DR 98-043
                                     
                 New Hampshire Electric Cooperative, Inc.
                                     
                 1998/1999 Demand-Side Management Program
                                     
                  Order Approving Settlement Stipulation
                                     
                         O R D E R   N O.  22,970
                                     
                               June 30, 1998
     
         APPEARANCES: Dean, Rice & Kane by Anne Davidson,
     Esq. for the New Hampshire Electric Cooperative, Inc.; David
     W. Marshall, Esq. for the Conservation Law Foundation; Heidi
     L. Kroll for the Governor's Office of Energy and Community
     Services; Kenneth E. Traum for the Office of the Consumer
     Advocate; and Eugene F. Sullivan, III, Esq. for the Staff of
     the New Hampshire Public Utilities Commission.
     
     
     I.   PROCEDURAL HISTORY
               On March 31, 1998, the New Hampshire Electric
     Cooperative, Inc. (NHEC) filed with the New Hampshire Public
     Utilities Commission (Commission) a petition for approval of
     its Demand-Side Management (DSM) Program for the program
     year July 1, 1998 through June 30, 1999.  Included in the
     petition is the supporting testimony of Robert L. Reals,
     Jr., Manager of Energy Services, and Heather K. Saladino,
     Manager of Rates & Financial Analysis.
               NHEC proposes a 1998/1999 DSM Revenue Requirement
     of $1,206,059 with $827,333 allocated for residential
     programs and $378,726 allocated for commercial/industrial
     programs.  The proposed overall program budget is $1,412,278
     with $206,219 allocated from base rates.  The approved
     1997/1998 overall program budget is $1,421,159.  NHEC
     intends to offer a program portfolio of the same ten
     programs approved by the Commission for the 1997/1998
     program year with only minor program modifications.  The
     programs were screened using the Total Resource Cost (TRC)
     test, the method approved to evaluate the cost-effectiveness
     of energy efficiency programs in New Hampshire, with
     resulting TRC ratios ranging between 1.20 and 2.16.
               By an Order of Notice issued April 3, 1998, the
     Commission scheduled a prehearing conference and a first
     technical session for April 29, 1998, set deadlines for
     intervention requests and objections thereto, outlined a
     procedural schedule, and required the Parties and Commission
     Staff (Staff) to summarize their positions with regard to
     the filing for the record.  On April 20, 1998, the
     Conservation Law Foundation (CLF) filed a Petition to
     Intervene.  On April 23, 1998, the Governor's Office of
     Energy and Community Services (ECS) filed a Motion for
     Limited Intervention.  No party objected to either CLF's or
     ECS's petition and the Commission granted their
     interventions at the prehearing conference.  The Office of
     the Consumer Advocate (OCA) is a statutorily recognized
     intervenor. 
     
               Pursuant to the procedural schedule, NHEC, CLF,
     ECS, OCA and Staff engaged in formal discovery and technical
     sessions.  On May 27, 1998, Staff filed testimony and ECS
     submitted written comments.  On May 29, 1998, CLF filed
     testimony.  On June 5, 1998, NHEC, CLF, ECS, OCA and Staff
     participated in a settlement conference.  On June 10, 1998,
     a Settlement Stipulation was filed with the Commission
     signed by NHEC, OCA and Staff.  On June 12, 1998, CLF and
     ECS filed a Written Response to the proposed Settlement
     Stipulation.  
               A hearing was held on June 17, 1998 at which time
     testimony supporting the Settlement Stipulation was
     presented to the Commission.  Due to the unavailability of a
     witness to sponsor their Written Response, CLF and ECS were
     afforded the opportunity to submit late filed exhibits.  On
     June 19, 1998, CLF and ECS filed Exhibits 8 and 9,
     respectively.  On June 22, 1998, Staff filed supplemental
     testimony.  On June 23, 1998, NHEC submitted comments
     regarding CLF's and ECS's late filed exhibits.
     II.  POSITIONS OF THE PARTIES AND STAFF 
          A.   NHEC, OCA and STAFF
               NHEC, OCA and Staff agreed that NHEC's 1998/1999
     DSM Program, as set forth in NHEC's March 31, 1998 filing,
     should be approved subject to the following modifications
     outlined in the Settlement Stipulation filed with the
     Commission on June 10, 1998:
     1.   As proposed by Staff, one full-time equivalent position, in
               the amount of $53,560, will be recovered through the DSM
               surcharges.  As a result of the recovery of the $53,560 from
               the proposed surcharges, the proposed DSM surcharge for the
               Residential Class will be $0.00159 per kilowatt-hour (kWh);
               the proposed DSM surcharge for the General Class will be
               $0.00229/kWh; and the proposed DSM surcharge for the Primary
               General Class will be $0.00229/kWh.  NHEC's proposed DSM
               revenue requirement increases from $1,206,059 to $1,259,619
               due to the reallocation of $53,560 to the DSM surcharges.
     
     2.   NHEC, OCA and Staff can petition the Commission to revisit
               NHEC's 1998/1999 DSM Program Proposal based upon the
               progress of the proceedings in the Restructuring Docket, DR
               96-150, and the impact of that proceeding on NHEC's DSM
               programs.  NHEC agrees that it will provide disclosure to
               its members concerning the proceedings in the Restructuring
               Docket and the resulting uncertainty of the benefit of some
               of the DSM programs.
     
          
          B.   CLF and ECS
               CLF and ECS agreed in part and disagreed in part
     with the Settlement Stipulation filed by NHEC, OCA and
     Staff.  Their position, as outlined in their June 12, 1998
     Written Response, is summarized below:
     1.   CLF and ECS support the proposal in the Settlement
               Stipulation to continue to recover $53,560 in costs
               associated with a DSM full time equivalent through the DSM
               surcharges rather than through base rates.  CLF and ECS also
               agree, in general, with that aspect of the proposed
               Settlement Agreement that would allow the parties to
               petition the Commission to revisit NHEC's 1998/1999 DSM
               programs based upon the progress of the Restructuring
               Docket.  However, CLF and ECS request that permission to
               petition the Commission not be restricted solely to NHEC,
               OCA and Staff but would be extended to all interested
               parties, and any petition filed with the Commission should
               be addressed in the context of an adjudicatory proceeding in
               which intervenors may participate.
          
     2.   CLF and ECS do not support the proposal in the Settlement
               Stipulation that would allow NHEC to use the expected
               balance of $261,604 in underspending from program year
               1997/1998 to reduce its class-specific DSM surcharges in
               program year 1998/1999.  CLF and ECS recommend that the
               Commission instruct NHEC to maintain its current
               class-specific DSM surcharges during the period when the
               Energy Efficiency Working Group's recommendations are being
               formulated and acted upon.  Furthermore, they recommend that
               the Commission direct NHEC to use at least some portion of
               the carryover of roughly $260,000 to participate in regional
               and national market transformation initiatives and to
               improve the design of its existing programs.
     
     
               At the hearing, CLF clarified its and ECS's
     position.  CLF and ECS request that the Commission approve
     the current DSM surcharges effective through the 1998/1999
     program year.  The revenues generated by the current DSM
     surcharges at the 1998 kWh sales forecast plus the expected
     overrecovery of $261,604 creates a 1998/1999 program year
     budget of $1,327,999 (exclusive of $152,859 in base rates). 
     Thus, CLF and ECS request an additional $68,380 beyond the
     revenue requirement advocated by NHEC, OCA and Staff.  CLF
     and ECS recommend that the Commission use the $68,380 to
     support NHEC's involvement in five regional market
     transformation initiatives facilitated by the Northeast
     Energy Efficiency Partnerships and to increase the average
     customer weatherization package in the Low Income Program
     from $800 to $1,065 and to increase the $1,000 member cap to
     $1,500.
     III. COMMISSION ANALYSIS
               After careful review of the entire record in this
     docket, we find that the Settlement Stipulation filed by
     NHEC, OCA and Staff is reasonable and is in the public good. 
     We will approve NHEC's 1998/1999 DSM Program subject to the
     terms outlined in the Settlement Stipulation.
               We believe that it is premature to order NHEC to
     increase its program budget and to expand its 1998/1999 DSM
     Program to include the market transformation initiatives
     proposed by CLF and ECS.  In our March 20, 1998 order on
     rehearing in our restructuring docket, DR 96-150, we
     established a working group to examine a number of issues
     related to energy efficiency programs and to report back to
     us with recommendations.  We further directed utilities to
     cap their program funding at existing levels until we have
     received and ruled upon the working group's recommendations. 
     We continue to believe that is the correct approach.  
               The Settlement Stipulation appropriately addresses
     NHEC's current filing.  NHEC's budget is approximate to the
     level we approved in NHEC's 1997/1998 DSM Program docket and
     is consistent with our order on rehearing which caps
     "program funding at existing levels until we have received
     and ruled upon the working group's recommendations."  By
     existing levels, we refer to the latest approved budget and
     not to the DSM cost recovery mechanisms which may not
     accurately reflect the program costs due to prior year
     over/underrecoveries and variances in the sales forecasts
     used to calculate the surcharges.  The budget level of
     $1,412,278 is consistent with the approved budget for the
     1997/1998 program year and should be achievable given NHEC's
     historical spending.  However, we encourage NHEC to continue
     to find ways of obtaining its energy and capacity saving
     goals while spending less ratepayer funds.
               Finally, consistent with treatment we have
     recently allowed for Granite State Electric Company in
     Docket DR 97-211 in Order No. 22,818 (January 2, 1998), we
     waive the application of N.H. Admin. Rules, Puc 1203.05(a),
     which requires generally that rate changes be implemented on
     a service-rendered basis, and will allow NHEC to implement
     its DSM surcharges on a bills-rendered basis.  This waiver,
     pursuant to Puc 201.05, produces a result consistent with
     the principles embodied in Puc 1203.05(b), which sets forth
     exceptions for allowing rate changes on a bills-rendered
     basis, and is in the public interest because it eliminates
     consumer confusion and reduces administrative costs.
               Based upon the foregoing, it is hereby 
               ORDERED, that NHEC's 1998/1999 DSM Program is
     APPROVED as modified by the Settlement Stipulation; and it
     is
               FURTHER ORDERED, that effective July 1, 1998 on a
     bills-rendered basis, the Residential Class DSM surcharge
     shall be $0.00159/kWh, the General Class DSM surcharge shall
     be $0.00229/kWh, and the Primary General Class DSM surcharge
     shall be $0.00229/kWh; and it is
               FURTHER ORDERED, that NHEC shall file compliance
     tariff pages within ten days of the date of this order.
               By order of the Public Utilities Commission of New
     Hampshire this thirtieth day of June, 1998.
     
     
     
                                                                 
      Douglas L. Patch    Bruce B. Ellsworth     Susan S. Geiger
          Chairman           Commissioner         Commissioner
     
     Attested by:
     
     
     
                                      
     Thomas B. Getz
     Executive Director and Secretary