New Hampshire’s largest electric utility, Eversource, told state regulators late last week that failures in wholesale energy markets could make it difficult for them to secure enough energy for customers this winter using their normal process.
Because the utility only distributes electricity, instead of owning plants that generate it, Eversource gets its energy supply from a competitive bidding process. Twice a year, the company calculates how much power customers will need over the next six months and signs contracts for that power with energy suppliers. The price of that power then gets directly passed on to ratepayers in the form of a rate adjustment. This is how the utility provides its default energy service, which about 84% of residential customers use.
The next auction date is coming up in early December; those prices would set the rate for next February through August.
But during a recent meeting of the state Public Utilities Commission, the company said it’s worried there might not be enough bidders to fulfill all of the power it needs to supply. And if there are enough bidders, the prices those bidders offer could be “extraordinarily high.”
Eversource’s New Hampshire customers are currently paying 22 cents per kilowatt hour for default service – more than double the rate of the previous procurement period.
This scenario has played out in other New England states where Eversource has conducted auctions in recent weeks, said utility attorney Jessica Chiavara.
She added that the bids received in Massachusetts and Connecticut are concerning, “indicating a breakdown in the competitive market.” A similar experience in New Hampshire could hinder the process of procuring power.
The warning comes as energy prices have already skyrocketed for many across New England, in the wake of Russia’s invasion of Ukraine. That war is contributing to the volatility of energy markets, Eversource said.
The company proposed that the Public Utilities Commission, the state’s Department of Energy, and the Office of the Consumer Advocate should get more involved in the process of buying power, saying the market conditions are unprecedented and how Eversource moves forward is a question that should include policymakers.
“It is no longer an easy math problem,” said Chiavara. “It's a totality of the circumstances problem.”
Specifically, there is a four-hour window during the day of the auction scheduled for December 6th in which Eversource must choose which contracts to sign. The company wants state regulators and energy officials to be present during those hours to help them make decisions.
If commissioners weigh in on the day of the auction, Eversource argued, it could avoid a situation where state regulators reject a proposed rate increase after contracts for power are already signed. A rejection of a rate increase would be unprecedented – and could have a chilling effect on energy markets, said Chiavara.
“The market will not respond favorably. Seeing those rejections, they will not be encouraged to bid again and will likely not bid again. And this will put customers at greater risk,” she said.
But New Hampshire’s consumer advocate, Don Kreis, and the state’s Department of Energy say it's not right for them to collaborate. Kreis called the proposal “illegal and inappropriate,” and said he would likely refuse to participate.
Kreis noted that having Public Utilities Commissioners in the room helping to decide what electricity rates should be would conflict with their role as regulators, who must review those rates and decide if they are reasonable.
Additionally, the Consumer Advocate and Department of Energy said they didn’t have the staff to advise Eversource on the quality of bids, and wouldn’t have time to hire consultants by December.
The PUC is currently investigating other options for the procurement process, and state officials said that could change their stances – but on short notice, changing the process would be problematic.
“We don't believe there's a role for regulators, including the DOE, the OCA, or in particular the commissioners, to be in the room giving any level of assurance to the company based on the decision it makes,” said David Wiesner, the legal director at the Department of Energy. "It is their decision to make."
If Eversource can’t buy enough power to meet demand through competitive suppliers, or if that power is too expensive, the company could procure power directly from the wholesale market, committing to buy electricity every day for the next day. The company would set a stable rate for 6 months, but would then reconcile the difference between that rate and what the power actually cost every day.
The state Department of Energy said that way of procuring power could expose ratepayers to even more price swings, and additional costs.
Note: Gregory B. Butler, who is an executive with Eversource Energy, is a member of Connecticut Public's Board of Trustees.
