Eversource says the failure of wholesale markets can affect energy supply

New Hampshire’s largest electric utility, Eversource, told state regulators late last week that failures in wholesale energy markets could make it difficult for them to secure enough power for customers this winter using their normal process.

Why the utility it only distributes electricity, instead of owning plants that generate it, Eversource obtains its energy supply from a competitive bidding process. Twice a year, the company calculates how much energy customers will need over the next six months and signs contracts for that energy with energy suppliers. The price of that power then gets sold directly to taxpayers in the form of a tariff adjustment. This is how the utility provides its default energy service, which approximately 84% of residential customers use.

The next auction date is scheduled for early December; those prices would set the rate for next February through August.

But at a recent meeting of the State Utilities Commission, the company said it worries there may not be enough bidders to meet all the energy it needs to provide. And if there are enough bidders, the prices offered by those bidders could be “extraordinarily high”.

Eversource customers in New Hampshire are currently paying 22 cents per kilowatt hour for default service, more than double the previous procurement period.

This scenario has occurred in other New England states where Eversource has conducted auctions in recent weeks, attorney Jessica Chiavara said.

He added that the offers received in Massachusetts and Connecticut are worrying, “indicating a break in the competitive market.” A similar experience in New Hampshire could hinder the process of gaining power.

The warning comes as energy prices have already skyrocketed for many across New England in the wake of the Russian invasion of Ukraine. That war is contributing to the volatility of energy markets, Eversource said.

The company proposed that the Public Utilities Commission, the State Department of Energy and the Office of the Consumer Advocate should be more involved in the power-buying process, stating that market conditions are unprecedented and how Eversource advances is a question that should include policy makers.

“It’s no longer an easy math problem,” Chiavara said. “It is a problem of totality of circumstances.”

Specifically, there is a four-hour window during the auction day scheduled for December 6th in which Eversource must choose which contracts to sign. The company wants state regulators and energy officials to be present during those hours to help them make decisions.

If commissioners step in on auction day, Eversource said, a situation could be avoided where state regulators reject a proposed rate hike after energy contracts have already been signed. A rejection of a rate hike would be unprecedented and could have a chilling effect on energy markets, Chiavara said.

“The market will not respond favorably. Seeing this refusal, they will not be encouraged to make another offer and will likely not make any more offers. And that will put customers at greater risk, “she said.

But New Hampshire consumer advocate Don Kreis and the state’s Department of Energy say it’s not fair for them to cooperate. Kreis called the proposal “illegal and inappropriate” and said he would probably refuse to participate.

Kreis noted that having Commissioners for Utilities in the room to help decide what electricity tariffs should be would conflict with their role as regulators, who must review those tariffs and decide if they are reasonable.

Additionally, the Consumer Advocate and the Department of Energy said they did not have the staff to advise Eversource on the quality of the offerings and that they would not have time to hire consultants by December.

The PUC is currently investigating other options for the procurement process and state officials said they could change their positions, but on short notice, changing the process would be problematic.

“We don’t believe there is a role for regulators, including the DOE, the OCA, or especially the commissioners, to be in the room that provides any level of security to the company based on the decision they make,” he said. said David Wiesner, the legal director of the Department of Energy. “It’s their decision to make.”

If Eversource is unable to purchase enough energy to meet demand through competitive suppliers, or if that energy is too expensive, the company could source power directly from the wholesale market, committing to purchase electricity each day for the next day. . The company would set a stable rate for 6 months, but then reconcile the difference between that rate and how much energy actually costs each day.

The state Department of Energy said how energy is procured could expose taxpayers to further price swings and additional costs.

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