Taxes are a dirty word that neither political party (current Democrats running for Governor notwithstanding) wants to be accused of supporting. To avoid being labeled “tax and spenders” New Hampshire’s elected officials have been very creative in finding ways to provide tax benefits to politically favored industries without directly raising taxes. They often do it by increasing your electricity rates.
The latest attempt to extract more money from ratepayers’ pocketbooks comes in the form of two bills vetoed by Governor Sununu—SB 365 and SB 446.
SB 365 would force two of the four New Hampshire utilities to purchase electricity at several times market rates from inefficient biomass and trash-to-energy power plants. The New Hampshire Public Utilities Commission estimated the increased costs to local families and businesses to be approximately $20 million per year to keep these plants operational. These plants can’t compete in our current electricity markets, which reward lower-cost plants with energy market sales. However, and this is important, these plants would also not survive the “used and useful” principle fundamental to utility ratemaking. In layman’s terms, without legislation there is no way the PUC would allow these plants to operate because they are literally worthless to ratepayers. By forcing ratepayers to prop up these foreign owned plants, the Legislature is creating a back-door tax on your utility bill.
One of the most specious claims by proponents of the biomass tax is that ratepayers would pay $17 million per year in increased capacity costs if we “lost” 100 MW of biomass generation. This argument displays a misunderstanding of how New England’s forward capacity market operates. Capacity market auctions occur annually to meet the region’s installed capacity requirements three years into the future. That means the biomass plants still have a forward capacity supply obligation. If they can’t meet their obligations, market rules place the cost of meeting the “lost capacity” on these generators, not ratepayers. Considering New Hampshire ratepayers will pay roughly $500,000 in capacity for these plants as of the most recent capacity auction—someone really needs to explain how they derived that $17 million number.
If our elected officials have determined that the state needs to appropriate funds to cull low-grade wood from New Hampshire’s forests, then they should transparently take that money from the general fund. But legislators, especially Republicans, don’t want to be seen as increasing taxes or adding to the budget. The truth is, if they support SB 365 then they are supporting a broad-based tax and one that will hit every customer served by Eversource and Unitil.
Similarly, SB 446 will compensate small solar and hydro generators at several times the price paid to other generators. Why is this bad for ratepayers? Because solar and small-hydro are resources whose excess generation is exported to the distribution system intermittently, not when it is needed relative to electricity demand.
While the potential costs are not easy to estimate, they are real, and they will continue to grow if suppliers are forced to pay above market costs for power. Default energy is the fully bundled cost of electricity supply, including energy, capacity and ancillary market costs, hedging, and risk premiums, but these small generators don’t provide most of these attributes. The more we bake intermittent resources into rates, the higher the risk premium is going to be to account for them. These costs are passed on to all other ratepayers. Even Massachusetts’ regulators have recognized that there is a cost-shift from net metering customers to non-net metering customers. New Hampshire should learn from their mistakes.
Manufacturers and the New Hampshire Business and Industry Association have been vocal about the need to lower electricity costs. Over the past few years we have seen Sturm, Ruger & Company, HK, Foss and others expand to other states with lower electricity rates. BAE Systems is expanding operations outside of New Hampshire and it has been reported that Hitchiner Manufacturing, which has hundreds of employees, was considering expanding to a state that would have saved them millions in electricity costs. NERA recently participated in a roundtable energy discussion at Sig Sauer in Epping where we learned that the manufacturer’s electricity costs are twice what they are for a similar facility in Arkansas. What would happen to the Seacoast’s economy if Sig Sauer moved its 1500 jobs to Arkansas because New Hampshire repeatedly passes bills that raise electricity costs?
With his vetoes, Governor Sununu showed that he is interested in looking out for all of New Hampshire’s ratepayers—not just the privileged few. Our legislators should do the same and sustain his vetoes.
Marc Brown is the President of the New England Ratepayers Association, a nonprofit dedicated to protecting ratepayers in New England.