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Tom Getz - Tom Getz is the Executive Director and Secretary of the New Hampshire Public Utilities Commission. He has held that position since September of 1996. Mr. Getz has worked in the utility field since 1980 with experience in the industry as corporate counsel, as an advisor to the New York Public Service Commission and as a consumer advocate in New York. Mr. Getz has a BA from Holy Cross and a JD from Franklin Pierce Law Center.
Amanda Noonan - Amanda Noonan is the Director of Consumer Affairs of the New Hampshire Public Utilities Commission. She has held that position since May of 1997. Previously, Ms. Noonan was a member of the Electric Restructuring Division and an Information Representative in the Consumer Affairs Division. Ms. Noonan has a BS from the University of New Hampshire.
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OVERVIEW OF RESTRUCTURING
AND ELECTRIC CHOICE
While work on introducing competition in New Hampshire's electric industry began in earnest in 1995, its roots go back at least 20 years. Even so, after more than eight decades of monopoly regulation, competition is a fairly recent development.
The Electric Industry Begins
New Hampshire's electric industry began just after the turn of the century. The earliest electric companies in New Hampshire generated their own power and delivered it to nearby homes and businesses. These first companies had a problem transmitting power over a long distance because of inefficient wires and because they were very local in nature. Often more than one provider of electric service operated in the same area, and those operations were virtually unregulated.
The Public Utilities Commission was established in 1911 in response to high rates, questionable utility practices and the recognition that duplication of these inefficient wires and poles was wasteful and unsightly. The solution was to grant franchises so only one company served a given area. In addition, the government, through a public utilities commission, would determine reasonable rates for electric service. To balance the power of these newly created monopolies, the utility's operations were highly regulated.
Technological progress and innovation continually helped create larger and cheaper generating stations and the regulatory system worked well. However in the early 1970s, major changes in the industry began to occur. First, the cost for building nuclear power plants, such as Seabrook, escalated. This was a marked difference from the electric industry's traditional trend of declining costs of generation for large plants. As a result, utilities and consumers were faced with paying for the higher costs of these nuclear generation plants that were built during this time.
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Rising Electric Rates
The OPEC oil crisis also forced the United States to reconsider its energy policies. One of the outcomes of the oil crisis, the Public Utilities Regulatory Policy Act (PURPA), encouraged alternative generating capacity and also required utilities to purchase electricity from small power producers (SPPs). As an important side note, this particular requirement remains a major issue today in New Hampshire's electric industry. At the time PURPA was enacted, the state mandated the purchasing of power from SPPs at rates that appeared reasonable given what was happening to energy costs in the 1970s. Long-term agreements to purchase power at set rates were entered into at that time. Today, PSNH continues to be obligated to purchase power from SPPs even though the rates paid to these producers are significantly higher than the current market prices.
These changes in the 1970s prompted the realization that independent generation plants could reliably produce electricity. The success of independent power laid the foundation for competition in the generation of electricity. In fact, NH legislation in 1978 allowed for retail competition on a small scale since some SPPs could sell at retail to three customers. However, this provision was never implemented.
In January of 1988, a significant upheaval in the state's electric industry occurred when Public Service Company of New Hampshire (PSNH) filed for bankruptcy protection.
In 1989, the State of New Hampshire reached an agreement with Northeast Utilities (NU) that allowed NU to bring PSNH out of bankruptcy and acquire the utility. The approved plan included seven annual rate increases of 5.5 percent. In December of 1989, the legislature endorsed the reorganization plan, with its rate increases, and in July of 1990, the Public Utilities Commission gave its approval as well.
While that plan allowed PSNH to reorganize and emerge from bankruptcy, the effect of the annual rate increases began to affect New Hampshire residents and businesses. Soon, New Hampshire's electric rates surpassed those of the region and were among the highest in the nation.
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A Competitive Electric Market
Taking into consideration the changes in the electric industry that had already occurred in the 1970s and 1980s, as well as the deregulation of other industries, the idea of creating a restructured and competitive electric marketplace took hold.
In 1995, the New Hampshire Public Utilities Commission sponsored a Roundtable on Competition in New Hampshire's Electric Energy Industry. Also in that year, legislative committee work began at the State House on House Bill 1392, which eventually passed both the House and Senate and was signed into law by the Governor in May of 1996.
In essence, HB 1392 was a directive to the Public Utilities Commission to split up the traditional utility functions and "aggressively pursue restructuring and increased consumer choice" in the electric industry. Thus, instead of utilities generating, transmitting and distributing electricity, the law in New Hampshire mandates separation of the generation from the transmission and distribution functions and the provision of generation service by the competitive market. It maintains the monopoly for delivery of electricity, both the transmission and distribution, avoiding the duplication of poles and wires. The consumer's local utility will remain in place to deliver electricity, but other companies will now be able to sell the consumer the generation part of electricity. This is where residents and businesses of New Hampshire will have the power to choose - the suppliers of their energy.
In mandating competition, the legislature's goal was to lower New Hampshire's electric rates by bringing them closer to the regional average in order to: 1) help established businesses become more competitive; 2) make New Hampshire a more attractive place to live and do business; and, 3) provide financial relief to residential customers.
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Pilot Program Offered
Prior to the passage of HB 1392, a pilot program was developed to test the idea of competition in New Hampshire's electric industry. Roughly 17,000 customers were selected to participate in the pilot, which began in May of 1996. A total of 33 electric supply companies registered for New Hampshire's pilot.
In May of 1998, the New Hampshire Public Utilities Commission extended the term of the pilot program indefinitely. The Pilot remains on-going and research will continue to be drawn from those participants. However, the pilot can already be deemed a success. The program demonstrated that it is technically feasible to provide competition and keep the reliable service to which New Hampshire consumers have been accustomed.
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