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New Hampshire Issues Final Plan for Electric Restructuring

Fortnightly Magazine - April 15 1997

value of the PSNH non-Seabrook assets and an acquisition premium of approximately $800 million to be determined according to an established formula by the commission, and reflected on the utility's "stand-alone" books as an acquisition premium to be recovered through rates." The agreement calls for recovery of $425 million of the acquisition premium during the fixed-rate period after which any excess "will be amortized on a straight-line basis and recovered with a return over a period ending 20 years." PSNH argues that in approving the preceding language, the commission guaranteed recovery of the acquisition premium through rates after the fixed-rate period.

The agreement also had established the FPPAC to allow the utility to recover nonbase-fixed and variable power costs. The costs included purchased power costs associated with deliveries of Seabrook power to the utility by its affiliate, North Atlantic Energy Corp., a special-purpose subsidiary of Northeast Utilities that owns a 35.98-percent interest in the Seabrook plant. The FPPAC recovery period was set at 10 years, after which "the cost of fuel and purchased power shall be recovered in the manner established by the NHPUC." The utility argues that the adjustment clause provision creates an obligation that the commission guarantee full recovery of the named costs after the 10-year period.

In rejecting PSNH's entire claim (that the Feb. 28 decision violated the bankruptcy agreement), the commission relied in large part on its overarching responsibility to set just and reasonable rates. The regional average cost cap strikes the appropriate balance between ratepayers and investors and "reflexive inclusion of all costs" is not required in meeting this goal, the commission said. Further, in the commission's view, the state Legislature provided "renewed authority" to adopt such an approach in its 1996 restructuring law wherein it encouraged the commission to bring rates "as close as possible to competitive regional rates." It did not delegate any authority to "develop special exceptions for PSNH," the commission added.

According to the commission, PSNH has misinterpreted the language of the rate agreement and has ignored its own statements and forecasts made in support of the financial plan. According to the commission, the language of the rate agreement cannot be read to guarantee recovery of such a large sum over such a long time period, any more than the rate plan can be interpreted to bind the utility to set its own rates at the regional average. Looking back at the performance of the approved rate order, the commission observed that rates had risen unacceptably despite the bankruptcy plan, and that its new restructuring plan, with customer choice, would do a better job of keeping rates low. It also pointed out that PSNH had claimed rates envisioned under the financial reorganization plan would "approximate those of the regional average after the fixed-rate period." %n7%n

The PUC added that the rate agreement contained no values for what must be recovered through the FPPAC from year 8 through year 10. In establishing such values, the commission will take into account the fact that PSNH like other utilities in the state "has no obligation to