DR 98-202
                                
            New Hampshire Electric Cooperative, Inc.
                                
                      Power Cost Recovery
                                
              Order Approving Power Cost Recovery
                                
                    O R D E R   N O.  23,091
                                
                       December 21, 1998
     
       APPEARANCES: Dean, Rice and Kane by Mark W. Dean, Esq.
     on behalf of the New Hampshire Electric Cooperative, Inc.; Office
     of the Consumer Advocate by Kenneth E. Traum on behalf of
     residential ratepayers; and, Tracy B. Guyette, Thomas C. Frantz,
     and James J. Cunningham, Jr. for the Staff of the New Hampshire
     Public Utilities Commission.
     
          I.   PROCEDURAL HISTORY
               On November 24, 1998, the New Hampshire Electric
     Cooperative, Inc. (NHEC) filed with the New Hampshire Public
     Utilities Commission (Commission) a request and supporting
     testimony and exhibits to decrease its Stranded Cost Charge from
     $0.01920 per kilowatt-hour to $0.01343 per kilowatt-hour,
     increase each of its Default Power Service Charges by $0.00577
     per kilowatt-hour, and defer $195,000 in power costs for effect
     January 1, 1999 to June 30, 1999.  NHEC also filed short-term
     rates for purchases from Qualifying Facilities (QF).  The
     proposed QF rates are based on the short-term avoided energy
     rates of each of the four utilities from which NHEC purchases
     power.  A duly noticed hearing was held before the Commission on
     December 14, 1998.
          II.  POSITIONS OF THE PARTIES AND STAFF
                    A.   NHEC
               In its pre-filed testimony, NHEC proposed to maintain
     its current Power Cost Recovery Charge (PCR)(consisting of a
     Stranded Cost Charge and a Default Power Service Charge) by
     decreasing the Stranded Cost Charge by $0.00577 per kilowatt-hour
     and increasing the Default Power Service Charge by $0.00577 per
     kilowatt-hour. NHEC bases its 6-month PCR on a one-year forecast
     of Stranded Cost and Default Power Service Cost.  The Stranded
     Cost forecast for 1999 is $9,178,936 and the Default Power Cost
     forecast is $54,149,157.  The Cooperative is seeking to defer
     $195,000 into the year 2000 in order to ensure rate continuity. 
     The deferral has the effect of reducing the PCR by $0.00035 per
     kilowatt-hour.  Overall NHEC's filing has no effect on rates for
     this PCR period from January 1, 1999 to June 30, 1999.
               The Stranded Cost Charge is composed of the
     non-incremental components of the wholesale power contracts
     through which NHEC obtains power.  These elements include
     delivery point charges from Public Service New Hampshire (PSNH)
     and Green Mountain Power, minimum charges from Central Vermont
     Public Service, and billings from the New England Power Pool.  In
     addition, the Stranded Cost Charge includes PSNH Demand Ratchet
     Charges.  Total Default Power Service Charges are calculated by
     subtracting assumed Stranded Cost Charges from total forecast
     power recovery requirements.  At the time customers are able to
     choose a competitive electricity supplier, the competitive power
     price will replace the Default Power Service Charge for those
     customers who switch to a competitive supplier, but all customers
     will still pay the Stranded Cost Charge.
               Currently, NHEC is awaiting an order from the Federal
     Energy Regulatory Commission (FERC) to resolve the dispute
     between NHEC and PSNH over interpretation of the Amended Partial
     Requirements Agreement (APRA).  If NHEC receives a favorable
     ruling from the FERC, NHEC expects consumers who choose a
     competitive supplier to see substantial rate decreases.  In its
     filing, NHEC assumed that all customers will choose a competitive
     supplier by January 1, 1999.  This assumption creates no change
     to the PCR total but reallocates collections, effectively
     decreasing the Stranded Cost Charge and increasing the Default
     Power Service Charge.
               Numerous adjustments, both increasing and decreasing,
     caused changes in the PCR.  These changes, which balance each
     other out, include:
          1.   A change in PSNH's Wholesale Fuel and Purchased Power
          Adjustment Clause (FPPAC) rate, approved by FERC, plus a
          PSNH FPPAC deferral, to be collected in the upcoming period,
          cause an increase to the PCR of $0.00020 per kilowatt-hour. 
          2.   An increase in PSNH's base energy charges from $0.0802 per
          kilowatt-hour to $0.0822 per kilowatt-hour for calender year
          1999 in accordance with the APRA will increase the PCR
          requirement by $0.00189 per kilowatt-hour.
          3.   QF purchases, at rates less than short-term avoided cost,
          with a strong likelihood of occurring are included in the
          PCR forecast, resulting in a decrease of $0.00310 per
          kilowatt-hour. 
          4.   A predicted under-recovery of $919,139 as of January 1,
          1999, offset by the collection of an under-recovery of
          $435,277 in the period July 1, 1998 to December 31, 1998,
          results in a PCR increase of $0.0004 per kilowatt-hour.  
          5.   The interest charge in the proposed PCR offset by the
          interest in the current PCR results in a $0.00014 per
          kilowatt-hour increase.
          6.   The proposed deferral of $195,000 creates a decrease of
          $0.00035 per kilowatt-hour.
     
               In November of 1998, PSNH made an offer to NHEC to
     collect the FPPAC under-recovery balance, previously deferred, as
     a line item on customers' bills over 12 months without interest
     as opposed to the standard method of 6 months with interest.  The
     Cooperative declined the offer because special contract ski area
     customers, whose rates are dependent upon FPPAC, would not pay
     any of the under-recovery under PSNH's proposed methodology of
     collecting the deferral through a line item charge on tariff
     customers' bills rather than through FPPAC.       
               Based on a contractual dispute between NHEC and other
     "secondary purchasers" of Maine Yankee, NHEC has stopped making
     payments to Maine Yankee.  NHEC has not included any Maine Yankee
     costs in the 1999 PCR forecast.
          B.   OCA
               The OCA did not file testimony, but questioned NHEC's
     witness about PSNH's FPPAC offer to NHEC, possible increases in
     QF purchases, and the effect of changing the assumption that all
     customers will choose a competitive supplier on January 1, 1999. 
     The OCA also requested that NHEC ask PSNH if it would consider an
     interest free deferral recovery using a collection methodology
     which would be more acceptable to NHEC.
               OCA recommended approval of the proposed rates in the
     interest of rate continuity.  The OCA expressed concern that
     tariff ratepayers were not able to benefit from PSNH's offer to
     collect deferred FPPAC payments without interest due to
     mechanisms in the ski area special contracts.
                    B.   Staff
               Staff did not file testimony, but questioned NHEC's
     forecast of PSNH Demand Ratchet Charges, the effect of assuming
     all customers will choose a competitive supplier on January 1,
     1998, purchases from New England Power, and steps NHEC is taking
     to mitigate power costs.
               Staff recommended that the Commission approve NHEC's
     proposed Stranded Cost Charge and Default Power Service Charge as
     filed.  Staff stated it believed allowing NHEC to defer the
     proposed $195,000 in order to prevent a rate increase is
     appropriate at this time given that NHEC is in QF negotiations
     which would lower its energy costs and that it is still awaiting
     a decision from the FERC over interpretation of the APRA.   
          III. COMMISSION ANALYSIS
               Pursuant to Order No. 23,013 (September 8, 1998) in
     docket DR 98-097, NHEC unbundled its Power Cost Recovery into its
     two component parts, namely, Stranded Cost and Default Power, and
     calculated the component rates.  Based on the record in this
     proceeding, we find the proposed allocation of the PCR between
     the two component parts just and reasonable given the current
     over-recovery of the Stranded Cost component and the current
     under-recovery of the Default Power Cost component.  Taking into
     consideration NHEC's high rates, the possibility of lower cost QF
     power in the near future, and the possibility of lower cost power
     once the FERC issues an order on the APRA issue, we find it in
     the public interest for NHEC to defer the proposed $195,000 in
     order to keep PCR rates constant for the period January 1, 1999
     to June 30, 1999.
               We also agree with the OCA that NHEC should discuss
     with PSNH whether there is a mechanism to take advantage of
     PSNH's FPPAC offer without bypassing special contract customers. 
               Based upon the foregoing, it is hereby 
               ORDERED, that the New Hampshire Electric Cooperative,
     Inc. is authorized to increase its Default Power Service Charge
     by $0.00577 per kilowatt-hour and decrease its Stranded Cost
     Charge by $0.00577 per kilowatt-hour to $0.01343 per
     kilowatt-hour for the period January 1, 1999 to June 30, 1999;
     and it is
               FURTHER ORDERED, that the short-term avoided cost rate
     for Qualifying Facilities is set at the following prices per
     kilowatt-hour for the period January 1, 1999 to June 30, 1999 at
     the respective delivery points:
     Public Service Company of NH       Base Energy    8.347¢
                                        FPPAC          1.050¢
     
     Central Vermont Public Service     Base Energy    3.204¢
     
     New England Power Company          Base Energy
                                             On-Peak   2.782¢
                                             Off-Peak  1.766¢
     
     Green Mountain Power Corporation   Base Energy    3.960¢
                                        Fuel Charge    varies monthly;
     and it is
     
               FURTHER ORDERED, that NHEC file with the Commission a
     letter summarizing the result of discussions with PSNH regarding
     FPPAC deferral payments.
               By order of the Public Utilities Commission of New
     Hampshire this twenty-first day of December, 1998.
     
                                                                      
           Douglas L. Patch       Susan S. Geiger     Nancy Brockway
               Chairman           Commissioner          Commissioner
     
     
     Attested by:
     
     
                                      
     Thomas B. Getz
     Executive Director and Secretary