Northern Pass Transmission public utility status

New Hampshire utility regulators have issued an order conditionally authorizing Northern Pass Transmission LLC to operate as a public utility, with respect to its proposed 192-mile, high-voltage electric transmission line from Canada into New Hampshire.  The New Hampshire Public Utilities Commission's Order No. 25,953 approves a settlement agreement between the transmission line developer and Commission staff.  Among its conditions are requirements that NPT obtain all necessary permits, contribute $20 million over 10 years to support energy efficiency and clean energy initiatives, and hold New Hampshire electric ratepayers harmless from costs associated with the possible regional allocation of costs for a portion of the Northern Pass transmission line.

Proposed by two companies affiliated under the Eversource family -- Northern Pass Transmission LLC and Public Service Company of New Hampshire d/b/a Eversource Energy -- the Northern Pass line would include new direct current transmission lines and an AC-DC converter station.  A variety of federal and state approvals are required for the line's development, including certification of site and facility by the state Site Evaluation Commission, plus several approvals from the Public Utilities Commission.

NPT secured one of those approvals this month, in the form of Public Utilities Commission Order No. 25,953, which conditionally authorizes NPT to operate as a public utilities in municipalities along its route.  In the Order, the Commission found "that NPT has the necessary technical, managerial, and financial expertise to operate as a public utility."

The Commission next found that the terms and conditions of a settlement agreement between Commission staff and NPT "ensure that granting NPT authority to commence business as a public utility is for the public good."

• First, the Commission noted public benefit, in the form of transparency, from the fact that the settlement recites a list of applicable statutes and rules.
• Second, the settlement called for a $20 million public interest payment, to be paid in installments of $2 million per year over the first 10 years of the operation of the Northern Pass Project; the Commission noted that this payment "will benefit customers by allowing the Commission to direct the use of this payment to energy efficiency programs and clean energy projects under its supervision."
• Third, the Commission noted that its grant of public utility status is conditioned on NPT procuring all necessary approvals for the Northern Pass Project, including obtaining a certificate of site and facility from the SEC.
• Finally, the Commission noted a provision in the settlement that "NPT must hold New Hampshire electric ratepayers harmless from costs associated with the possible regional allocation of costs for a portion of the Northern Pass transmission line."  The Commission expressed a belief "that the rate treatment provision applicable to the DC portion of the line could constitute a significant benefit to ratepayers in the event the ISO-NE designates this portion as eligible for regional cost recovery.

On this basis, the Commission approved the settlement agreement in its entirety, adopted its conditions, and found that commencement of business as public utility subject to those terms and conditions will be for the public good.

Meanwhile, NPT continues to pursue other approvals, such as PUC approval for crossings of public waters, and the SEC certificate of site and facility itself.

NHPUC considers PSNH divestiture auction format

As the New Hampshire Public Utilities Commission prepares for an auction of the state's largest utility’s generating assets, its auction advisor J.P. Morgan has recommended a broad public auction of the assets, using a two phase structure.

At issue are the generation facilities owned by Public Service Company of New Hampshire d/b/a Eversource Energy (Eversource).  Following a legislative finding that divestiture is in the public interest at the present time, on July 1, 2016, the Commission issued Order No. 25,920 approving the 2015 Public Service Company of New Hampshire Restructuring and Rate Stabilization Agreement and the Partial Litigation Settlement Agreement. Those settlement agreements called for the Commission to open an expedited proceeding to oversee the process of auctioning the Eversource generation facilities.

On September 7, 2016, the Commission opened a proceeding to implement the divestiture process for the generation facilities of Eversource as approved in Order 25,920. In its Order of Notice opening the auction process docket, the Commission noted a primary objective of obtaining the highest possible sale value of the generation facilities in order to minimize the level of stranded costs ultimately paid by Eversource customers. It also noted a secondary objective, to the extent not inconsistent with the primary objective, to accommodate the participation of municipalities that host generation assets and to fairly allocate among individual assets the sale price of any assets that are sold as a group.

A report recently filed in the docket by Commission staff presents recommendations from its advisor J.P. Morgan on the auction design and process.  According to the report, these recommendations were designed to maximize the overall value of the transaction and the likelihood of the successful sale of each asset.

In Phase I, Eversource, the Commission, and its advisor would develop of a list of potential bidders who would be invited to respond to a Request for Qualifications (RFQ). Parties satisfying the requirements of the RFQ would be asked to execute a confidentiality agreement, after which they could review a Confidential Information Memorandum. This document would provide certain limited information about the assets, to let bidders develop a preliminary non-binding indication of interest. The report suggests this phase could take six weeks from launch to the submission of preliminary, non-binding proposals – potentially spanning from November 2016 into January 2017.

In Phase II, bidder indications of interest would be used to identify potential bidders likely to transact on terms most favorable to the seller. These “second round” bidders would have access to full due diligence. The report suggests allowing about 8 weeks for Phase II parties to conduct due diligence, mark up a draft purchase and sale agreement, and submit a final, binding proposal. The report suggests Phase II might run from January 2017 into March 2017.

Following the submission of final bids, the report suggests that the Commission select one or two parties per asset or group of assets for final negotiations, depending on the level of interest.

Written comments on the auction design and process are due by September 30, 2016. The Commission has said that the proceeding will culminate in a decision on auction results, and if necessary, a financing order authorizing securitization of stranded costs and stranded cost rates.

EPA carbon rule: how it works

Last week, the U.S. Environmental Protection Agency issued a groundbreaking proposed rule to limit carbon emissions from power plants.  EPA's Clean Power Plan would require each state to develop a plan to limit the amount of carbon dioxide its power plants produce per unit of electricity generated.  By reducing the carbon intensity of electric generation, EPA projects that the Clean Power Plan would would achieve a 30 percent reduction in CO2 emission from the nation's power sector below CO2 emission levels in 2005, resulting in net climate and health benefits of $48 billion to $82 billion.  Importantly, the Clean Power Plan would rely on federal and state cooperation to achieve this goal.

Public Service of New Hampshire's Schiller Station, in Portsmouth, NH, can burn coal, oil, and wood chips.

EPA proposed the carbon rule pursuant to its authority under Section 111(d) of the Clean Air Act.  As with other Section 111(d) regulations, the Clean Power Plan relies on a combination of federal emission limits and state implementation plans.  First, EPA proposed state-specific carbon dioxide emission goals, stated as an emission rate of pounds of CO2 emitted per net megawatt-hour of electricity generated.  Second, EPA offered states guidelines for how to develop, submit, and implement their own plans to reach those emission goals.

At the federal level, EPA set a carbon emissions rate limit for each state based on the agency's evaluation of how much the state could feasibly reduce emissions by adopting the "best system of emission reduction", or BSER.  Effectively, EPA considered each state's portfolio of electricity generating resources as well as how hard it would be to reduce its carbon intensity.

At the state level, EPA expects each state to propose a plan based on a combination of four "building blocks" or types of measures:

• Reducing the carbon intensity of generation at individual affected fossil-fired electric generating units (or EGUs) through heat rate improvements
• Reducing emissions from the most carbon-intensive affected EGUs by substituting generation at those EGUs with generation from natural gas combined cycle power plants and other less carbon-intensive fossil-fired units
• Reducing emissions from affected EGUs by substituting generation at those EGUs with expanded low- or zero-carbon generation
• Reducing emissions from affected EGUs through demand-side energy efficiency measures 

State plans would be subject to EPA approval, based on their enforceability, ability to achieve emission performance, verifiability, and reporting process.  EPA suggested that states may develop collaborative multistate programs.  States may also incorporate existing CO2 emissions reduction programs such as the Regional Greenhouse Gas Initiative or California's carbon market into their plans.  Procedurally, EPA expects that states would submit their plans by June 30, 2016, for review and approval, with the possibility of a one-year extension of this deadline.

EPA is now taking public comment on its proposed Clean Power Plan rule for 120 days, and will hold public hearings on the proposal in July and August.  EPA projects that it would issue its final Clean Power Plan rule in June 2015.