Power to the People is a column by New Hampshire consumer advocate Donald M. Kreis. Kreis and his four-person team represent the interests of residential utility customers before the NH Public Utilities Commission and elsewhere.
By DONALD M. KREIS, Power to the People
To paraphrase the revolutionary pamphleteer Thomas Paine, these are the times that try the souls of taxpayers. New Hampshire’s 22-cent August 1 electricity drop is the biggest and scariest energy news to hit the Granite State in 26 years.
Yes, 22 cents is a small number – less than a quarter – but we’re talking about 22 cents here. per kilowatt hour. A typical residential customer consumes approximately 650 kilowatt hours per month. So we’re looking down the barrel of $150 per month in energy costs.
And remember, these are just the energy charges. Your electricity bill also includes other line items, such as distribution charges (which pay for poles and wires) and transmission charges (which pay for the bulk power transmission system). In total, a typical residential bill will increase by something like 50 or 60% – the most staggering one-time rate increase in the history of staggering one-time rate increases.
Here are some fine print to keep in mind. The rates are actually 22.566 cents (Eversource) and 22.228 cents (Liberty).
Meanwhile, our third investor-owned electric utility, Unitil, has an energy service rate of 10.1 cents that will remain in effect until November 30. And the New Hampshire Electric Cooperative – owned by customers rather than investors – is increasing its energy service rate (known as “Co-op Power”) from 9.6 cents to just under 17 cents in 1st of August.
You might be wondering: WTF? Or why these fees? Specifically, how can Unitil and the co-op get away with charging so much less than 22 cents? In the end, the answer boils down to two words: torpid agency.
It is an “agency” as in: utilities are agents for their customers when they buy electricity in the wholesale market and pass the cost on to retail bills without making a profit. It is “sluggish” as in (according to Merriam-Webster): “slow to operate or act”.
With the blessing of the Public Utilities Commission (PUC), Eversource, Liberty and Unitil wield a very blunt instrument every six months: a request for proposals (RFP) from wholesale electricity providers for six full months of energy service for the “small” customers. , a group that includes all residential customers.
Bids are for the “all requirements” service, which means that the bidder must promise to meet any load that will materialize. And it must promise to do so in a highly volatile wholesale environment. As you can imagine, these parameters cause wholesalers to build a high “risk premium” into their offerings.
This also matters when you come to market with your tender.
If you’re looking for spring bids for a service that includes the first half of winter, bidders are going to include in their prices what they reasonably expect to be gargantuan wholesale costs in December and January. It will be cold then and the global demand for natural gas is expected to be monumental. Most of New England’s electricity is produced by generators that use natural gas as fuel.
Unitil’s 10.1 cent rate went into effect June 1 and only runs through the end of November. Its successful bidder was not required to include expected wholesale costs for December and January in its proposal.
The new co-op rate of 16.98 cents on August 1, a 76% increase over the current co-op electric rate, is certainly not good news. But the co-op’s ability to beat Eversource and Liberty by more than five cents per kilowatt hour is worth considering.
Active portfolio management – primarily the “staggering” of wholesale contracts so that they don’t all expire at the same time – accounts for the difference. To their credit, the PUC and Governor Sununu have publicly called for a review of energy service procurement practices for all electric utilities.
While we’re at it, we should reexamine assumptions about how much of this should be kept secret. For example, although I know (because I have access to documents that the PUC deems confidential) how many wholesalers responded to Eversource and Liberty tenders, I am not authorized to tell you.
Believe me, this is information you would like to know. How many bids are needed to make a wholesale electricity bidding process truly competitive? This is a question for economists. I was an English student, which means I like to educate myself by reading stuff – unredacted stuff.
When I said this was the biggest energy news in 26 years, I was thinking of the Electric Utilities Restructuring Act passed in 1996. The co-authors of this landmark legislation, Clifton Below and Jeb Bradley, were then members of the House, but are now an Alderman in Lebanon and Senate Majority Leader at State House in Concord, respectively.
Given that Below and Bradley are still around, one might ask them: what about the assumption in the 1996 Restructuring Act that most customers would buy electricity from a non- -public service and would just use the default service, if any, as a safety net? Finally, 85% of Eversource’s residential customers buy their energy from Eversource.
It would be a good time to see if the fundamental rules of the game, adopted in 1996, need an update. If Major League Baseball can adapt (by using a designated hitter in both leagues and foolishly putting an auto-runner on second base for extra innings), then we can revisit the policy choices made in 1996.
Some people, oddly, think the answer is the end of retail choice for residential electric customers. I tend to look in the opposite direction, towards reforms that would make energy service by default obsolete.
The PUC is set to approve its community power aggregation rules on July 5, which (hopefully) will allow municipalities (or consortia of municipalities, like the Community Power Coalition of New Hampshire) to be active and vigilant agents for residential customers much of the time. in the same way as the New Hampshire Electric Co-op is now. We should find a way to make these kinds of opportunities available to everyone.
These huge rate increases are forcing us all to think about electricity, on top of whatever else we’re concerned about. “What we get too cheap we value too lightly,” wrote Thomas Paine in 1776. He was talking about freedom. But much the same can be done about energy.