DR 98-025
            New hampshire Electric Cooperative, Inc.
                      Base Rate Proceeding
   Order Approving Settlement Stipulation on Permanent Rates
                    O R D E R   N O.  23,104
                        January 12, 1999
       APPEARANCES: Dean, Rice and Kane by Anne Davidson, Esq.
     on behalf of New Hampshire Electric Cooperative, Inc.; Kenneth
     Traum for the Office of Consumer Advocate on behalf of
     Residential Ratepayers; and Eugene F. Sullivan, III, Esq. for the
     Staff of the New Hampshire Public Utilities Commission.
               On April 14, 1998, the New Hampshire Electric
     Cooperative, Inc. (NHEC or Company) filed a petition to increase
     base rates by $4.68 million or 5.1 percent on an annual basis
     effective July 1, 1998.  NHEC also requested approval to recover
     approximately $400,000 of incremental setup costs related to
     electric industry restructuring through a separate surcharge
     mechanism.  The base rate request combined with the
     restructuring-related costs would result in a 5.5 percent overall
     increase in rates. The Company's filing included the pre-filed
     testimony and exhibits of Heather K. Saladino, Manager of Rates
     and Finance for NHEC, and the testimonies and exhibits of two
     consultants, Dennis Eicher and Peter Williamson.   
               On May 12, 1998, NHEC submitted a motion for Temporary
     Rates effective July 1, 1998, pursuant to RSA 378:27, based on a
     5.1 percent rate increase for all classes of customers.  On May
     12, 1998, the Commission suspended the proposed rate increase
     pending an investigation pursuant to RSA 378:6 and set a hearing
     on temporary rates.  See Order No. 22,926.
               On June 2, 1998, Commission Staff (Staff) pre-filed the
     testimony of Henry J. Bergeron of the Commission's Finance
     Department and the Office of Consumer Advocate (OCA) pre-filed
     the testimony of its Finance Director, Kenneth Traum.  At a
     prehearing conference on June 10, 1998, the Commission granted a
     June 5, 1998 petition to Intervene filed by Public Service
     Company of New Hampshire (PSNH). 
               NHEC, OCA, PSNH and Staff signed a Settlement
     Stipulation on Temporary Rates (Settlement on Temporary Rates)
     that allowed NHEC to set temporary rates at current levels as of
     August 1, 1998.  The Settlement on Temporary Rates also allowed
     rates to be increased across the board by $4.146 million on the
     date of customer choice.  However, if customer choice were
     delayed beyond October 1, 1998, the temporary rate increase would
     be effective on October 1, 1998.  On October 5, 1998, the
     Commission issued Order No. 23,032 which approved the temporary
     rate increase based on the Settlement on Temporary Rates.
               A final settlement stipulation on permanent rates
     (Stipulation) supported by NHEC, OCA and Staff was submitted to
     the Commission on December 3, 1998.  A duly noticed hearing on
     the Stipulation was held on December 9, 1998.  Heather K.
     Saladino, Manager of Rates and Finance, testified in support of
     the Stipulation.
               The Stipulation would allow NHEC the same level of
     permanent rates for all customer classes that was authorized by
     the Commission on October 1, 1998 pursuant to the Settlement on
     Temporary Rates, i.e., an increase of $4.146 million.  NHEC
     estimates that the rate increase, based on NHEC's pro forma test
     year, will result in a Times Interest Earned Ratio (TIER) of 1.38
     and a Debt Service Coverage (DSC) ratio of 1.53 which will
     enhance NHEC's efforts to reverse its negative equity position. 
               The Stipulation would allow NHEC to defer its Maine
     Yankee litigation costs associated with the early closure of the
     Maine Yankee nuclear facility until the earlier of July 1, 1999
     or customer choice commences.  At that time, NHEC will make a
     surcharge filing which indicates the amount of litigation costs 
     requested and the rate to recover those costs over a twelve month
     period, subject to Commission review.
               Although the Settlement on Temporary Rates stated that
     NHEC could reconcile its permanent rates back to August 1, 1998
     once permanent rates were approved, the Stipulation indicates
     that NHEC agrees to waive such recoupment.  
               NHEC will file a proposal to implement a Targeted Low
     Income Program within 60 days after the Commission issues an
     order on permanent rates.  NHEC will implement the Targeted Low
     Income Program 60 days after its filing or as ordered by the
     Commission.  NHEC shall recover its Targeted Low Income Program
     costs through a surcharge on its members' bills.  NHEC also
     agrees to continue its efforts to reduce its operating costs
     while maintaining its present level of tree trimming.  
               The Commission is required to establish just and
     reasonable rates pursuant to RSA 378:28.  Permanent rates
     resulting from the Stipulation would remain the same as those
     approved for temporary rates. Combined with NHEC's recent filing
     in DR 98-202, the Power Cost Recovery proceeding, NHEC's overall
     level of rates will not change. See Order No. 23,091 (December
     21, 1998).  Based on our review of the record in this proceeding,
     we will approve the Stipulation.  
               We appreciate the efforts of NHEC, OCA and Staff to
     reach agreement on permanent rates.  NHEC's rates, now unbundled
     pursuant to Order No. 23,013 in docket DR 98-097, are the highest
     in New Hampshire and perhaps in New England.  The unbundling of
     NHEC's rates reflects NHEC's and the Commission's interests in
     moving the members of NHEC to retail choice.  Unbundling also
     clearly indicates that the largest portion of NHEC's costs are
     due to its disputed wholesale power contract with PSNH, NHEC's
     power supplier for approximately 90 percent of its wholesale
     requirements.  The wholesale contract is subject to the Federal
     Energy Regulatory Commission's (FERC) interpretation and the
     rates are subject to FERC approval.  
               The Stipulation would allow NHEC to permanently
     increase its base rates by $4.146 million or 5.0 percent,
     approximately.  The Rate D residential members' rate will be
     16.686 cents per kWh for all energy used.  With the $9.29 monthly
     customer charge, a NHEC residential members bill will be $92.72
     for 500 kWh of usage.  These are rates that strain members'
     patience and present payment challenges to many.  This is also
     the latest in a number of base rate proceedings filed by NHEC, a
     fact we find troubling.  We expect NHEC to seriously review its
     operational costs and implement all cost savings possible while
     maintaining safety and improving reliability.  
               We are pleased that the Stipulation includes a
     provision for NHEC to file and implement a Low Income program
     targeted to needy members.  We look forward to reviewing it when
     it is filed and recommend NHEC consult with our Staff when
     developing its program.   
               Based upon the foregoing, it is hereby 
               ORDERED, that the Stipulation on Permanent Rates is
     APPROVED; and it is
               FURTHER ORDERED, that NHEC file tariff pages in
     compliance with this order no later than January 22, 1999.
               By order of the Public Utilities Commission of New
     Hampshire this twelfth day of January, 1999.
           Douglas L. Patch       Susan S. Geiger     Nancy Brockway
               Chairman           Commissioner          Commissioner
     Attested by:
     Thomas B. Getz
     Executive Director and Secretary