29 October 2008
By CHARLES M. ARLINGHAUS
Wednesday, Oct. 29, 2008
I hope you don't mind taking a little break from the election to talk about coal. Obscured by the constant noise of the election, a subtle attempt is being made to eliminate coal from New Hampshire's energy mix and significantly raise prices for New Hampshire taxpayers.
Electricity is provided in New Hampshire by regulated public utilities, each with an exclusive service area. The smallest buy electricity on the market to sell to their customers. The largest company, Public Service of New Hampshire (PSNH), supplies electricity to about two-thirds of the state's residents and generates much of the electricity its customers use in its own power plants. Because the plants have been paid for over time, PSNH is able to supply that portion of its electricity at significantly discounted rates.
The plants themselves are heavily regulated by state government, and the rates any utility can charge are carefully determined and approved by state regulators.
Periodically, the state mandates new equipment at the existing plants. Two years ago, a law was passed requiring a new scrubber at PSNH's coal plant to reduce mercury and sulfur dioxide emissions. In the two years since the law passed, the expected cost of the new equipment has about doubled. Some opponents of the existing plant are using the cost hike as an opportunity to delay the installation of the new equipment and instead shut down the plant or at least consider shutting the plant down.
The new scrubber would cost about $450 million if construction began immediately. That cost, although large, would add about one-third of a cent, or 3 percent, to PSNH's current rates. Largely because they produce their own power and we, the ratepayers, have been paying off the plants over time, PSNH's current rates are about 2.4 cents, or 25 percent below the New England average.
It's like finally paying off your car. We've been making the car payments for a long time. Now that we've finally finished, the cost of operating the car is a lot cheaper.
At this point, we have two choices. We can build the pollution control equipment mandated by state law, or we can scrap the plant and try to find that energy elsewhere.
Scrapping the plant doesn't work financially or for our long-term energy needs. According to filings with the Public Utilities Commission, while the new scrubber will add one-third of a cent to rates, scrapping the plant will add .73 cents to the rate, more than double the cost of the scrubber. So if cost is the only consideration, there's no question consumers should repair the plant, not scrap it.
The current group opposed to fixing the plant object on grounds other than cost. No one disputes that construction costs are rising and that delaying the start of construction would only add to the cost. No one would dispute that keeping the plant will provide less expensive electricity, an important consideration in a region with uncompetitive electric costs.
The problem for the objectors is coal. They would rather the electricity be produced by wind and solar and other green technologies. The problem is our energy mix and base load.
In general, large coal, nuclear and gas plants provide the base load of electricity, the bulk of power production that ensures when you flip a switch someone is generating power. New or renewable technologies like wind and hydro can't produce enough power to supply the vast amounts of electricity we use. Instead, they provide additional power to supplement the workhorse base load.
The PSNH coal plant supplies about a third of the power its customers use. Replacing that amount of power in today's market is also a problem. For years, New England has faced a generation problem. New plants haven't been built at the rate we need, and the current economy makes new projects unlikely.
Our future energy needs will have to include a balanced portfolio that includes coal, nuclear and gas to provide the large base load we need. Renewables can't supply enough energy to make up for the loss of a huge plant.
Scrapping the PSNH plant instead of fixing it will cost ratepayers more money just as they are starting to reap the benefits of paying off many years of fixed costs. Scrapping it would also leave our power supply with a big hole when it needs more generation, not less.
It seems clear that shuttering the plant would be bad for ratepayers and a bad idea in general.
Charles M. Arlinghaus is president of the Josiah Bartlett Center for Public Policy, a free-market think tank in Concord.