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..Case Studies
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PSNH
Electricity service regulation had
been problematic in New Hampshire since the PSNH bankruptcy more
than ten years ago. Ownership changed, but difficulties persisted
following Northeast Utility’s acquisition of PSNH and the emergence
of the utility from bankruptcy proceedings. The utility operated
under a rate agreement that built in substantial annual increases
for retail customers. The Public Utilities Commission sought to
introduce retail competition, entering orders that would have
required a very substantial write-off of the utility’s generation
and regulatory assets, many associated with the Seabrook nuclear
project. Federal litigation ensued and restructuring as then ordered
did not become effective. Federal courts had stayed the Commission’s
exercise of its jurisdiction on restructuring, and threatened even
more pervasive intrusion into the state’s utility regulatory
process. Customers, the commission, and the utility needed some
solution that would allow all to move forward effectively and
economically.
Liberty’s first engagement for the
Commission was to perform a management and operations audit and to
assess likely revenue requirements anticipatory to a major base-rate
case for PSNH; the first to follow the period of built-in annual
increases. The Governor and the Staff of the Commission then asked
Liberty to work as part of a team assigned to explore settlement of
restructuring proceedings that the litigation had tied up for years.
Liberty’s help was instrumental in securing a settlement of the
restructuring litigation, establishing delivery service rates for
the three-year period following the introduction of competition,
valuing generation assets to be divested, establishing methods for
providing default or standard offer service, structuring the
recovery of stranded costs, and gaining legislative support for the
stranded cost securitization. One of the strongest features of the
settlement reached was preservation of the option for retention of
the company’s low-cost fossil and hydro stations.
The significant write-off that the
utility accepted and the retention of these stations as base-rate
assets have done much to make PSNH rates for the first time in many
years to an extremely competitive position in comparison to its New
England peers. Liberty’s work has gained the firm a strong
reputation for expertise, candor, and sound judgment with
regulators, elected officials, utility representatives, customer
groups and the residents of the Granite State.
Liberty later assisted the Commission
in exercising its statutory responsibility to sell utility interests
in the Seabrook nuclear station. Ultimately encompassing a number of
different owners from several
different states, this sale was very unusual. New Hampshire law
required the Public Utilities Commission not merely to review and
approve a utility-run sale, but to administer the sale itself.
Liberty assisted in efforts to bring the varying ownership interests
together, to select and contract with an asset sale manager, to
review the sale’s marketing and legal documents, to actively monitor
due diligence activities, to review, analyze, and compare bids
received, to assist in selecting the winning bidder, and to assure
that final sale documents were appropriate.
Liberty’s work for the Commission has
continued. Liberty performed another audit intended to examine
delivery service revenue requirements as PSNH prepared to move out
of the transition, period during which electricity delivery rates
have been fixed. PUC hearings on those new rates will commence in
the near future. Liberty is expected to testify about them for the
Commission Staff. Liberty has also supported the Commission’s
efforts to reconcile actual stranded cost recovery to date with
approved levels, which vary according to the proceeds of asset
divestitures and changes in the prices of PSNH purchases and sales
of energy in the marketplace. One of Liberty’s senior consultants
has also served as a technical engineering advisor to the Commission
for a number of years.
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