State consumer advocate sees big rate hike in ISO proposal

New Hampshire Business Review, Nov 26, 2004

State Consumer Advocate Anne Ross has joined with attorneys general, business advocates and energy companies around New England in opposing a proposed federal policy change.

The proposed change is being pursued by the Independent System Operator of New England, or ISO-NE, before the Federal Energy Regulatory Commission.

ISO-NE says & change would create more economic incentives for energy companies to build power plants in New England, with extra incentives to build them in areas such as Greater Boston and Fairfield County, Conn., where supplies are tight. After a spree of new power plant production in the late 1990s, proposals for new plants have decreased. The incentive would require New England ratepayers to pay an additional $10.4 billion to cover subsidies to builders of the power plants over a five-year period, starting in 2006.

The ISO proposal provides incentives to construct more electric plants by moving away from the current system, where competitive markets set prices. Instead, it would return to a system of price-setting by FERC.

"FERC has generally been sympathetic to the transmission owners and generation owners," Ross said.

If FERC approves the plan, according to Ross, New Hampshire ratepayers will be faced with a significant rate hike, from 0.7 cents per kilowatt hour to 3.06 cents per kilowatt hour. According to Ross, that increase would translate into a $15 to $20 a month hike in a typical New Hampshire resident's electric bill.

The rate increases would be the largest in New England history, Ross said, adding that there would be no additional benefits or guarantees that new generating plants will be built.

Ross said - that New Hampshire customers, already paying more for fuel, can't afford to pay millions in subsidies to wholesale generators. There are too many people in New England already struggling to pay their electric bills, she said, adding that this plan would have a "dire" effect on low-income ratepayers.

Ellen Foley, spokeswoman for ISO-NE, which manages the bulk power grid for New England, said ISO-NE estimates rates would be limited to 2 percent. Foley added that the plan is a marketplace enhancement that's needed to ensure longterm reliability of the bulk power system.

"It's like a blueprint for investment," Foley said. "If we don't have a capacity market that works, it's like running a school system to pay for teacher salaries or for books, but not having enough revenue to maintain the building or build new ones as enrollment grows. We have to make sure that the power grid is reliable, and that the wholesale electricity marketplace is efficient."'

The proposal sparked the formation of the Consumer Coalition Supporting New England Ratepayers, which filed testimony Nov. 4 with FERC in opposing the plan.

In addition to Ross, the coalition includes Massachusetts Attorney General Tom Reilly, Rhode Island Attorney General Patrick Lynch, Associated Industries of

Massachusetts, The Energy Consortium, NStar Electric and Gas Corp., the Rhode Island Division of Public Utilities and Carriers and Strategic Energy LLC.

The coalition argues that the proposal requires customers to make "excessive" payments to generators beyond the established criteria needed for reliability and discourages efficient, cost effective electric generation.

Martin Murray, a spokesman for Public Service of New Hampshire, told the Nashua Telegraph that the company has not taken a position on the issue.

"We're in kind of a unique position," Murray said. "In large part, we're insolated from this proposal because we still own and operate generation plants."

PSNH meets about 80 percent of the power demanded by its customers, and purchases about 20 percent from the market, he said.

"So if this proposal were implemented, it could potentially impact that portion of our load that we don't meet," Murray said. He could not comment on what potential impact the proposal might have on a PSNH customer because the numbers aren't yet fully known, he said.

The FERC is expected to make a decision in June 2005 on the base price for capacity.