ENERGY/UTILITIES

Retail Choice: What It Means for PSNH Customers

January 26, 2001

By Heidi L. Kroll
for New Hampshire Business Review

On January 16, the New Hampshire Supreme Court upheld the Public Service of New Hampshire (PSNH) restructuring plan paving the way for immediate rate reductions and the opportunity for consumers to choose an alternative supplier as early as April 1, "Competition Day."

Under the plan, PSNH's commercial and industrial customers can expect an upfront rate reduction of 7- to 10-percent, while its residential and street lighting customers will see a reduction in the range of 12- to 13-percent. These savings are on top of the 5-percent rate reduction that went into effect for all consumers on October 1, 2000.

While these reductions are significant, the savings are guaranteed only for a maximum of 33 months. For PSNH's larger customers the period is much shorter - just 9 months. Under the deal, PSNH will offer generation or "transition service" for the first 9 months of competition at a price of 4.4 cents per kilowatt-hour to all customers who have not chosen a competitive supplier. At the end of 9 months, transition service for Primary General and Large General customers will be set at a competitively bid market price for 12 months, and then transition service will end for these two rate classes.

In the not-too-distant future, PSNH's larger consumers could see their rate reductions offset by higher market prices for power. In fact, if the market price for power is around 5.5 cents per kilowatt-hour, Primary General and Large General customers will see rates above their current levels. At prices around 6.0 cents per kilowatt-hour, these customers will see their entire 12- to 14-percent rate reduction completely eroded. Market prices in the 5.5 to 6.0 cent range, or even higher, are likely until new power plants come on-line, oil and natural gas prices come down, and markets have additional time to mature.

PSNH's larger customers are not the only ones faced with this outlook. Granite State customers will be fully exposed to market prices for power when their transition service ends on June 30, 2002. New Hampshire Electric Cooperative customers will have competitively bid transition service available through December 2003, while customers in Massachusetts and Rhode Island will have similar service available until March 1, 2005 and January 1, 2010, respectively.

PSNH's special contract customers are faced with a slightly different situation. They may choose one of three rate options under the terms of the settlement agreement. Option 1: the customer retains its special contract and the accompanying pricing provisions until the contract expires. Option 2: the customer's special contract rate is partially "unbundled," effectively reducing it by 4.4 cents per kilowatt-hour. This generation credit allows the customer to buy power from a competitive supplier that might have lower prices or other favorable terms. Option 3: the customer terminates its special contract (consistent with applicable termination provisions), takes regulated services under PSNH's tariffed rates, and buys power from a competitive supplier. Customers will be served automatically under Option 1 unless they notify PSNH of their decision to choose one of the other two.

For More Information

The competitive electricity market presents many new challenges to New Hampshire consumers. Learn now what's coming so you can position your business for the future by making strategic choices to secure your electricity needs.

Notes

1) Assumes competition begins on April 1, 2001.

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