Amid increases, NH Electric Cooperative’s rates remain lower than other utilities
Policy leaders are debating whether other state utilities should adopt the model
State leaders are discussing whether the NH Electric Cooperative’s more flexible model for purchasing energy should be adopted by other state utilities. (Photo by Dana Wormald | New Hampshire Bulletin)
The New Hampshire Electric Cooperative’s Facebook page was not a happy place the day after the co-op raised rates last week. Monitoring the page fell to Seth Wheeler, a spokesperson for the company.
Co-op members expressed their frustration and, Wheeler said, a lot of general disappointment. And he could understand that. “It’s just another cost that’s going up,” he said.
The co-op announced that its rates would rise to nearly 17 cents per kilowatt hour starting Aug. 1, a staggering 77 percent increase from the current 9.62-cent rate. For most households, that hike will mean paying around $38 more on their monthly electric bill.
But the dismay over rate increases isn’t the whole story: It misses the co-op’s success in moderating its rate increase better than all of the other state utilities. The cost of energy for co-op members remains significantly lower than for Eversource or Liberty customers, whose rates are doubling to 22 cents per kWh. And it’s not a one-time achievement, Wheeler pointed out: “Our power rates are consistently lower than most of the investor-owned utilities.”
That’s led some, including the consumer advocate, to question whether the co-op’s more flexible model for purchasing energy should be employed by the state’s other utilities in order to lower costs for customers. While some policy experts are concerned about this approach, decision makers in the state are considering it.
While the Public Utilities Commission approved rate increases for Eversource and Liberty in June, it also indicated it would investigate how utilities procure power and whether the process can be improved. Gov. Chris Sununu has indicated that he both supports this conversation and will participate in it.
The state utilities “are looking at additional regulatory flexibilities,” Sununu said at a press event on the energy crisis in June. “I’m asking all of the major utilities – Liberty, the co-op, Unitil, and Eversource – to really come to the table with the consumer advocate, the commissioner, in the next week or so to really look at the other regulatory opportunities that we have.”
The co-op, which is member-owned and democratically run, currently has more leeway in purchasing power than investor-owned utilities, such as Eversource, Liberty, and Unitil. Those utilities have to ask the PUC for approval on rate increases, among other things. Utilities don’t make a profit on the energy they sell; rather, the rates they secure are passed on to ratepayers without a markup. The co-op, which is a nonprofit, makes money on other things, such as the cost of delivering energy to its members, while investor-owned utilities have a guaranteed return on investments approved by the PUC for initiatives like improving the grid.
The way the co-op buys energy has allowed it to keep rates lower because the organization goes to market more frequently and with more flexibility than the other utilities. It engages in a process called active portfolio management, securing a lower price for power when it’s available. It has multiple contracts of various durations, starting at different times.
“We layer contracts,” Wheeler said. Unlike the other state utilities, “we don’t go out and fulfill six months’ worth of power. We have contracts that are layered in time and quantity and from different sources, so that we can have more flexibility to find better deals on the market.”
Other utilities, in contrast, put out requests for proposal two times per year. They don’t disclose how many bids they receive, but they typically choose the cheapest one.
The co-op is taking other innovative steps to keep costs down. Those include the state’s largest battery, which the co-op calculates will save $2.3 million over the next 12 years. Wheeler did not have an estimate on how much this will save a typical ratepayer on their monthly electric bill. If the savings were distributed evenly among the co-op’s 85,000 members, those members would save around $27 over the 12-year timeframe.
A battery saves money by charging during the time of day when electricity is cheap, such as at night when demand for electricity is low, and providing electricity when it’s expensive, such as in the evening when people are home from work.
The co-op employs smart meters enabling them to charge different rates depending on the time of day, incentivizing energy use when it’s cheap.
And the co-op has a 2.5 megawatt solar array in Moultonborough, enough to power around 600 homes, Wheeler said. The array is located within the co-op’s service area, avoiding transmission costs – the cost of pushing power through high-voltage lines to transport it long distances. Those savings are also passed on to co-op members.
Risk and reward
But applying some of these approaches elsewhere isn’t without risk.
Investor-owned utilities pay more for energy because the risk of energy prices fluctuating is borne by the wholesale supplier. In contrast, the co-op and its members are on the hook to pay if energy prices fluctuate.
Eversource and Liberty lock in all of the supply they need, while the co-op does not. Therefore the co-op has both more flexibility and more risk.
If other utilities were to adopt the co-op’s model, that risk would be passed on to their customers, according to Consumer Advocate Don Kreis.
Kreis likened it to fuel oil during a winter heating season: A buyer can lock in a price for the whole winter or they can assume the risk of market fluctuations.
Clif Below, a former PUC chair and longtime energy policy expert, worries that asking the investor-owned utilities to actively manage their portfolios could be a major step backward.
His concern is that “utilities move back into more of a monopoly control over owning the customer.”
“What they’ll say is, ‘OK, you want us to manage your portfolio, we need to lock in the customer base,” Below said. If utilities are procuring long-term contracts, he said, they could ask for assurances that customers couldn’t leave to procure cheaper power elsewhere.
To Below, that would be like going back 26 years, when the utilities did have monopoly control. Below and Sen. Jeb Bradley, a Wolfeboro Republican, rewrote state policy in 1996 to restructure the utilities and bar them from owning power generation – such as the co-op’s solar array.
Currently, customers are able to buy energy from a third-party competitive supplier to get cheaper power. Commercial and industrial customers have turned to this option, but most residential ratepayers have not, something Below and others are working to change through community power.
But in the three years since the utilities commission was authorized to create rules to enable community power, attempts to expand it have been delayed. In light of the recent price hikes, that delay is significant because it means another potentially cheaper alternative won’t be available until the spring of 2023 at the earliest.
“I’m frustrated, just like Don’s frustrated, because I think if the PUC had moved ahead in the first year that they were authorized to write rules to enable this instead of waiting for three years to do it, then we’d already be up and running,” Below said.
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