Energy/Utilities

NH Public Utilities Commission Rules Against Qualifying Facility

January 2008

By Heidi L. Kroll, Market and Policy Analyst

PSNH to Keep Forward Capacity Market Payments

Late last year, the New Hampshire Public Utilities Commission issued an important finding, namely that under the specific terms and intent of a 1982 contract, the Forward Capacity Market payments associated with the capacity from a hydroelectric plant belong to the ratepayers of Public Service of New Hampshire and not the Qualifying Facility's owner.1

The case was opened in March 2007 when Briar Hydro Associates sought a declaratory ruling with respect to a 30-year contract it has with PSNH for the "entire generation output" of the Penacook Lower Falls Hydroelectric Project. At issue was whether or not the output being sold under the specific 1982 contract in question includes the facility's capacity in addition to its energy. The capacity in question is entitled to valuable payments under New England's Forward Capacity Market, established in December 2006.

Briar Hydro asserted that the contract's use of the phrase "entire generation output" refers only to the hydro facility's energy and not its capacity. The contract includes phrases such as "sales of electric energy" and "a reliable supply of electrical energy", but it does not explicitly reference "capacity." In addition, payments under the contract are based on a cents-per-kilowatt-hour price; there is no separate price for capacity. Briar Hydro pointed to provisions in federal and state laws,2 and to circumstances surrounding the contract negotiations, to support its case that if the 1982 contract was meant to include capacity, it would have been explicit.

PSNH, as well as the Office of Consumer Advocate, asserted that the 1982 contract does cover both energy and capacity from the Penacook hydro facility. PSNH pointed to federal and state laws to bolster its position, and argued that the price in the contract was based on a PUC-approved rate that included both energy and capacity. Since 1982, PSNH has claimed the capacity of the facility for purposes of meeting its reserve requirements, and PSNH noted that Briar Hydro did not challenge this claim until 2006. Briar Hydro countered that neither it nor the hydro facility's prior owner had any knowledge that PSNH was claiming the capacity.

The Commission ultimately reached its decision based on its review of documents associated with the 1982 contract's formation and the regulatory context in which the contract was negotiated. It found in this case that PSNH has exclusive rights to purchase the energy and the associated capacity from the Penacook facility, and that PSNH's customers are entitled to the valuable capacity payments earned by the facility in the Forward Capacity Market.

Briar Hydro is challenging the Commission's decision and has filed a Motion for Reconsideration and Rehearing. PSNH has responded with an objection to this Motion. The Commission will now need to decide whether or not its November 21st Order should stand.


Footnotes.

1. NH PUC Order No. 24,804 in Docket No. DE 07-045

2. The federal Public Utility Regulatory Policies Act (PURPA) and NH's Limited Electrical Energy Producers Act (LEEPA).


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You may contact
Heidi Kroll at
800-528-1181.