2006 Interim Report

STATE OF NEW HAMPSHIRE GENERAL COURT



State Energy Policy Commission
HB1146, Chapter 257:1, Laws of 2006

Interim Report

Prepared for:
Governor John H. Lynch
Senate President Theodore L. Gatsas
Speaker of the House W. Douglas Scamman
Senate Clerk
House Clerk
State Librarian

December 1, 2006

Commission Members

Legislative Appointments:
Senator Peter Bragdon
Senator Martha Fuller Clark
Representative Jacqueline Cali-Pitts
Representative James Garrity
Representative Ryan Hansen
Representative Lawrence Ross

Gubernatorial Appointments:
Thomas Kelly, PhD.
Harold T. Judd, Esq.

Amy Ignatius, Director, Office of Energy and Planning
Thomas B. Getz, Chairman, Public Utilities Commission
Meredith Hatfield, Consumer Advocate, Office of Consumer Advocate
Robert Scott, Air Resources Director, Department of Environmental Services
Respectfully submitted,

Rep. James M. Garrity
Chairman

Organization

The 2006 Laws of New Hampshire, Chapter 257, approved May 25, 2006, established the State Energy Policy Commission and charged it with the duty to study: the adequacy of electricity supplies to meet demand including, but not limited to consideration of the following issues: a) diversity of fuel supplies and availability, b) reliability of service, c) price to end-use customers, d) divestiture of PSNH generation assets, e) structure, effectiveness, and competitiveness of wholesale and retail markets, f) renewable portfolio standards, g) Federal Energy Regulatory Commission (FERC) and Independent System Operator (ISO) initiatives to promote increased capacity within the region, such as the forward capacity market initiative. h) protection of public health and the environment; energy efficiency opportunities and programs, in all forms of energy uses; promoting renewable energy, both for electrical production and as a heat and transportation fuel source; the adequacy of natural gas supplies and fuel diversity within the state and region; and the regulatory process for siting commercial wind energy facilities in the state and the economic, environmental, visual and ratepayer effects associated with such facilities. The Commission was directed to report its findings and any recommendations for legislation in the form of an interim report by December 1, 2006, and a final report by December 1, 2007.

The members of the Commission are: Senators Peter Bragdon and Martha Fuller Clark; Representatives Jacqueline Cali-Pitts, James Garrity, Ryan Hansen and Lawrence Ross; gubernatorial appointments Thomas Kelly, PhD. and Harold T. Judd, Esq.; for the Office of Energy and Planning, Amy Ignatius, Director; for the Public Utilities Commission, Thomas B. Getz, Chairman; for the Office of Consumer Advocate, Meredith Hatfield, Consumer Advocate; and for the Department of Environmental Services, Robert Scott, Air Resources Director. The Committee elected Representative Garrity to serve as Chairperson at the organizational meeting held on July 27, 2006.

Proceedings to Date

On September 14, 2006, the Commission met jointly with the Energy Planning Advisory Board (EPAB) to review the EPAB report on its June 2006 stakeholder forum. The EPAB report and attachments are available on the Public Utilities Commission website.

At subsequent meetings of the Energy Policy Commission, the Commission concentrated on two substantive topics. At the September 28 meeting, the Commission heard presentations regarding the statewide “Core” residential and commercial energy efficiency programs, which are funded by the System Benefits Charge, a charge paid by all customers of regulated electric utilities. The presentation summarizing the results of the Core programs to date is contained in Attachment A. The Commission also heard from the state’s two natural gas utilities about their energy efficiency programs.

At the October 12 meeting, Mr. Bob Garside of the NH Oil Heat Council shared energy conservation measures currently in practice among the Council’s member dealers. Asked if the Oil Heat industry would consider a program similar to the Systems Benefits Charge, Mr. Garside commented that it would be difficult to implement such a program since oil heat is delivered by many independent dealers. The Commission then heard presentations focusing on net energy metering for small-scale renewable energy installations, and distributed generation and co-generation options being utilized by some commercial and municipal users. The Commission understands that if changes are needed to the current statutes or rules on net energy metering, review and consideration of those issues will be undertaken in the PUC’s docket investigating how the state will comply with provisions of the Energy Policy Act of 2005 related to renewable energy production or a separate rulemaking proceeding, if appropriate. That review will take place in 2007, and the Commission will monitor that progress and take action as needed.

In addition, on November 9, the Commission reviewed the three minority reports issued by the SB 389 System Benefits Charge Study Committee, which had been charged with examining the energy efficiency programs. The Commission discussed the various recommendations made by the Study Committee and also acknowledged that the Core programs that have been approved by the PUC are currently under review for the 2007 program year. The testimony presented thus far indicates that the Core programs are cost effective and provide many benefits to customers. The Commission voted to establish a subcommittee on energy efficiency to review the potential for new programs and policies on energy efficiency and demand response, including such issues as how demand reduction resources will be included in the new Forward Capacity Market at ISO-New England.

Subcommittees

On October 26, 2006, the Commission formed three subcommittees.

•Interim Report Drafting
Rep. Garrity (Chair)
Mr. Getz
Ms. Hatfield
Ms. Ignatius

•Renewable Portfolio Standard (RPS)
Rep. Ross (Chair)
Sen. Fuller Clark
Mr. Ruderman (designee of Ms. Ignatius)
Mr. Scott
Ms. Hatfield
Dr. Kelly

•Commercial Wind Siting
Mr. Scott (Chair)
Rep. Cali-Pitts
Ms. Ignatius
Rep. Garrity

•Energy Efficiency (subcommittee will be organized after December 6)

EPAB members will be invited to participate in the subcommittees to share their experience but will not be voting members. The subcommittees will hold public sessions to discuss, debate and refine specific resolves that will be brought before the Commission for further debate, with the intention of providing the framework for proposed legislation in the Commission’s final report. The Commercial Wind Siting Subcommittee held its initial meeting on November 17, 2006.

The formation of subcommittees to examine commercial wind siting, energy efficiency, and renewable portfolio standards can assist the Legislature during the 2007 session by sharing key learnings, analysis, and opinions with the standing legislative policy committees as such information becomes available. These topics are currently the subject of LSRs for the 2007 session and the ongoing efforts of the subcommittees should not preclude consideration of commercial wind siting, energy efficiency, and renewable portfolio standards in the 2007 legislative session.

The Commission also decided that a committee of the whole should address the various issues related to the current state of restructuring, the divestiture of PSNH’s generation assets, and electric competition generally.

Finally, the Commission determined that the PUC should provide background material for inclusion in this Interim Report. It is found at Attachment A.

Guiding Energy Policy Pillars

The Commission concluded that a set of overarching guiding principles, or Policy Pillars, would be useful for evaluating current energy policy initiatives and designing the State’s short-term and long-term strategic energy policy. The Commission reached consensus on the following Energy Policy Pillars and recommends that the Governor and Legislature use these Energy Policy Pillars to evaluate any new energy policy initiatives:

Peak Energy Demand
Goal is to meet peak demand (both electricity & transportation)

Fuel Diversity/Buffer Against Global Instability
Reduce fossil fuel component of energy mix, promote use of renewables.

Environmental and Public Health Benefits
Reduce undesirable emissions

System Reliability
Energy transmission infrastructure must be dependable and reliable to encourage businesses to locate, remain, and expand in New Hampshire.

Consumer Price Stability
Goal is to minimize spikes in energy prices.

Economic Benefits and Certainty
Benefits to New Hampshire economy and long-term economic predictability.

ATTACHMENT A
BACKGROUND MATERIALS

The Energy Policy Commission was tasked with the duty to study a number of issues and to report its findings and any recommendations. As described in the body of the Interim Report, several issues are currently the subject of examination by the Commission or by subcommittees. The Commission also determined that it would be useful to include in its Interim Report certain background materials, drawn from a variety of sources, in order to provide a general picture of specified study areas. This Attachment provides some current information regarding the adequacy of electric supply, diversity of fuel supply for electric generation, reliability of electric service, price of electricity to end-use customers, energy efficiency programs for electric customers, and adequacy of natural gas supply. Following is an abstract of the materials for each topic.

Adequacy of Electric Supply New England peak electric demand continues to grow and reached a record of 28,021 MW on August 2, 2006. The New England Independent System Operator reports that additional capacity is needed for the New England region by 2009. The ISO also reports that potential capacity additions are entering the generation queue following the FERC’s approval of the Forward Capacity Market, which will provide as well for demand response as a resource.

Diversity of Fuel Supply New England continues to rely heavily on fossil fuels for electric generation while natural gas has been replacing oil over time as the largest source of electric generation. New Hampshire has a very diverse fuel mix, although, consistent with the rest of the region, the most recent large-scale additions have been fueled by natural gas.

Reliability of Service Congress and the FERC, in the aftermath of the August 2003 Northeast Outage (which affected only the Southwestern Connecticut portion of New England), continue to implement mandatory national reliability standards. New Hampshire addresses distribution reliability through use of the System Average Interruption Duration Index (SAIDI), System Average Interruption Frequency Index (SAIFI), and Customer Average Interruption Duration Index (CAIDI).

Price to End-Use Customers For years New Hampshire had the highest electric prices in New England and, at times, the highest prices in the nation by some measures. New Hampshire now has some of the lower electric prices in New England and the Northeast.

Energy Efficiency Programs The energy efficiency programs funded by the System Benefits Charge have served over 192,000 electric customers, saved 3.3 billion lifetime kWh, saved $376 million (more than six times the cost of the programs), and reduced emissions by 2.2 million tons for the period June 2002 through December 2005.

Adequacy of Natural Gas Supply Currently the amount of natural gas in storage is at record levels and the supply outlook for the upcoming winter is very positive. For the long term, however, it is critical to diversify sources of supply and invest in efficiency programs.