DR 96-150
STATEWIDE ELECTRIC UTILITY RESTRUCTURING PLAN
Order Nisi Vacating Portions of Interim Stranded Cost
Orders Related to Wholesale Requirements Contracts
O R D E R N O. 22,986
July 22, 1998
I. BACKGROUND
By Order No. 22,514 (February 28, 1997), the New
Hampshire Public Utilities Commission (Commission) issued a
Statewide Electric Utility Restructuring Plan (Plan)
pursuant to RSA 374-F. On the same date, the Commission
established interim stranded cost charges (ISC charges) for
each jurisdictional utility consistent with the legal and
policy decisions announced in the Plan and the factual
circumstances of each utility.
The Plan included a legal analysis addressing,
inter alia, claims by electric utilities that the Federal
Power Act (FPA) requires the Commission to set stranded
cost charges which are designed to recover all costs
associated with wholesale purchase power contracts approved
by the Federal Energy Regulatory Commission (FERC). The
Commission determined that its jurisdiction had to be
decided on a case-by-case basis, but that the FPA did not
inherently prevent the Commission from disallowing the
recovery of costs under certain circumstances.
The ISC orders pertaining to CVEC, GSEC and
Unitil directed each of those companies to notify their
affiliated wholesale requirements suppliers of their intent
to terminate the foregoing contracts. The Commission
allowed GSEC and Unitil to fully recover the above-market
portion of their wholesale power costs on an interim basis,
but in the case of CVEC disallowed recovery of costs
related to the requirements contract with its parent
supplier, Central Vermont Public Service Corporation
(CVPS). The Commission noted that CVEC should have
provided notice to terminate the contract pursuant to its
right to do so - and that by so doing, it would have fully
mitigated the wholesale power costs from CVPS as of January
1, 1998, the date the ISC charge was expected to have gone
into effect.
In Order No. 22,875 (March 20, 1998), the
rehearing order on restructuring, the Commission affirmed
its decision to address on a case-by-case basis the
above-described jurisdictional preemption claims by
utilities. The Commission noted that its order did not bar
utilities from recovering unmitigatable costs associated
with purchased power obligations; rather, the Commission
decided to defer making final determinations on such
questions until examining utility-specific claims on a
case-by-case basis. The Commission also reiterated that
utilities were expected to take all reasonable measures to
mitigate or avoid incurring costs associated with existing
wholesale contracts.
II. DISCUSSION
Recently, the FERC issued a decision concerning a
dispute between PSNH and NHEC which affects a utility's
continuing purchase obligation under a wholesale
requirements contract. The fundamental issue addressed by
FERC in that decision was whether NHEC must continue to pay
for power to the degree needed to meet the energy needs of
all of its retail customers - even after customers begin to
purchase power from alternative suppliers pursuant to RSA
374-F. The FERC determined that the Amended Partial
Requirements Agreement(APRA) obligates NHEC to purchase
from PSNH only as much power as NHEC needs to serve those
retail customers who remain its customers. The FERC also
rejected an alternative request by PSNH for wholesale
stranded cost recovery under Order No. 888. We recognize that FERC's decision was limited to
the PSNH-NHEC requirements contract; however, the decision
has obvious implications for other New Hampshire electric
utilities with similar requirements contracts. For
instance, in the absence of a contractual obligation to
the contrary, the decision suggests that wholesale
requirements customers are contractually obligated to
purchase power only to the extent needed to serve their
retail power supply customers. This could mean that a
wholesale requirements customer (such as NHEC, GSEC, Unitil
or CVEC) may have no stranded cost liability to its
wholesale supplier when retail customers of the
requirements customer purchase power from alternative
suppliers. The decision also implies that it is
unnecessary for utilities to terminate their requirements
contracts in order to implement retail access in a manner
that fully mitigates potential stranded costs as required
by RSA 374-F. Accordingly, we vacate
our prior directives to GSEC, Unitil and CVEC to provide
notice of termination consistent with the terms of their
wholesale requirements contracts. However, we reiterate
that utilities have a statutory obligation to take all
reasonable measures to mitigate stranded costs.
Based upon the foregoing and for good cause
shown, it is hereby
ORDERED NISI, that the directive to CVEC to
provide notice to terminate in Order No. 22,509 is vacated
unless the Commission orders otherwise; and it is
ORDERED NISI, that the directive to Unitil to
provide notice to terminate in Order No. 22,510 is vacated
unless the Commission orders otherwise; and it is
ORDERED NISI, that the directive to GSEC to
provide notice to terminate in Order No. 22,511 is vacated
unless the Commission orders otherwise; and it is
FURTHER ORDERED, that the foregoing discussion
supplements the Commission's prior legal analysis in the
Plan and in Order No. 22,875; and it is
FURTHER ORDERED, that the Executive Director and
Secretary shall provide a copy of this Order Nisi to all
parties and persons on the service list in this docket; and
it is
FURTHER ORDERED, that any interested person may
submit their comments or file a written request for a
hearing on this matter before the Commission no later than
July 31, 1998;
FURTHER ORDERED, that this Order Nisi shall be
effective on July 22, 1998, unless the Commission provides
otherwise in a supplemental order.
By order of the Public Utilities Commission of
New Hampshire this twenty-second day of July, 1998.
Douglas L. Patch Bruce B. Ellsworth Susan S. Geiger
Chairman Commissioner Commissioner
Attested by:
Thomas B. Getz
Executive Director and Secretary