by statute with representing the interests of residential utility customers at the PUC?

The answer is twofold.  First, to state the obvious, energy is the lifeblood of the economy that sustains us as individuals.  Second, in discharging its role as the primary regulator of the public utilities that provide us with so much of our energy, the PUC has an explicit statutory mission to be the arbiter between the interests of utility owners and utility customers.

My office plays a critical role in helping the PUC do that; we assure there will be some weight on the “customer” side of the scale.  But here’s a critical point:  Our job is to represent the interests of residential utility customers; we cannot and do not advocate on behalf of commercial and industrial users of energy.

One might think the relationship I seek is doomed.  In a market economy, aren’t consumers and businesses natural enemies, at least when the question is how to regulate business?

Nope. Residential customers and business customers of public utilities have vastly more in common than they might think.  In particular, we have a shared interest in keeping each rate-regulated utility’s revenue requirement as low as possible, which means making sure utility investments are prudent, least-cost, and meet the so-called “used and useful” test – i.e., are actually used to provide the service covered by the rates.

The interests of all customers, of whatever rate class, are likewise united when it comes to getting more work from each kilowatt-hour or dekatherm of energy consumed.  The ineluctable reality is that when it comes to squeezing the next unit of work out of the electricity grid or natural gas pipeline network, megawatts and ‘negawatts’ (i.e., savings from energy efficiency) are fungible.  According to a recent joint utility filing at the PUC, the negawatts are the cheapest option for electric consumers – four cents per kilowatt-hour compared to six cents for natural gas generation, nine cents for renewables and ten cents for nuclear or coal-fired electricity.

Hence the fervent commitment of my office, on behalf of residential customers, to the Energy Efficiency Resource Standard (EERS) approved by the PUC last year.  An EERS means New Hampshire is committed to “all cost-effective energy efficiency,” which in this instance means a 3.1 percent reduction in electric sales in between 2018 and 2020 (and a slightly smaller reduction in natural gas sales) achieved via programs funded by ratepayers through charges on their electric and natural gas bills. We agreed to leave the utilities in place as program administrators for at least those three years, rather than replace them with a third party as has happened in Maine, Vermont and elsewhere.

The math is the same whether you’re a residential ratepayer or a large commercial customer.  Cost effective energy efficiency reduces everyone’s energy bills – that’s the reason for subsidizing them via nonbypassable charges – at the same time individual customer co-pays make economic sense because of the individual bill savings they produce.

One could make similar points about grid modernization, currently on hold at the PUC while the agency ponders the report submitted in March by the stakeholder working group convened to ponder these issues.  All customers would benefit from aggressive efforts to take full advantage of emerging technologies, but the utilities resist these efforts because they inevitably involve opening up the distribution system to solutions and investments made by third parties and even customers themselves.

Additional examples abound – everything from the need for time-varying rates (because appropriate price signals could help reduce costs for all) to the deployment of utility-scale battery storage to the question of whether electric utilities should be allowed to invest in natural gas pipeline capacity, sell the capacity to unregulated merchant generators that are mostly outside New Hampshire, and force all Granite State customers to guarantee the cost recovery.

My point is not to paper over the legitimate differences of opinion that exist, in all quarters, about these questions.  Rather, my contention is that non-residential utility customers are too often absent from the conversation – perhaps based on the mistaken assumption that what’s good for investor-owned utilities is good for investor-owned businesses generally.

Consider that the push to restructure the electric industry – a successful initiative by most accounts, and something the utilities resisted via litigation and otherwise – was driven in the first instance by commercial and industrial customers of the utilities.  Sadly, these days the only non-utility businesses that participate directly in PUC proceedings are not there as customers. They intervene as subsidy seekers, would-be competitors of utilities, or potential providers of services to them.

New Hampshire needs an alliance of commercial and industrial utility customers that can help the Office of the Consumer Advocate do right by all ratepayers.  It may not be the most romantic of partnerships, but it has every prospect of producing longterm happiness – or, in other words, safe and reliable service at the lowest possible cost.

 

Maurice (“Don”) Kreis, head of New Hampshire’s Office of the Consumer Advocate, is a former general counsel of the New Hampshire Public Utilities Commission who has also served as a hearing officer at the Vermont Public Utility Commission and a professor at Vermont Law School. He writes a regular column for the news web site indepthnh.org called Power to the People.