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N.H. Finds Power to Open Electric Franchises

Fortnightly Magazine - August 1995

In an important case involving electric retail competition, the New Hampshire Public Utilities Commission (PUC) has made a series of legal rulings favoring a proposal by Freedom Electric Power Co. to purchase and resell power to end users currently served by Public Service Co. of New Hampshire (PSNH). The PUC ruled that franchises granted to electric utilities in the state are not exclusive and that the proposed activities would make the energy company a public utility if approved and implemented. In its decision, the PUC focused on a "unique state constitutional directive" in favor of free markets and competition.

While postponing a final decision on allowing the proposed competitive service, pending further investigation, the PUC did point to a "thriving market of nonutility sources of generation" to support its conclusion that competition need not duplicate facilities or waste economic resources.

The PUC had earlier required Freedom to file detailed business plans and technical and financial specifications for its proposal to purchase wholesale power for delivery to the PSNH transmission system and then sell the power at retail to end users in close proximity to PSNH's transmission lines. The latest PUC findings set the stage for a review of whether to permit retail competition in the electric industry. The order also clears the way for Freedom to petition the Federal Energy Regulatory Commission for access to PSNH's transmission system.

According to the PUC, Freedom intends to own or operate plant, such as a service drop for each customer, sufficient to qualify the company as a public utility under state law. It cautioned, however, that the ruling does not mean that a pure marketer or broker of energy services (one who owns or operates no facilities in the state) will qualify as a public utility. On the contrary, current New Hampshire law contains no express provision regulating marketers or brokers that would likely play a role if retail competition is permitted.

While acknowledging that, historically, utility franchises had been considered exclusive and that its own orders granting such franchises have referred to "exclusive service territories," the PUC found no state law mandating exclusivity or prohibiting authorization of competition. It said its own orders granting exclusive service territories could not be viewed as permanent in light of its express authority to alter or amend any of its rulings.

The PUC added that state court rulings support its conclusion that utility franchises have been exclusive as a matter of practice but not as a matter of law. Nevertheless, the findings mark only the beginning of an inquiry into whether the state would benefit by a move to allow competition in the electric industry. According to the PUC, if the competition envisioned by Freedom is found to be in the public good, the PUC still must decide the "form and degree" of regulation that would be appropriate. It also said it would have to work out the extent of its jurisdiction over wheeling rates and stranded cost recovery. Re Freedom Electric Co., DE 94-163, Order No. 21,683, June 6, 1995 (N.H.P.U.C.).

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