Opinion ID: 197774
Heading Depth: 2
Heading Rank: 2

Heading: The Concord Tea Party.

Text: 10 Due in part to the annual rate increases mandated by the Agreement, New Hampshire consumers pay one of the highest average electric rates in the nation. Predictable discontent prompted the state legislature to enact the Electric Utility Restructuring Act, N.H.Rev.Stat. Ann. § 374-F:1 to F:6 (Supp.1997), a statute designed to introduce retail competition into the marketplace as a means of reducing electric rates. The statute directed the PUC to develop and put into effect no later than January 1, 1998, a restructuring plan for New Hampshire's electric utility industry. See id. § 374-F:4. 11 The PUC conducted hearings apace and issued its restructuring plan (the Plan) on February 28, 1997. The Plan provides that the PUC will continue to set all distribution access rates. However, electric utilities must unbundle their generation, transmission, and distribution services, as well as open their distribution networks--utility poles and wires--to all consumers on a nondiscriminatory basis. In theory, unbundling will enable customers to select from a roster of power generators whose rates will reflect market prices. And although federal law requires that transmission tariffs remain the province of the Federal Energy Regulatory Commission (FERC), the Plan seeks to have the PUC exercise a modicum of control in this area as well by directing utilities to obtain PUC approval of proposed tariffs prior to effecting FERC filings. Finally, the Plan imports a market domination deterrent, mandating that each utility choose whether to operate as a power generator or power distributor, and precluding utilities from continuing to act, directly or indirectly, in both capacities. Utilities that select the distribution pathway must divest all power generation assets by December 31, 2000, and likewise must sever contractual and corporate ties with utilities that offer competitive electric service in the same territory. Similar restrictions apply to utilities that select the generation pathway. 12 Two aspects of the PUC's edict are particularly pertinent for purposes of the pending litigation. First, in promulgating the Plan, the PUC declined to treat the Agreement as a contract that constrained its actions. Second, a side effect of the Plan's divestiture requirement is the creation of stranded costs. This phenomenon will occur because, under the Plan's competitive market paradigm, the costs of certain asset investments owned by an integrated utility will become unrecoverable from ratepayers when the utility elects between the distribution and generation routes. The Plan provides a palliative in the form of interim and long-term stranded cost recovery charges (SCRECHs). The PUC will assess each affected utility's stranded costs and calculate an appropriate SCRECH for inclusion in the rates set for access to the utility's distribution network. SCRECHs ordinarily will be calculated by means of a cost-of-service ratemaking methodology, but if the PUC concludes that a utility's costs and rates exceed a regional average rate benchmark, then it may deny the utility full recovery of its stranded costs. At present, PSNH's rates exceed the regional average rate benchmark, and the PUC has ruled that PSNH may not recover completely its stranded costs. Thus, PSNH insists that introduction of the benchmark will require it to write off the $400 million in regulatory assets and lead to another bankruptcy. 2 13