With so much partisan sniping in modern politics, it’s heartening to find an issue where Republicans and Democrats in the New Hampshire Legislature agree. They don’t think your electric rates are high enough.
In 2007, when Democrats ruled the Earth, or at least every corner of the State House, New Hampshire started the Renewable Portfolio Standards program. RPS mandates that a growing percentage of New Hampshire’s electricity comes from renewable sources, like sun, wind, wood and water. By 2025, RPS will require 23.8 percent of all the state’s electricity to come from renewable sources, just short of Gov. John Lynch’s 2006 goal of 25 percent by ’25.
But not all renewable are created equal. RPS splits power sources into four narrow classes.
Class I includes new sources not online before 2006 and increased production from previously existed generators. These yet-to-be-built power plants make up the bulk of the RPS mandates, growing by 1 percent a year to a total of 16 percent of all New Hampshire electricity by 2025. The wind farm in Lempster and wood-to-energy plant in Berlin are part of Class I.
Class II is new solar generation, and tops at just 0.3 percent of the total RPS mandate.
Class III, existing biomass, covers a half-dozen wood-to-energy plans spread across the North Country. Two turbines powered by landfill methane in New York also qualify. The Class III mandates quickly increase to 6.5 percent of the grid.
Class IV covers small hydro-electric dams that each produce less than 5 megawatts a year, provided they also comply with the Clean Water Act and have fish ladders to help repopulate New Hampshire’s rivers, and would top out 1 percent.
Under this new regime, power distributors such as PSNH don’t actually have to get their electricity from renewable sources. They have to purchase Renewable Energy Credits (RECs) from those power plants, or pay Alternative Compliance Payments (ACPs) to the Public Utilities Commission. Renewable power plants end up creating two parallel but entirely separate products: the electricity they generate and the
RECs they sell to utilities.
Last year, New Hampshire utilities produced just over 11 million megawatts of power, and the total RPS mandate was just under 10 percent, creating a market for about a million RECs. Utilities don’t have to show compliance with last year’s mandates until this summer. Over the program’s first three years, New Hampshire utilities paid just under $47 million for RECs and ACPs. Those costs are passed onto ratepayers, and means that every kilowatt of electricity costs about one-sixth of a cent more. That’s five times the rate impact of the far more controversial RGGI program. And keep in mind that the RPS mandates, and their costs, will more than double over the next decade.
Republican Sen. Jeb Bradley has a plan to expand RPS even further. Senate Bill 218 would increase Class III from 6.5 to 9 percent, a move cheered by North Country timberland owners who want to sell the waste wood that used to go to our idle paper mills.
Bradley would also eliminate methane as a Class III competitor, and ease fish ladder requirements for small hydro.
The House Science Committee last week approved an amendment crafted by Chairman Jim Garrity scaling back Bradley’s expansion a bit, and reducing ACP payments to ensure that the worst-case scenario for ratepayers would be no more expensive than current law.
Garrity was an original co-sponsor of RPS back in 2007, seeing it as a way to diversify New Hampshire’s energy grid. But he’s seen the program devolve as power generators try to tweak the system to maximize the subsidies that ratepayers give them.
The bill faces its toughest test in the House this week, where the Republican supermajority is bound to be skeptical of a program that benefits a small group of businesses by increasing our electric bills. Garrity hopes to convince his colleagues that his amendment does less to pick winners and losers, at least among renewable energy suppliers, without increasing the risk to ratepayers.
Manchester Democratic Rep. Nick Levasseur is also skeptical of what the program has become. “I’m not sure we need an RPS, but if we do, let’s make sure it works,” Levasseur told the committee this week. He prefers Bradley’s bill to Garrity’s substitute, but thinks either would improve on the current program.
RPS isn’t the first or last time that New Hampshire lawmakers have attempted to micromanage the state’s electric industry, which helps explain why we pay among the highest electric rates in the nation.
(Grant Bosse is lead investigator for the Josiah Bartlett Center for Public Policy, a free-market think tank based in Concord.)
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