Appeal of Public Service Co.

539 A.2d 275, 130 N.H. 285, 1988 N.H. LEXIS 2
CourtSupreme Court of New Hampshire
DecidedJanuary 29, 1988
DocketNo. 87-008
StatusPublished
Cited by12 cases

This text of 539 A.2d 275 (Appeal of Public Service Co.) is published on Counsel Stack Legal Research, covering Supreme Court of New Hampshire primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Appeal of Public Service Co., 539 A.2d 275, 130 N.H. 285, 1988 N.H. LEXIS 2 (N.H. 1988).

Opinion

Batchelder, J.

Public Service Company of New Hampshire (PSNH) appeals an order of the public utilities commission (PUC or commission) granting Wormser Engineering, Inc. and Martin Energy, Inc. (Wormser) long-term rates at which PSNH must purchase power from an electrical generating facility to be developed by Wormser. For the reasons that follow, we affirm.

In a rare instance of State and federal legislative coincidence, the New Hampshire Legislature and the United States Congress each enacted similar provisions in 1978 designed to diversify electrical power production through the encouragement of small power producers and cogenerators. In New Hampshire, the Limited Electrical Energy Producers Act (LEEPA), RSA ch. 362-A, sought through diversification “to lessen the state’s dependence upon other sources which may, from time to time, be uncertain.” RSA 362-A: 1. LEEPA “requires an electric utility, in certain circumstances, to purchase the entire output of electric power produced by a limited electrical energy producer at a rate set by the PUC.” Appeal of Granite State Elec. Co., 121 N.H. 787, 789, 435 A.2d 119, 119-20 (1981) (citations omitted). At the federal level, the Public Utility Regulatory Policies Act of 1978, Pub. L. No. 95-617, 92 Stat. 3117 (1978) (PURPA), embodied a similar policy, and required the Federal Energy Regulatory Commission (FERC) “to prescribe rules to encourage, inter alia, small power production, including rules requiring electric utilities to purchase power from small power production facilities.” Appeal of Granite State Elec. Co., 121 N.H. at 789, 435 A.2d at 120 (citing PURPA § 210, 16 U.S.C.A. § 824a-3 (Supp. 1981)).

In July 1984, pursuant to its authority under PURPA and LEEPA, the PUC, in Docket DE 83-62, Report and Supplemental Order No. 17,104, established and updated both the short- and long-term rates to be paid by PSNH to small power producers and cogenerators and the methodology to be used in calculating such rates. Based in part upon stipulations entered into by PSNH and a number of small power producers, the PUC set the rate schedule for all rate requests filed while the DE 83-62 rates remained in effect. Among other features of the DE 83-62 methodology was agreement by the small power producers to be obligated to deliver [288]*288power for the term specified in the rate request, while PSNH was permitted to file annual requests to update and revise the rates based on changes in its avoided cost data with respect to future contracts. In this context, “avoided cost” equals the “marginal cost that the utility would incur to generate or purchase the energy from another source.” Appeal of Marmac, 130 N.H. 53, 55, 534 A.2d 710, 711 (1987); see also 18 C.F.R. § 292.101(b)(6) (1985) (“incremental costs to an electric utility of electric energy . . . which, but for the purchase from the [small power producer or cogenerator], such utility would generate itself or purchase from another source”).

PSNH filed a request for an update of rates in June, 1985. In September, 1985, following a series of hearings in DR 85-215, the PUC set a revised rate schedule, retroactive to June 21, 1985, for all rate requests filed while DR 85-215 remained in effect. On January 6, 1986, Wormser filed a petition with the PUC in accordance with DE 83-62 and DR 85-215, accompanied by a signed interconnection agreement, for a front-end loaded (or levelized) twenty (20) year rate order for its proposed cogeneration project. The PUC opened Docket No. DR 86-1, and held a series of hearings throughout 1986 to consider the Wormser application.

Meanwhile, on February 7, 1986, PSNH filed a petition for comprehensive review of the methodology and procedures set forth in DE 83-62. This petition was brought as a result of a sharp and unanticipated decline in the price of oil, which resulted in a decrease in PSNH’s actual avoided costs. PSNH was denied a temporary suspension of DR 85-215 rate requests, and was later denied a motion for interim rates pending PUC consideration of the review request. On April 15, PSNH filed another petition for an update of its avoided cost data, and in May, the PUC placed a moratorium on long-term rate petitions under DR 85-215 pending its inquiry into PSNH’s April 15 request. See Appeal of Marmac, 130. N.H. at 56, 534 A.2d at 712.

In its January 6, 1986 application, Wormser sought a front-end loaded, twenty (20) year rate order for its 20-megawatt fluidized bed coal combustion (FBC) technology facility, to be developed in Rochester by Wormser Engineering, Inc. and Martin Energy, Inc. as a joint venture. The facility is designed to produce steam to be used in part for sale to the neighboring Spaulding Fibre plant, and in part to generate electricity to be sold to PSNH. Under a front-end loaded rate structure, Wormser would receive rates that in the first years of the project would exceed PSNH’s avoided costs and in the later years of the front-end loaded rates would be lower than those costs. The net present value over the 20-year period would [289]*289be equal to the net present value of the rates available under DR 85-215.

The issues in dispute at the hearings were examined in detail by the PUC. They involved “the timeliness of the rate filing and . . . the eligibility of the project for front-end loaded or levelized rates.” DR 86-1, Report and Second Supplemental Order No. 18,460, at 11 (October 29, 1986). The timeliness issue was whether the project had reached such a stage that the rate filing was not premature. The PUC found that Wormser had “demonstrated that its project reached the development stage where it qualifies for a long-term rate order under DR 85-215.” The PUC found that Wormser had acquired sufficient, though not all necessary, federal, State, and local permits for construction and operation. In addition, the PUC found that Wormser’s project design and construction planning had advanced to a stage where “not-to-exceed” construction quotations had been provided by reliable design and construction firms. Wormser had secured property rights to the project site, and a steam sales contract with Spaulding Fibre had been executed. Finally, the PUC concluded that financing arrangements had sufficiently progressed to warrant the granting of a rate order.

In terms of eligibility, the PUC examined, pursuant to the DE 83-62 methodology, the economic, technical, and operational viability of the proposed cogeneration facility. This inquiry required an assessment of the risks associated with new technologies such as FBC, and a balancing of the risks posed to the ratepayers by the use of front-end loaded rates with the benefits to be derived from developing the project. The PUC considered Wormser’s operational experience with the FBC technology and determined that front-end loading of rates for the proposed 20-megawatt project should be limited to an amount consistent with full levelization for a smaller, 9-megawatt plant with which Wormser had more experience. According to the record, the proposed FBC technology was operational in only one other plant in the United States, a 9-megawatt plant owner by Wormser. This rate design would, in the opinion of the PUC, benefit ratepayers “through a lower total net present value” than that assumed for a 20-megawatt project under the DR 85-215 rates.

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Bluebook (online)
539 A.2d 275, 130 N.H. 285, 1988 N.H. LEXIS 2, Counsel Stack Legal Research, https://law.counselstack.com/opinion/appeal-of-public-service-co-nh-1988.