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05/01/01 1076-EBA

2001 SESSION

01-0553

03/01

HOUSE BILL 489

COMMITTEE: Science, Technology and Energy

AMENDED ANALYSIS

This bill:

I. Makes certain provisions relating to transition service and competitive electricity supplier requirements applicable, to the same extent as for municipal utilities, to rural electric cooperatives for which a certificate of deregulation is on file with the public utilities commission.

II. Limits the charges that may be assessed by certain rural electric cooperatives against members who do not purchase generation services by or through the cooperative.

III. Grants the public utilities commission greater discretion regarding transition and default electricity services.

IV. Extends the period of transition service which Public Service Company of New Hampshire is required to provide and postpones the date of the sale of certain Public Service Company of New Hampshire generation assets.

V. Entitles an electric utility to retain 20 percent of the savings from an approved renegotiation of a public utilities commission order.

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Explanation: Matter added to current law appears in bold italics.

Matter removed from current law appears [in brackets and struckthrough.]

Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

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01-0553

03/01

STATE OF NEW HAMPSHIRE

In the Year of Our Lord Two Thousand One

Be it Enacted by the Senate and House of Representatives in General Court convened:

29:1 Purpose and Findings. The general court finds that:

I. Rural electric cooperatives are owned by, and operated for the benefit of, their ratepayer members.

II. The business and affairs of rural electric cooperatives are managed by boards of directors chosen by and from the membership through annual elections in which each member is entitled to one vote.

III. A primary task of the public utilities commission in its regulatory function is to balance the competing interests of ratepayers and investor owners.

IV. The ratepayers of rural electric cooperatives are also the investor owners of those organizations.

V. Regulation by the public utilities commission imposes upon rural electric cooperatives certain transactional expenses, delays, and operational restrictions which are inherent in the regulatory process.

VI. In 1997, the general court amended RSA 301:57, finding that members of rural electric cooperatives should be empowered to elect, through a vote of the membership, to limit the scope of regulation imposed upon the organization which they own and from which they purchase electricity. The general court amended RSA 362:2 to limit the public utilities commission's jurisdiction over many aspects of the business and affairs of rural electric cooperatives whose members elect limited regulation, treating such member-controlled cooperatives in a manner consistent with the regulatory treatment of municipal utilities. All rural electric cooperatives, however, remained subject to public utilities commission regulation for certain matters, including those matters addressed in New Hampshire's restructuring statute, RSA 374-F.

VII. Subsequent to the amendment of RSA 301:57 and RSA 362:2, the provisions of RSA 374-F were amended to include specific requirements concerning the provisions of transition and default service. The public utilities commission has implemented the amended provisions by issuing orders which limit the ability of all utilities, with the exception of municipal utilities, to aggregate on behalf of, or otherwise make electric energy available to, their distribution ratepayers, except pursuant to the provisions of RSA 374-F:3, V and RSA 374-F:7.

VIII. The restrictions contained in RSA 374-F:3, V and RSA 374-F:7 impose upon rural electric cooperatives certain transactional expenses, delays, and operational restrictions which contribute to higher electric costs and hinder a cooperative's ability to fulfill its mission of making affordable electric service available to its membership on a not-for-profit basis.

IX. A rural electric cooperative whose membership has elected to limit the scope of regulation imposed upon the cooperative should be subject to the provisions of RSA 374-F concerning transition service and the retail supply of electricity to the same extent as those provisions apply to a municipal utility.

29:2 Public Utility; Regulation of Rural Electric Cooperatives. Amend RSA 362:2, II to read as follows:

II. For the purposes of this title only, rural electric cooperatives for which a certificate of deregulation is on file with the public utilities commission pursuant to RSA 301:57 shall not be considered public utilities; provided, however, that the provisions of RSA 362-A, 363-B, 371, 374:2-a, 374:26, 374:26-a, 374-A, 374-C, 374-F, and 378:37-39 shall, unless otherwise provided herein, be applicable to rural electric cooperatives, without regard to whether a certificate of regulation or deregulation is on file with the public utilities commission. The provisions of RSA 374-A and the provisions of RSA 374-F:3, V(b) and RSA 374-F:7 shall [apply] be applicable to rural electric cooperatives for which a certificate of deregulation is on file with the public utilities commission to the same extent as municipal utilities.

29:3 New Section; Rural Electrification Associations; Financial Responsibility. Amend RSA 301 by inserting after section 61 the following new section:

301:62 Financial Responsibility. A rural electric cooperative which has filed a certificate of deregulation with the public utilities commission shall not, without prior authorization of the commission, after consent to jurisdiction pursuant to RSA 301:60, notice, and hearing, charge, through its stranded cost recovery charge, delivery services rates, or any other rate or surcharge, any member who does not purchase generation services provided by or acquired through such rural electric cooperative, for any costs of generation services incurred by such rural electric cooperative after retail competition is certified to exist pursuant to RSA 38:36, except for electric power consumed directly by the rural electric cooperative. Nothing in this paragraph shall prevent any member or members from entering contracts of any duration with such rural electric cooperative for the purchase of generation services and being bound by their terms, including damages for termination.

29:4 Findings. The general court finds that:

I. Commodity prices for oil and natural gas have substantially increased in the past year, resulting in higher wholesale electricity prices in New Hampshire and throughout the New England region. The higher wholesale electricity prices have prevented competitive electricity suppliers from being able to compete with standard transition service, causing them to exit the market or not even enter it in the first place.

II. Given the increase in wholesale electricity prices and the potential lack of a significant number of viable competitive suppliers, it is important that measures be taken to protect customers from the potential of a non-competitive and volatile electricity market. For these reasons, the public utilities commission should be given ample authority and flexibility in determining the appropriate length and terms of transition and default service for each electric utility.

III. A critically important measure that should be undertaken to protect customers from price volatility and a noncompetitive market is for the public utilities commission to delay the divestiture of Public Service Company of New Hampshire's ("PSNH") fossil and hydro generation assets until the commission determines such sale is in the public interest. Delay in the divestiture of PSNH's fossil and hydro generation assets would allow for the use of those assets to serve transition service. While this delay in divestiture dates is in the public interest today, the general court finds that competitive electricity markets should provide benefits for customers over the long term. When the sale of PSNH's fossil and hydro generation assets is in the public interest, the public utilities commission should proceed with the sale of those assets in order to establish competitive electricity markets.

IV. The planned sale of PSNH's generation assets will be done in a manner consistent with RSA 374:30.

V. Changes to RSA 369-B and RSA 374-F which are designed to protect PSNH customers from current price volatility must be accomplished in a manner that shall not affect the validity, effectiveness, or finality of Order No. 23,550 issued by the public utilities commission, and does not diminish the value of the settlement agreement to either PSNH or PSNH's customers.

29:5 Electric Utility Restructuring Policy Principles; Transition and Default Service. Amend RSA 374-F:3, V(b)-(c) to read as follows:

(b) As competitive markets emerge, customers should have the option of stable and predictable ceiling electricity prices through a reasonable transition period, consistent with the near term rate relief principle of RSA 374-F:3, XI. Upon the implementation of retail choice, transition service should be available for at least one but not more than [4] 5 years after [the start of] competition has been certified to exist in at least 70 percent of the state pursuant to RSA 38:36, for customers who have not yet chosen a competitive electricity supplier. Transition service should be procured through competitive means and may be administered by independent third parties. The price of transition service should increase over time to encourage customers to choose a competitive electricity supplier during the transition period. Such transition service should be separate and distinct from default service.

(c) Default service should be designed to provide a [temporary] safety net and to assure universal access and system integrity. Default service should be procured through the competitive market [and based on short-term market prices,] and may be administered by independent third parties. The [cost] allocation of the costs of administering default service should be borne by the customers of default service in a manner approved by the commission. If the commission determines it to be in the public interest, the commission may implement measures to discourage misuse, or long-term use, of default service. Revenues, if any, generated from such measures should be used to defray stranded costs.

29:6 New Subparagraph; Electric Utility Restructuring Policy Principles; Alternative Transition or Default Services. Amend RSA 374-F:3, V by inserting after subparagraph (d) the following new subparagraph:

(e) Notwithstanding any provision of subparagraphs (b) and (c), as competitive markets develop, the commission may approve alternative means of providing transition or default services which are designed to minimize customer risk, not unduly harm the development of competitive markets, and mitigate against price volatility without creating new deferred costs, if the commission determines such means to be in the public interest.

29:7 New Section; Electric Utility Restructuring Policy Principles; Competitive Market Enhancement. Amend RSA 374-F by inserting after section 7 the following new section:

374-F:8 Competitive Market Enhancement. The commission shall take an active role in advocating for nondiscriminatory open access to the electric system for wholesale and retail transactions. The commission shall participate in the activities of all regional bodies that control the transmission of electricity and shall advocate for needed structural changes that will enhance competitive markets.

29:8 Limited Electrical Energy Producers; Retention of Savings by Electric Utility. Amend RSA 362-A:4-d to read as follows:

362-A:4-d Retention of Savings by Electric Utility. An electric utility that is party to an approved renegotiation of a commission order under RSA 362-A:4-c shall be entitled to retain [up to] 20 percent of the savings resulting from such renegotiation[, subject to order of the commission].

29:9 Electric Rate Reduction Financing and Commission Action; Definitions; Initial Transition Service End Day. Amend RSA 369-B:2, VII to read as follows:

VII. "Initial transition service end day" means [9] 33 months after competition day.

29:10 Authority to Issue Finance Orders; Transition Service. Amend RSA 369-B:3, IV(b)(1)(A)-(D) to read as follows:

(A) From competition day until [initial transition service end day] the completion of the sale of PSNH's ownership interests in fossil and entitlement interests in nuclear generation assets located in New Hampshire, PSNH shall supply all transition service and default service offered in its retail electric service territory from its generation assets and, if necessary, through supplemental power purchases in a manner approved by the commission. [After initial transition service end day] Once PSNH is no longer supplying transition service, to the extent applicable, any provider or providers of transition service shall have been chosen through a competitive bid process, administered by the commission, to provide such service or as determined under RSA 374-F:3, V(e). The commission may, if it finds it to be in the public interest, divide the competitive bid process into multiple categories or multiple competitive bids;

(B)(i) Transition service for residential customers, street lighting customers, and general delivery service rate G customers shall be available until at least 24 months after initial transition service end day or as extended by the commission under RSA 374-F:3, V. From competition day until [initial transition service end day] 21 months after competition day, the price of transition service for these customers shall be $0.044 per kilowatt-hour. [From initial transition service end day to 12 months after initial transition service end day, the price of transition service for these customers shall be $0.044 per kilowatt-hour, or the competitively bid price for transition service, whichever is less. From 12 months after initial transition service end day to 24 months after] From 21 months after competition day until initial transition service end day, the price of transition service for these customers shall be $0.046 per kilowatt-hour[, or the competitively bid price for transition service for these customers, whichever is less. If the competitively bid price exceeds these fixed prices, the differences shall be reconciled for these customers in the manner prescribed in the original proposed settlement];

(ii) From initial transition service end day to the day that PSNH ceases to provide transition service, the price of transition service shall be PSNH's actual, prudent, and reasonable costs of providing such power, as approved by the commission. Thereafter, the price of transition service, if offered, shall be the competitively bid price for transition service, or as determined under RSA 374-F:3, V(e);

(iii) At the end of the transition service period, up to 25 percent of the residential customers, street lighting customers, and general delivery service rate G customers who have not chosen a competitive supplier may be assigned randomly to registered competitive suppliers other than the transition service supplier or suppliers, if the commission finds such random assignment to be in the public interest. The commission shall develop procedures and regulations for this assignment process. Any random assignment must be affirmatively approved by an individual customer;

(C) Transition service for all other customers shall be available until at least 12 months after initial transition service end day or as extended by the commission under RSA 374-F:3, V. From competition day to [initial transition service end day] 21 months after competition day, the price of transition service for these customers shall be $0.044 per kilowatt-hour. From [initial transition service end day to 12 months after initial transition service end day] 21 months after competition day to the day that PSNH ceases to provide transition service, the price of transition service [for these customers] shall be PSNH's actual, prudent, and reasonable costs of providing such power as approved by the commission. Thereafter, the price of transition service, if offered, shall be the competitively bid price for transition service or as determined under RSA 374-F:3, V(e);

(D) Any difference between the price of transition service from competition day to [initial transition service end day] the day that PSNH ceases to provide transition service and PSNH's actual, prudent, and reasonable costs of providing such power as determined by the commission shall first be separated between the 2 groups of customers described in subparagraphs (b)(1)(B) and (b)(1)(C), used first to offset any differences described in subparagraph (b)(1)(B), and the net then reconciled for each group of customers either by changing the recovery end date, or by decreasing the stranded cost recovery charge, as the commission finds to be in the public interest;

29:11 Authority to Issue Finance Orders; System Benefits Charge. Amend RSA 369-B:3, IV(b)(6) to read as follows:

(6) The total system benefits charge shall be [fixed at $0.002] no greater than $0.003 per kilowatt-hour for 33 months from competition day divided between low-income assistance and energy efficiency/conservation programs. In the event that the commission finds that a significant amount of unencumbered dollars have accumulated in either program, and are not needed for program purposes, the commission shall refund such unencumbered dollars to ratepayers in a timely manner;

29:12 Electric Utility Restructuring; Implementation; System Benefits Charge; Energy Efficiency Programs. Amend RSA 374-F:4, VIII(b) to read as follows:

(b) [The system benefits charge referred to in RSA 374-F:3, VI shall be limited as follows:

(1) During the first year after competition is certified to exist pursuant to RSA 38:36, the portion of the system benefits charge due to energy efficiency programs, new renewable programs, and programs for low-income customers shall not exceed 2.5 mills per kilowatt hour for any utility whose rates are at or above regional average as determined by the commission.

(2)] During the first and second year after competition is certified to exist pursuant to RSA 38:36, the portion of the system benefits charge referred to in RSA 374-F:3, VI due to energy efficiency programs, new renewable programs, and programs for low-income customers shall not exceed 3 mills per kilowatt hour for any utility [whose rates are at or above regional average as determined by the commission].

29:13 Sale of PSNH Generation Assets; Date. Amend 2000, 249:7, II to read as follows:

II. The sale of PSNH fossil and hydro generation assets shall take place no [later] sooner than [July 1, 2001, unless the commission finds due to circumstances beyond its control that further delay is in the public interest] 33 months after competition day as defined in RSA 369-B:2, III.

29:14 Energy Efficiency Program. The public utilities commission shall phase-in, as quickly as can be effectively administered by Public Service Company of New Hampshire, an energy efficiency program for Public Service Company of New Hampshire that is funded at a rate of $0.0018 per kilowatt-hour to be allocated from the system benefits charge. The public utilities commission shall not decrease the amount of the system benefits charge allocated to low-income customers due to passage of this act.

29:15 Liquidation of Generation Assets. As part of the public utilities commission's administration of the liquidation of Public Service Company of New Hampshire's generation assets, the commission shall:

I. Allow and consider bids for the generation assets that may include proposals for providing transition service at a ceiling price for any customer class. Should such a bid be accepted by the commission, the commission shall consider such transition service commitment as part of any supplemental power purchase or competitive bid process under RSA 369-B:3, IV(b)(1)(A) and RSA 374-F:3, V. If such transition service is used, then it shall be considered the "competitively bid price" for purposes of RSA 369-B:3, IV(b)(1)(B) and (C), as applicable.

II. Expeditiously initiate and complete, in a manner consistent with RSA 374:30, the sale of nuclear generation assets located in New Hampshire required by the settlement in a manner that benefits all New Hampshire customers with stranded cost recovery obligations associated with such assets.

29:16 Effect on Finance Order. The provisions of this act shall amend the specific provisions of public utilities commission Order No. 23,550, approving the issuance of rate reduction bonds, issued by the public utilities commission in Docket No. DE 99-099. All provisions of RSA 369-B, including the amendments made by this act, and all provisions of commission Order No. 23,550, as amended by this act, shall remain in full force and effect and are hereby ratified and confirmed in all respects. The provisions of this act shall not affect the validity, effectiveness, or finality of commission Order No. 23,550, or the validity of any rate reduction bonds issued thereto. The general court finds that commission Order No. 23,550, as amended by this act, satisfies all of the conditions and requirements of RSA 369-B, as amended, including without limitation, RSA 369-B:3, IV, and is deemed to be authorized and issued pursuant to RSA 369-B, as amended, and that the implementation of such order, as amended, is in the public interest.

29:17 Proceedings on Municipal Petitions. The public utilities commission may stay or suspend any proceedings on petitions filed under 2000, 249:5 consistent with the provisions of this act relative to the divestiture of Public Service Company of New Hampshire assets.

29:18 Effective Date. This act shall take effect upon its passage.

(Approved: May 22, 2001)

(Effective Date: May 22, 2001)