DR 98-025
New hampshire Electric Cooperative, Inc.
Base Rate Proceeding
Order Approving Settlement Stipulation on Permanent Rates
O R D E R N O. 23,104
January 12, 1999
APPEARANCES: Dean, Rice and Kane by Anne Davidson, Esq.
on behalf of New Hampshire Electric Cooperative, Inc.; Kenneth
Traum for the Office of Consumer Advocate on behalf of
Residential Ratepayers; and Eugene F. Sullivan, III, Esq. for the
Staff of the New Hampshire Public Utilities Commission.
I. PROCEDURAL HISTORY
On April 14, 1998, the New Hampshire Electric
Cooperative, Inc. (NHEC or Company) filed a petition to increase
base rates by $4.68 million or 5.1 percent on an annual basis
effective July 1, 1998. NHEC also requested approval to recover
approximately $400,000 of incremental setup costs related to
electric industry restructuring through a separate surcharge
mechanism. The base rate request combined with the
restructuring-related costs would result in a 5.5 percent overall
increase in rates. The Company's filing included the pre-filed
testimony and exhibits of Heather K. Saladino, Manager of Rates
and Finance for NHEC, and the testimonies and exhibits of two
consultants, Dennis Eicher and Peter Williamson.
On May 12, 1998, NHEC submitted a motion for Temporary
Rates effective July 1, 1998, pursuant to RSA 378:27, based on a
5.1 percent rate increase for all classes of customers. On May
12, 1998, the Commission suspended the proposed rate increase
pending an investigation pursuant to RSA 378:6 and set a hearing
on temporary rates. See Order No. 22,926.
On June 2, 1998, Commission Staff (Staff) pre-filed the
testimony of Henry J. Bergeron of the Commission's Finance
Department and the Office of Consumer Advocate (OCA) pre-filed
the testimony of its Finance Director, Kenneth Traum. At a
prehearing conference on June 10, 1998, the Commission granted a
June 5, 1998 petition to Intervene filed by Public Service
Company of New Hampshire (PSNH).
NHEC, OCA, PSNH and Staff signed a Settlement
Stipulation on Temporary Rates (Settlement on Temporary Rates)
that allowed NHEC to set temporary rates at current levels as of
August 1, 1998. The Settlement on Temporary Rates also allowed
rates to be increased across the board by $4.146 million on the
date of customer choice. However, if customer choice were
delayed beyond October 1, 1998, the temporary rate increase would
be effective on October 1, 1998. On October 5, 1998, the
Commission issued Order No. 23,032 which approved the temporary
rate increase based on the Settlement on Temporary Rates.
A final settlement stipulation on permanent rates
(Stipulation) supported by NHEC, OCA and Staff was submitted to
the Commission on December 3, 1998. A duly noticed hearing on
the Stipulation was held on December 9, 1998. Heather K.
Saladino, Manager of Rates and Finance, testified in support of
the Stipulation.
II. SETTLEMENT
The Stipulation would allow NHEC the same level of
permanent rates for all customer classes that was authorized by
the Commission on October 1, 1998 pursuant to the Settlement on
Temporary Rates, i.e., an increase of $4.146 million. NHEC
estimates that the rate increase, based on NHEC's pro forma test
year, will result in a Times Interest Earned Ratio (TIER) of 1.38
and a Debt Service Coverage (DSC) ratio of 1.53 which will
enhance NHEC's efforts to reverse its negative equity position.
The Stipulation would allow NHEC to defer its Maine
Yankee litigation costs associated with the early closure of the
Maine Yankee nuclear facility until the earlier of July 1, 1999
or customer choice commences. At that time, NHEC will make a
surcharge filing which indicates the amount of litigation costs
requested and the rate to recover those costs over a twelve month
period, subject to Commission review.
Although the Settlement on Temporary Rates stated that
NHEC could reconcile its permanent rates back to August 1, 1998
once permanent rates were approved, the Stipulation indicates
that NHEC agrees to waive such recoupment.
NHEC will file a proposal to implement a Targeted Low
Income Program within 60 days after the Commission issues an
order on permanent rates. NHEC will implement the Targeted Low
Income Program 60 days after its filing or as ordered by the
Commission. NHEC shall recover its Targeted Low Income Program
costs through a surcharge on its members' bills. NHEC also
agrees to continue its efforts to reduce its operating costs
while maintaining its present level of tree trimming.
III. COMMISSION ANALYSIS
The Commission is required to establish just and
reasonable rates pursuant to RSA 378:28. Permanent rates
resulting from the Stipulation would remain the same as those
approved for temporary rates. Combined with NHEC's recent filing
in DR 98-202, the Power Cost Recovery proceeding, NHEC's overall
level of rates will not change. See Order No. 23,091 (December
21, 1998). Based on our review of the record in this proceeding,
we will approve the Stipulation.
We appreciate the efforts of NHEC, OCA and Staff to
reach agreement on permanent rates. NHEC's rates, now unbundled
pursuant to Order No. 23,013 in docket DR 98-097, are the highest
in New Hampshire and perhaps in New England. The unbundling of
NHEC's rates reflects NHEC's and the Commission's interests in
moving the members of NHEC to retail choice. Unbundling also
clearly indicates that the largest portion of NHEC's costs are
due to its disputed wholesale power contract with PSNH, NHEC's
power supplier for approximately 90 percent of its wholesale
requirements. The wholesale contract is subject to the Federal
Energy Regulatory Commission's (FERC) interpretation and the
rates are subject to FERC approval.
The Stipulation would allow NHEC to permanently
increase its base rates by $4.146 million or 5.0 percent,
approximately. The Rate D residential members' rate will be
16.686 cents per kWh for all energy used. With the $9.29 monthly
customer charge, a NHEC residential members bill will be $92.72
for 500 kWh of usage. These are rates that strain members'
patience and present payment challenges to many. This is also
the latest in a number of base rate proceedings filed by NHEC, a
fact we find troubling. We expect NHEC to seriously review its
operational costs and implement all cost savings possible while
maintaining safety and improving reliability.
We are pleased that the Stipulation includes a
provision for NHEC to file and implement a Low Income program
targeted to needy members. We look forward to reviewing it when
it is filed and recommend NHEC consult with our Staff when
developing its program.
Based upon the foregoing, it is hereby
ORDERED, that the Stipulation on Permanent Rates is
APPROVED; and it is
FURTHER ORDERED, that NHEC file tariff pages in
compliance with this order no later than January 22, 1999.
By order of the Public Utilities Commission of New
Hampshire this twelfth day of January, 1999.
Douglas L. Patch Susan S. Geiger Nancy Brockway
Chairman Commissioner Commissioner
Attested by:
Thomas B. Getz
Executive Director and Secretary