On Friday evening, 11/12/21, New Hampshire's Public Utilities Commission decided to reject a long-sought update to the state's energy-efficiency programs. In a letter to the Consumer Advocate's advisory board, state Consumer Advocate Don Kreis explains the history leading up to the decision and why he considers the move "a radical repudiation of the last eight years of PUC-approved energy efficiency program development in New Hampshire."

November 14, 2021 Dear Advisory Board:

Ordinarily I only write to you once a quarter, but Friday’s Order from the Public Utilities Commission was both the most consequential and the most troubling decision the PUC has made since I arrived on the scene as a fledgling PUC Staff Attorney in 1999. In these circumstances, I am eager to take up Neal’s suggestion that I summarize the order and explain what’s wrong with it.

First, the background and context.

Twenty years ago, when the dust settled from the federal litigation over the Restructuring Act (RSA 374-F) and New Hampshire was opened to retail competition in electricity, the PUC adopted the recommendations of its Energy Efficiency Working Group to create a set of statewide energy efficiency programs to be administered by the utilities and paid for via the System Benefits Charge authorized by RSA 374-F. In due course, the utilities jointly created the NHSaves brand for the programs and the PUC added natural gas utilities to the programs.

Not long after I became Consumer Advocate in 2016, the PUC approved the concept of an Energy Efficiency Resource Standard (EERS) in Docket No. DE 15-137. Although the EERS is frequently associated with its policy mantra – “all cost effective energy efficiency” – in reality the significance of the EERS lies in the way the scope of the programs is determined. Prior to the EERS, the PUC set energy efficiency charges for electric and natural gas utilities, which then created as much energy efficiency as they could with the funds available. Under the EERS, the goals (expressed in terms of how much retail kilowatt-hour or therm sales were to be avoided) were set first and the energy efficiency charges were adjusted to meet those goals.

When the EERS was adopted in 2016 via a settlement agreement, the consensus among stakeholders was that the EERS should be implemented via three-year plans. The first triennial plan, covering 2018, 2019, and 2020, earned approval by the PUC in Docket No. DE 17-136 after a stakeholder engagement process that took place via the EERS Committee of the Energy Efficiency and Sustainable Energy (EESE) Board, which I chaired. The premise of the Committee’s deliberations was that it is better for stakeholder to engage with the utilities while the plan was being formulated, as opposed to litigating against the utilities once the plan was submitted to the PUC for its approval.

One outgrowth of the first triennial plan was the creation of several PUC-administered working groups to develop recommendations on certain key EE-related policy areas that were still in controversy. In my view, the most important was the cost-benefit test to be used to determine whether a particular EE program should be funded by ratepayers. The working group settled upon, and in late 2019 the PUC approved, a new cost-benefit screen known as the “Granite State” Test (GST). Under the GST, a program is cost effective if it saves all ratepayers money, net of the EE charges they have paid. Previous cost-benefit screens were bogged down in determinations of total costs and total benefits, factoring in payments made by and savings accruing to both ratepayers as a group and the individual ratepayers on whose premises the measures were installed. Those individual costs and benefits are important, of course, but don’t tell us much about whether a particular program should be funded by all ratepayers.

Armed with the new Granite State Test, the EERS Committee of the EESE Board began work on a 2021-2023 triennial plan in November 2019. I again chaired the committee, which (despite the arrival of the pandemic in March 2020) held a total of 20 afternoon-long and sometimes contentious meetings culminating in agreement on the parameters of a new triennial plan in August of 2020. The utilities submitted the plan for PUC approval on September 1, 2020 and the PUC opened a contested administrative proceeding, Docket No. DE 20-092, to consider it.

In the contested administrative proceeding that followed, no party opposed the plan. The Staff of the PUC – which, prior to the creation of the Department of Energy a few months ago, participated in PUC proceedings as if it were a party – complained that the plan was too expensive. So we pared it back, via a settlement agreement submitted in early December.

However, as pared back, the 2021-2023 triennial plan still called for significant increases to the NHSaves programs. The savings goals – a cumulative 4.5 percent of electric sales and 2.8 percent of natural gas sales – required spending levels of about $380 million over the course of the triennium, most of which (but not all of which) would have been paid for by nonbypassable charges on utility bills.

Although no party opposed the settlement, Commission Staff did not sign the agreement and two widely noted comment letters from non-parties were filed with the Commission. One was from the Business and Industry Association (BIA); the other was from Rep. Michael Vose and eight other Republican members of the House (including Speaker of the House Hinch, just weeks before his death). These letters asked the Commission to reject the settlement and freeze energy efficiency charges on utility bills at their 2020 levels at least until the end of the pandemic.

Evidentiary hearings occurred over four days in early and mid-December. Consistent with past practice, the settling parties requested an order by December 31. On December 29, the Commission awarded a de facto though ostensibly temporary victory to the BIA et alia by directing the utilities to maintain their 2020 energy efficiency charges until further notice, which the Commission said could be expected within eight weeks. In fact, we were 316 days into the triennium before the Commission issued its order, on the evening of Chairwoman Martin’s last day in office.

Here are the key aspects of the Commission’s November 12 order. The Commission:

•  rejected the settlement agreement and the triennial plan outright, concluding that even the existing energy efficiency rates do not meet the statutory “just and reasonable” standard.
•  Invoked orders issued in 1998 and 2000, at the outset of restructuring, referring to the need to develop market-based, rather than utility-sponsored, energy efficiency programs, essentially ignoring PUC decisions made in the wake of the 2014 State Energy Strategy (which called for the establishment of an Energy Efficiency Resource Standard).1
•  Found that residential customers not participating in the NHSaves programs “will not receive economic benefits with the costs they would be required to pay.”
•  Determined that the proponents of the settlement agreement failed to establish that the NHSaves programs are “least cost” or were “evaluated on a similar basis to supply-side resources or market purchases.”
•  Characterized the proposed increases to energy efficiency charges as “drastic,” particularly when compared to their 2017 level (that being the last year before the EERS) of 0.198 cents per kwh.