Consumer advocate asks regulators to find biomass subsidy violates federal law

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The Springfield Power biomass plant in Springfield, NH. Photo/ID. Maurice Kreis

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CONCORD, NH — Calling a recent law to subsidize wood-burning, electric generating plants “an unabashed frontal assault on consumer protection,” the state’s consumer advocate asks federal regulators to find it violates federal utility law.

Last session, lawmakers passed Senate Bill 365, which requires the state’s electric utilities to buy 100 percent of the output of seven wood-burning power plants.

Under the bill, which is now state law, the utilities would purchase the power at 80 percent of the retail price.

But New Hamphire’s Consumer Advocate D. Maurice Kreis argues the Federal Power Act forbids such agreements that would require all of the utilities’ ratepayers to subsidize the generators.

Through attorney Susan Geiger, Kreis supports a motion filed by the New England Ratepayers Association asking the Federal Energy Regulatory Commission to declare that federal law preempts the New Hampshire statute, which also violates the commerce clause of the U.S. Constitution.

D. Maurice Kreis, NH Consumer Advocate

There are currently seven wood-fired generating facilities in New Hampshire. The larger Berlin bio-mass plant and one trash-burning generating plant in Concord have separate power purchase agreements with utilities.

The bill was intended to protect the wood burning plants by requiring utilities to purchase all the power they produce at prices greater than it would cost the utilities to generate the electricity themselves.

The sale price to the utilities under the new law would be greater than the cost to generate the power themselves and greater than the average wholesale market costs, requiring the utilities to increase rates for all customers, according to the consumer advocate, which is forbidden under the Federal Power Act.

Supporters of the bill claimed it would help preserve forest industry jobs in the economically-challenged North Country along with facility jobs and help diversify the state’s electric generation, which is overly dependent on natural gas.

The bill was vetoed by Gov. Chris Sununu, but the legislature overrode the veto and the bill is now law. It requires state regulators to approve agreements between the utilities and the wood-burning generators.

In his veto, Sununu estimated the bill would cost electric consumers $25 million a year for the next three years.

Kreis notes the law is similar to a Maryland law declared unacceptable because it guaranteed a set price for generators in a deregulated industry where a free market determines price.

“SB 365’s disregard for FERC’s ‘turf’ is even more blatant than Maryland’s was; here, there is no pretense that rates paid to QFs (qualifying facilities) have any connection to wholesale market prices,” Geiger writes in the motion.

“The very purpose of SB 365 is to provide certain generators with income in excess of the market-based rate that would be deemed just and reasonable for purposes of the Federal Power Act.”

Federal regulators have jurisdiction over wholesale market prices, while states regulate retail prices.

The consumer advocate also argues that it discriminates against out-of-state generators because the wholesale rate utilities would pay for the power is only available to the New Hampshire plants.

The consumer advocate asks federal regulators to declare that federal law preempts SB 365.

“(Federal electric utility law) protects these customers from providing the exact sort of subsidy to Qualifying Facilities that SB 365 imposes,” Geiger writes.


Garry Rayno may be reached at garry.rayno@yahoo.com