Hey, New Hampshire State Senate—Jimmy Carter is calling, and he wants his energy policy back.
It’s Senate Bill 365, which is New Hampshire’s very own proposal to mirror the 1978 Public Utility Regulatory Policies Act (PURPA) and would require that utilities purchase power from a select group of qualified facilities at above market rates. Instead of receiving the market rate for power, which is about 3.8 cents per kilowatt-hour, they would get more than twice that amount should SB 365 pass.
PUPRA was passed in response to the Middle East oil embargo, subsequent oil price “shocks” and the oft-repeated “peak oil” theories. PURPA, along with the Solar Photovoltaic Energy Research, Development and Demonstration Act of 1978, were supposed to lead us to “energy independence”. A year later the Iranian Revolution led to more oil price shocks and we have yet to reach “peak oil”—further proof that the government is never right when it intervenes in energy policy. PURPA did, however, result in higher prices. At the time of New Hampshire’s electricity restructuring in 1997, legacy PURPA contracts had cost New Hampshire’s ratepayers $1 billion in excess electricity costs—and tens of billions nationwide.
Under SB 365, biomass generators (and other small generators) with “local” ownership like Korea East-West (South Korea) and GDF Suez (France) would receive approximately $20-$30 million per year in above market payments to keep their inefficient and uncompetitive plants open. That’s right, legislators want to hand millions of ratepayer funds to foreign corporations. These above-market payments will increase costs to residential ratepayers by increasing the risk premium that generators will have to build into prices. This cost is passed on to utilities (and ultimately ratepayers) because the generators benefiting from SB 365 won’t be providing “firm” power. This is like buying a book on Amazon that does not get delivered, not getting your money back, and having to go to the bookstore to buy it again.
SB 365 is another well-intentioned, yet misguided attempt to save the biomass industry. The concern with this thinking is that it ignores the jobs that have been lost from the $2 billion in subsidies (PURPA, RPS, et. al.) provided to many of these plants since the 1980’s. In addition, it ignores the “death by a thousand cuts” energy policies that have undermined competitive markets. This puts power plants that participate in the competitive markets in jeopardy, such as Seabrook Station, which employs 600 people (over 1,000 during refueling) and contributes nearly half a billion dollars in economic activity to the state. Will the Senate say no when Seabrook comes to legislators looking for its own subsidy because they can’t compete in an artificially suppressed wholesale market? The result of all this is higher electricity costs for the rest of us and job losses in energy intensive businesses like manufacturing.
The State Senate, despite repeated public comments from the Governor emphasizing the need to REDUCE regulations, has voted to add another layer to our already over-regulated electricity markets. SB 365 is a step deeper into the Rube Goldberg machine that is New England’s electricity markets, which will ultimately become a patchwork quilt of long-term bilateral contracts devoid of competition.
Elected officials intent on “doing something” must look beyond the one-dimensional benefits that SB 365 would provide to the forest products industry and consider the harm higher electricity costs have on ALL sectors of our economy.
In voting for Senate Bill 365 the New Hampshire Senate ignored the testimony of NERA, the New Hampshire Business and Industry Association, and the New Hampshire Consumer Advocate, whose charge is specifically to protect residential ratepayers. They also ignored the energy providers whose business it is to procure energy supply and bid on default service solicitations. These providers warned that passing SB 365 would make it more difficult for them to respond to utility RFPs for default energy service.
In his written testimony, Consumer Advocate Don Kreis commented on the timing of SB 365 as it relates to recent completed restructuring 22 years after it began: “In essence, the full benefits of restructuring will finally be available to all customers of Eversource on April 1. This is not a good time to walk back those benefits by transferring risk back onto the backs of those electric customers who can least afford it…”
As always when government picks winners and losers in energy markets, ratepayers end up hurting—especially those of more modest means. The next candidate for office who runs a campaign touting higher electricity costs will be the first because they all run with grand plans to lower the costs of energy. Unfortunately, the rhetoric of “lowering electricity costs” too often loses out to political whim—and we all end up paying.
Marc Brown is the President of the New England Ratepayers Association, a nonprofit dedicated to protecting ratepayers in New England.