On March 6, 2019, the New Hampshire Public Utilities Commission (“PUC”) declined to reconsider an earlier order refusing to enforce a newly-enacted mandatory biomass power purchase obligation, and associated subsidy scheme. Although the New Hampshire PUC ruled narrowly in both decisions, the law subsidizing state biomass generators at above-market rates is the latest in a series of recent state actions pushing the jurisdictional line between FERC and state authority (see, e.g., April 27, 2016 edition of the WER; September 25, 2018 edition of the WER; October 3, 2018 edition of the WER).  As of this writing, challenges to the law remain pending at FERC.

The power purchase and subsidy scheme is contained in New Hampshire Senate Bill 365 (“SB 365”), and was enacted on September 13, 2018 over a veto from Governor Chris Sununu.  SB 365 requires the state’s electric distribution companies to enter into power purchase agreements (“eligible facility agreements”) with certain independently-owned biomass facilities—which are also Qualified Facilities under the Public Utility Regulatory Policies Act (“PURPA”)—to purchase a portion of their electricity at an above-market rate equal to 80% of the retail electric service rate, minus an adjustment for the cost of compliance with the state’s renewable portfolio standard.  The electric distribution companies are then required to submit executed eligible facility agreements to the PUC for review and approval.

Less than two months after the law was enacted, on November 2, 2018, the New England Ratepayers Association filed a Petition for Declaratory Order asking FERC to find that SB 365 is preempted under the Federal Power Act because it intrudes on FERC’s exclusive jurisdiction to set rates for wholesale electricity.  The Petition also asks FERC to find that the New Hampshire law violates its regulations under PURPA by setting a rate for a Qualified Facility’s output in excess of the utility’s avoided cost.  The Petition remains pending before the Commission.

Meanwhile, Public Service Company of New Hampshire d/b/a Eversource Energy (“Eversource”) solicited proposals from eligible biomass facilities as required by SB 365, but asserted that it would only enter into eligible facility agreements if ordered to do so by the PUC.  Eversource then filed a petition for PUC review of the solicitation responses it received.  Arguing against enforcement of the mandatory purchase obligation, Eversource’s petition noted the pending Petition for Declaratory Order at FERC, and stated its position that under PURPA, the state of New Hampshire has no authority to set wholesale rates outside of the utility’s avoided costs or rates established through voluntary bilateral contracts.  Eversource also noted that it believed above-market payments to the biomass generators required by SB 365 would total $11 million during the first six-month procurement period, and requested that the PUC find that those payments would be recoverable from ratepayers as stranded costs.  The biomass facilities that responded to Eversource’s solicitation intervened in the proceeding and moved for an order requiring Eversource to sign their proposed power purchase agreements.

In a January 11, 2019 order on the petition, the PUC held narrowly that although SB 365 authorized it review eligible facility agreements, it was unable to do so because Eversource and the biomass facilities had not executed any agreements.  In addition, the PUC concluded that it lacked express authority to order Eversource to enter into any such agreement with the biomass facilities, and at the request of all the parties in the proceeding, the PUC declined to address the constitutional issue while it remained pending at FERC.  Finally, the PUC concluded that until the constitutional challenge to the law is resolved, it could not order rate recovery for above-market costs associated with Eversource’s compliance with SB 365.  The PUC’s March 6 order denied the biomass facilities’ request for rehearing, and noted that “the legal and factual bases for the Order have not changed, and we see no reason to reconsider our conclusion.”

The PUC’s January 11 Order is available here.
The PUC’s March 6 Order is available here.
The New England Ratepayers Association’s November 2, 2018 Petition for Declaratory Order in FERC Docket No. EL19-10 is available here.