Prohibits divestiture of PSNH fossil fuel power plants until electricity prices overall stop fluctuating more than 10% each year.
Note: This write-up was last updated in April 2017.
In 2006, after negotiations among representatives from the Legislature, Public Service of New Hampshire (PSNH) and various environmental groups, New Hampshire enacted a law requiring PSNH to install pollution control technology known as a scrubber to reduce by 80% emissions of mercury at its coal-burning Merrimack Station in Bow, NH. In 2006, the cost of the scrubber was estimated to be $250 million.
By late 2008, however, the cost had nearly doubled to $457 million. There is a chance that federal requirements to reduce climate-altering carbon dioxide emissions through some form of carbon pricing could be implemented during the expected life of the plant. Some people estimate that carbon fees could significantly increase the cost of electricity from Merrimack Station during its projected life. Also, it is possible that additional pollution abatement requirements will be mandated in the future.
State authorities approved the scrubber project and construction began in March 2009. In 2009, certain commercial ratepayers asked the New Hampshire Public Utilities Commission (PUC) to review the scrubber cost increase. The PUC's authority is established and limited by state law. The PUC declined to review the costs of the scrubber before the project was completed. The PUC based its decision on the basis that state law mandated that the scrubber be constructed. The commercial ratepayers appealed the PUC's decision to the state Supreme Court. In August 2009, the court rejected the appeal on the basis of standing; ratepayers hadn't yet been charged for the scrubber. The commercial ratepayers also advocated for a law requiring a far-reaching study related to the scrubber, but the law was not enacted. Challenges by environmental advocates and merchant power generators, some of whom would like to see the plant retired, have subsequently been lodged under federal and state statutes and regulations.
In November 2011, PSNH said the scrubber would come in $35 million under budget, chalking up the savings to a dip in the cost of materials and lower-than-anticipated construction costs. The total estimated project cost shrunk to $422 million for the scrubber, which started operating in September 2011. New Hampshire Business Review in November 2012 called the scrubber "a major contributor to PSNH's preliminary estimate of a January rate increase from 7.11 cents per kWh, to 8.97 cents." The sentiment was subsequently confirmed by PSNH spokesman Mike Skelton, speaking with New Hampshire Public Radio.
In April 2012, PSNH announced that the scrubber had cut mercury emissions by 98 percent, though the announcement has hardly mollified critics of the company and its coal-fired plant in Bow.
In 2014, the PUC evaluated whether PSNH could recover the cost of the scrubber through ratepayer increases. PSNH argued that the Legislature clearly mandated the scrubber's installation, so ratepayer increases are fair. Opponents argued that PSNH should have returned to the Legislature and/or shut down the Bow plant when the cost of the scrubber increased.
In January 2015, the PUC agreed to let PSNH negotiate a settlement over scrubber costs with the Legislature. In March 2015, PSNH—now part of Eversource Energy—announced a settlement to cover most of the costs of the scrubber. First, Eversource Energy will sell all of its power plants. It will also write off $25 million in scrubber costs. In return, the state will allow ratepayer increases to cover the remaining costs of the scrubber and any other losses on the power plant sales.
The settlement agreement was approved by the PUC in July 2016.
PROS & CONS
The 2006 law requires PSNH to install the scrubber and PSNH must comply with state law:
Businesses and homes need electricity on demand:
- Base load generation, such as coal and nuclear plants, provide the backbone of our energy supply because they run when we need them, and can be put in service on demand. Emerging technologies, such as wind and solar power, will play an expanding role in meeting energy needs, but until they can be dispatched on demand the reliable generation from Merrimack Station is needed.
The scrubber is state of the art technology that will create important environmental benefits:
- Mercury, a dangerous neurotoxin, will be reduced by over 80%. Less mercury in the air and water will be safer for people, and especially for pregnant women and children. Sulfur dioxide will be reduced by over 90%. Less sulfuric acid in the atmosphere reduces acid rain. Reduced mercury and sulfur emissions will promote healthier bodies of water, plant life and wildlife.
The scrubber project will create jobs:
- The project will generate over 300 temporary construction jobs. It will also create 5-10 new permanent jobs and preserve 100 existing jobs during a time of economic recession.
The plant will produce reliable electricity:
- Even with the cost of the scrubber factored in, ratepayers can expect the plant to produce energy at competitive rates over its expected life. Coal is a low-cost fuel for electricity generation, enabling PSNH to keep its rates competitive. To ensure price stability, our power supply should include a mix of fuel sources. Coal is less vulnerable to spikes in prices and fuel shortage than other fuels such as natural gas and oil and a proven, economical source of power.
All sides were represented in the decision to build the scrubber:
- The decision to build the scrubber was the product of a collaborative process with a diverse mix of interested parties. When the law mandating the scrubber was enacted, environmental groups, such as the New Hampshire Audubon Society and the New Hampshire Lakes Association, helped draft the law. They, along with the Society for the Protection of New Hampshire Forests and the New Hampshire Timberland Owners, hailed the law as an example of the positive results that can be achieved when the environmental community and business interests work together to improve the environment.
Ratepayers could incur significant costs if the project is cancelled:
- Ending the construction would leave ratepayers liable for claims by PSNH for costs incurred thus far, without receiving a corresponding benefit. Because law mandated that the scrubber be built, PSNH will seek to recover everything spent on the project. If the project were shut down now, that claim would be for approximately $250 million.
The Bow plant is about out of steam and there are better solutions:
- At 40 years old, the plant is nearing the end of its useful life. For the $457 million cost of the scrubber, a brand new, efficient natural gas power plant could be built instead. Gas pipelines exist near the Bow site and natural gas supplies are increasing while their costs decline. A mercury scrubber would be unnecessary. Future carbon costs for a gas plant would be half those of burning coal, and future environmental risks would also be reduced.
There are ample and better alternatives to produce power:
- There is ample available additional generation capacity in the New England region today (about 8-10 Bow plants) to supply power to PSNH's customers.
Customers will potentially have to absorb more costs:
- Competitive merchant generators are already under-pricing PSNH in energy costs by 10-20%. If this trend continues (and/or is exacerbated by carbon costs), the Bow plant could become uneconomic to dispatch, saddling ratepayers with $457 million more in "stranded costs." Commercial and industrial ratepayers are already starting to leave PSNH for other suppliers, loading greater fixed cost burdens on remaining companies and residential ratepayers.
Pursuing alternatives will create jobs:
- Energy cost savings to commercial and industrial ratepayers by avoiding excessive and/or stranded costs from the scrubber project can be expected to create or retain more jobs. Further, renewable energy and energy efficiency initiatives typically create about twice as many jobs as traditional fossil generation on a MWh-by-MWh basis.
What is the harm of a study?:
- Nowhere is the juncture between past and future more evident than in the way we generate and consume energy. Careful study of all options is thus warranted before ratepayers are asked to bear new expensive, long-term energy infrastructure commitments.
Authorizes the Public Utilities Commission to proceed with a settlement with Eversource to sell its power plants.
Givies the Public Utilities Commission the power to force PSNH to sell its power plants. This bill also requires the state Site Evaluation Committee to address scenic impacts, sound impacts, fire protection plans, and more when evaluating wind farm proposals.
Requires the Site Evaluation Committee to approve any changes or additions to energy facilities that include construction expenses of greater than 15% of an energy facility's value.
Should PSNH be allowed to bill customers for the cost of the scrubber?
The scrubber has been operational since 2012, and a settlement over how the costs will be repaid is finalized. As a result, this page is no longer being updated.
If you think this issue should be moved to active status, let us know.
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