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Opinion: Energy Policy Shouldn’t Cost Ratepayers

Published Monday Jul 1, 2019

Author Jim Roche and Kat Lehmann

Opinion: Energy Policy Shouldn’t Cost Ratepayers

State legislators continue to pursue energy policies that are heavily subsidized by consumers and further burden them by taking away rebates. These actions fall especially hard on manufacturers that drive the state’s economy, and other large energy users such as hospitals, colleges, corporate campuses, banks with myriad branches, grocery stores, retailers, and other commercial enterprises. This also hits their employees, many of whom struggle to meet basic living expenses.

Clean energy should be part of NH’s approach to addressing high electricity costs. While the state needs solar, wind, hydro, nuclear and natural gas, we also need to ensure reliable power at all times and at rates that are at least stable, if not declining.    

New Hampshire is part of a six-state power grid managed by Independent System Operator (ISO) New England. The region has seen a substantial shift over the past 20 years in how electric energy is generated—from oil and coal to natural gas. In 2000, almost 35 percent of the region’s electric generation came from coal and oil and 13 percent from natural gas. Today, nearly 50 percent of electricity generation comes from natural gas and 2 percent comes from coal and oil. One benefit of relying more heavily on natural gas is the dramatic decrease in greenhouse gas emissions we’ve experienced as a result.

During that same period, electricity from renewables such as  solar, wind and hydro, has increased from 12 to 16 percent.

While renewables are a growing part of power generation, there are also growing subsidies to prop them up. The Business and Industry Association of NH (BIA) objects to policy makers stepping in to dramatically affect market forces and forcing ratepayers to underwrite the development of favored renewables.

Already, NH electric customers absorb prices that are 50 to 60 percent higher than the national average. Rates for large industrial users are more than double the U.S. average. Many bills under serious consideration by legislators this session not only fail to mitigate or lower these costs, but actually add to them.

Concerns About Changing the Energy Mix
The biggest potential rate effect being considered by the legislature is a proposal to change NH’s Renewable Portfolio Standard. States across the country have adopted Renewable Portfolio Standards that require a portion of electric utilities’ mix of generation to come from renewable sources such as wind, solar and thermal. Currently, NH requires that 17 percent of utilities’ mix of energy come from renewables; that percentage climbs to 25 percent by 2025.

Two pieces of legislation, which already passed the Senate and are now in the House, seek to raise that to 56 percent by 2040. This increase in the 21-year period between 2019 and 2040 will cost NH ratepayers—businesses, homeowners and renters alike—between $4 billion and $5 billion. This is more than $200 million per year that customers will have to pay.

Beyond the price tag, this Renewable Portfolio Standard has other challenges. It’s not clear that there will be enough renewable energy generated in the region to meet a 56 percent obligation by 2040. And  because wind and solar energy are intermittent, there are serious questions about adequate backup from either fast-start natural gas power plants or large batteries to ensure that we can maintain 24/7/365 reliability. Many believe that battery technology is nowhere near meeting the level of storage capacity required to ensure uninterrupted power to customers.

ISO New England, which is responsible for regional energy security and a competitive energy market, released the results of an Operational Fuel Security Analysis in 2018. ISO concluded that in 19 of 23 market scenarios, rolling blackouts will be necessary to meet peak demand by winter 2024/2025.

The fact is, the region is already hard-pressed to meet current electricity demand. Accelerating development of renewables through heavy subsidization by ratepayers is an expensive gamble with incredible risk.  

RGGI Rebates
Another recently passed Senate bill eliminates rebates associated with the Regional Greenhouse Gas Initiative (RGGI), a nine-state agreement to cap and reduce greenhouse gas emissions by selling allowances through auctions.

While some of the auction proceeds in NH are dedicated to specific goals, such as energy efficiency, most proceeds are rebated directly to utility customers. Rebates to residential and business customers have been a part of RGGI since its inception. Legislation eliminating this rebate will add another $11 million in costs to NH electricity customers.

Net Metering
Many legislators are also seeking to raise the cap on net metering from 1 megawatt to 5 megawatts. Net metering allows consumers who generate excess electricity through their own solar arrays, wind generators, or other means, to receive credit for excess energy sent back to the grid.

While the BIA has no issue with raising the cap on net metering, we are concerned about the credit amount given to those who generate excess electricity. The NH Public Utilities Commission established a threshold below which electric utilities avoid costs they would otherwise pay by obtaining power directly from net metering customers. This “avoided cost” includes the wholesale cost of power and ancillary services related to generation. Anything paid to net metering customers above the avoided cost means other ratepayers are subsiding them. It is not fair to all ratepayers and adds to the cost of electricity.

Instead of protecting ratepayers to the greatest extent possible from the high cost of electricity, many policy makers seek to advance their priorities by further burdening them. If we seek to retain businesses located here and help them grow, particularly manufacturers and other large energy users, policy makers should be working to lower electricity costs, not increase them.

Jim Roche is president of the Business and Industry Association of NH (BIA), and Kat Lehmann is director of public policy for the BIA.

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