Ready for an increase of more than 30% on the supply portion of your electricity bill? Well, if you have PSNH as a supplier, maybe sit down before opening this month’s bill. And, if the electricity situation was not bad enough, a group of citizens and environmental activists have just filed a motion with the Public Utility Commission to reopen hearings from a decade ago.
Despite heavy advertising and public notices, New Hampshire’s public at large has not paid a lot of attention to the PSNH per-kilowatt-hour (KWH) rate for providing electricity. The public will certainly start paying a little more attention when this month’s electric bills start arriving at their homes. And then there are the many electricity providers who have suddenly started advertising lower rates. What is this all about anyhow?
What has happened is that Public Service of New Hampshire (PSNH) has received approval to raise its rates from 7.1 cents per KWH to 9.5 cents per KWH. Reasons for the need for increase are many but the most recent example is the just completed EPA mandated scrubber system upgrades to the PSNH Bow generation station at a cost of a little over $400 million. PSNH is a regulated electricity generator and provider and it cannot raise rates without the approval of the Public Utility Commission (PUC). PSNH generates electricity through a combination of natural gas, coal, and nuclear generating plus “renewable” sources including Northern Wood Power (biomass, 50 MegaWatt) and nine hydroelectric power plants (65 MegaWatt total). PSNH is the only supplier in New Hampshire that also owns generating and distribution assets.
During the late 1990’s, New Hampshire started working on laws that were aimed at deregulating the electricity industry. The initial laws in 2001 separated the distribution and supply portions so they could be sold and billed separately. PSNH was the only utility that retained ownership of generation, distribution, and supply capabilities. The other suppliers such as National Grid owned some transmission equipment but not the generating capacity inside New Hampshire.
Until recently under the new laws, supplier marketing activities were focused mostly on businesses with high consumption of electricity. During that time, there simply was not enough of a profit margin for alternate suppliers to sell electricity to the relatively small scale uses of residential customers.
But, on January 1, 2013, the PSNH per KWH charge will start showing up in this month’s bills. That means that for an “average” household with a winter usage of about 550 KWH, the increase will be a little less than $10 per month, and much more if air conditioning is used in the summer. The increase in PSNH supply rate is being offset to some extent by a small decrease in the “stranded cost recovery” fee. But, this shifting of some cost from the delivery charges to the supply charges has actually made the difference between PSNH rates and other suppliers’ rates higher.
On recognizing the upcoming cost differential between their contract rates and the new PSNH rate, several electricity suppliers have been marketing through mail, TV and radio advertising, and even multi-level marketing.
These companies contract to buy electricity from any available sources in the New England grid markets. They contract for large quantities and then sell that to their contracted customers, either businesses or residential. They are not bound by the PUC rate regulations and they can charge whatever the market will bear for their electricity. Almost overnight, for residential customers, their rates suddenly have come from being almost the same as PSNH to offering a 25% savings without altering their pricing at all.
There are many generating companies within the New England grid, ranging from very small solar or wind stations to the very large nuclear plants. Until recently, coal-fired generation was the “bread and butter” of the industry but natural gas has suddenly become so cheap in relation to coal that coal-fired stations are operated only when critically necessary. Fracking in the Marsalis Shale Region, which runs from central New York and down through West Virginia has caused a glut of natural gas with resulting lower prices. It is anybody’s guess as to how long natural gas prices will remain so low and the low prices of natural gas are a large factor in the lower rates from the alternate suppliers.
The alternate electricity suppliers can buy electricity from the lowest cost generator or they can offer customers green (renewable source) electricity. All-green sources can be the same or even higher than the new PSNH rates depending on many factors. Rates shown in alternate supplier advertising is usually the lowest cost electricity generated by any means.
When considering an alternate electricity supplier, first consideration is to be certain that they are registered with the New Hampshire Public Utility Commission (the companies listed on the official PUC page have passed the vetting process). Also, check other reputable sources such as the Better Business Bureau or even neighbors or friends.
It is also important to note that the alternate suppliers provide services mostly by having their customers sign a contract. That contract should be reviewed by the customer in detail since, similar to cell phone contracts, most contain early termination fees or other charges that might not be regulated by the PUC.
Note that any cost savings would apply only to the supply portion of the bill. The delivery charges will remain the same. Also, if you do leave PSNH and go to an alternate supplier, PSNH would still be the delivery company that would send the bill and you would call them for outages or other physical services.
According to the Concord Monitor, PSNH lost over 2000 customers in one day, on December 31, 2012. With that scope of migration of its base customers, PSNH and regulators are now concerned with what will happen when only a relatively few customers are left with PSNH and its operating costs are not being covered without drastically raising rates even higher. The situation is not quite dire yet but spiraling costs and decreasing revenue can become major issues that will need to be tackled soon.
The new motion that was filed with the state and upcoming hearings can have a significant impact on how electricity is delivered and its rates.