Wednesday, March 9, 2016

Wholesale prices are way down. Where are the savings on our retail rates?



March 4, 2016
Debra A. Howland
 Executive Director
New Hampshire Public Utilities Commission
21 S. Fruit Street, Suite 10
Concord, NH 03301

Dear Ms. Howland,

I’m writing with regard to DE 16-241 and to challenge the misinformation that is being spread regarding our high electricity prices by various groups such as the BIA’s EnergizeNH, Kinder Morgan, and the Coalition to Lower Energy Costs (CLEC) energycostcrisis campaigns.
The following is an ad that appears on sites for online access to magazines and newspapers,

This is, in fact, not true.  Please refer to the eia.gov website and download the 2014 Average Monthly Bill-Residential in table5_a_2014AveBill.pdf.  Actually, the average monthly residential bill is $108.57 in New Hampshire, while in Virginia the average monthly bill for residential customers is $130.04.   If Ms Tewksbury lived in Virginia, her annual electric bill would be $257.64 higher than it is in New Hampshire.  The national average was $114.19 per month.   So, New Hampshire residential customers actually have lower monthly electric bills than the national average and are at least 20% lower than VA. 

It IS true that residential customers in VA pay only 11.10 cents per kWh and NH pays 17.53 cents per kWh, but while a VA household’s average usage is 1172 kWh per month, a NH household only uses 619 kWh!  VA customers may use more electricity because of warmer summers or perhaps it’s because they haven’t invested in energy efficiency and weatherization projects as the RGGI states have. 
There are several examples of these kinds of ads and claims from CLEC and Kinder Morgan.  One claim that is quoted frequently http://ir.kindermorgan.com/press-release/all/new-study-outlines-new-englands-need-additional-natural-gas-capacity-37-billion-co
"New Englanders could have saved approximately $3.7 billion in wholesale electricity costs during the 2013-2014 ‘Polar Vortex’ winter had the proposed Northeast Energy Direct Project (NED) been in service, according to an independent study by ICF International, commissioned by Tennessee Gas Pipeline Company, L.L.C. (TGP), a Kinder Morgan, Inc. (NYSE: KMI) company. The study also concluded that the additional gas capacity that NED would provide could generate $2.1 billion to $2.8 billion in annual savings going forward for New England electric consumers under normal weather conditions."
and later,
"Further analysis by Kinder Morgan finds that the estimated energy cost savings for 2013-2014 would equate to $578 if spread across each of New England’s 6.4 million households, and average $437 per household over the next 10 years assuming normal weather conditions."
The $578 is the number I get when I divide $3.7 Billion by the 6.4 million households.  $437 is what I get if I divide the $2.8 billion mentioned in the first paragraph by 6.4 million households.
There are two MAJOR problems with this.  These numbers are not based on the number of kWhs used.  If you divide those numbers up into market share, residential customers account for only 40% of sales.  So the advertised savings are already less than half their claims.  Instead of $578 and $431; the numbers should be $231 and $174.80 and even the premises for these savings should be suspect.
The second problem is that the $3.7 Billion is for savings on wholesale prices.  "Average households" pay the retail rate which is some multiple of wholesale prices.   
Let’s look at the impact of wholesale electricity prices on retail rates.  The graph below shows data from 4 spreadsheets for wholesale electricity prices from ISO-NE for 2009, 2013, 2015 and 2016. 
New Hampshire wholesale prices are converted to cents/kWh from the ISO-NE spreadsheets
Month-Year
Wholesale All
Wholesale off pk
Wholesale on pk
Retail residential rate (1)
January 2009
7.42 cents/kWh
6.99 cents/kWh
7.94 cents/kWh
16.30 cents/kWh
January 2013
9.42 cents/kWh
8.62 cents/kWh
10.2 cents/kWh
16.33 cents/kWh
January 2015
7.34 cents/kWh
6.59 cents/kWh
8.25 cents/kWh
18.52 cents/kWh
December 2015
2.98 cents/kWh
2.32 cents/kWh
3.72 cents/kWh
18 cents/kWh
January 2016
4.34 cents/kWh
3.76 cents/kWh
5.11 cents/kWh
Not yet available

(1)    Retail prices are from http://www.eia.gov/electricity/data/browser
The Eversource proposal in DE 16-241 claims the ANE pipeline will reduce wholesale prices by somewhere between  0.8 cents and a little over 1 cent per kWh.  These savings are forecast against 2013-2014 wholesale prices.  Yet, milder weather and adding LNG contracts to the Winter Reliability Program have reduced wholesale prices significantly more than those expected from building the ANE pipeline without any evidence of a similar reduction in retail prices.   Moreover, wholesale prices haven’t exceeded 5.62 cents/kWh (peak) since April of 2015.  Where are the savings on our retail rates from the dramatic reductions in wholesale electricity prices?
Please keep in mind that any of these pipeline projects can only reduce wholesale electricity prices with a (hopefully) consequent reduction in the default retail energy supply charges.  The pipelines can’t reduce delivery (transmission or distribution) charges or stranded costs from the coal plant scrubber or the 20 year contract with the Berlin biomass plant.  In fact, according to the Eversource proposal, any tariffs or fees to cover the 20 year capacity contract will be assigned to the delivery portion of the bill. 
In the case of ratepayers who have signed contracts with competitive suppliers (I have a 20 month contract at 8.9 cents/kWh of 100% Green electric supply with Fairpoint), we will see no reduction in the energy supply charge, but will see an increase in the delivery (transmission and distribution) charges from the utility to cover the tariff.
I believe the BIA, the business community, and the general public are being misled about the positive impact that nearly doubling the supply of natural gas into New England will have on electric rates.   Investing in additional energy efficiency, demand response, renewable energy sources, and maintaining supply diversity with dual fuel generation and LNG contracts are all much better ways to address natural gas shortfalls during the winter.   
Despite a number of “open seasons” by the pipeline companies, power generators have failed to contract with them for capacity.  The utilities have no existing mechanism for selling pipeline capacity to power generators.   Yet, we are asked to believe that somehow power generators are going to buy capacity from the utilities.  Today’s price for natural gas was about $1.70/DTH.  The capacity contract would add at least $1.50/DTH to the delivered price.  
We also learn from the Kinder Morgan/TGP objection to Eversource’s request for confidentiality of financial information in DE 16-241 that an Eversource entity has a 40% interest in the Algonquin/Spectra pipeline company.  We already know from IR 15-124 that the parent company of Liberty has a 10% stake in the NED project.  We are being asked to become unwilling and voiceless investors in a new business venture for the utilities. 
The Federal Energy Regulatory Commission is investigating “unfair and unreasonable” transmission charges by the utilities of ISO-NE.  The results of that investigation are due out this month.  If we are going to be concerned about high electricity prices in New England, we should really be examining why our transmission charges are so much higher than the other Regional Transmission Organizations.    The following chart is from a NESCOE presentation about ISO-NE being the last RTO to adopt FERC rules for competitive transmission. 


Why were the high transmission and distribution charges in New England never even mentioned in all the consultant reports on how to reduce electricity prices?   How will the public feel about New Hampshire’s government officials when, after sacrificing their land, safe air and water, and taking on a 20 year contract, our electricity prices go up with the increases in forward capacity payments in 2017 and 2018?  Why, when the utilities in our state are not competitive with other regions for transmission charges, would we bankroll them for a brand new business venture with ratepayer funds?   Why hasn’t the decoupling of the gas and electric utilities proceeded? 
Thank you for the opportunity to comment and ask questions on this important matter.

Pat Martin

2 comments:

  1. Thank you for sharing your expertise on energy issues in New Hampshire. ECHO Action is proud to have Pat Martin as a founding member, helping to move New Hampshire towards a clean energy future.

    ECHOaction.org

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