Electricity suppliers flock to New Hampshire
Despite alternative supplier’s recent troubles, firms are racing to provide electricity in N.H.
Gulf Oil sells gasoline, and its affiliated Cumberland Farms stores -- which sell that gasoline -- fuel you with everything from coffee to carbs. Now the petroleum giant is asking New Hampshire regulators for permission to sell you electricity at Cumberland Farms too.
In May, after Gulf plans to makes its announcement, you can expect to see slick brochures at those convenience stores and hear -- in videos now being advertised in Massachusetts, Maine and Connecticut – the following:
“Thanks to state deregulation, the same people who help you save at the pump, can help you save at home.”
Despite the brouhaha over the recent default of alternative electricity supplier PNE Energy Supply and the ensuing regulatory scrutiny -- not to mention the bad publicity focused on its sister power aggregator, Resident Power -- competition for New Hampshire’s kilowatt-hour dollar is growing.
In fact, so far this year, 10 more companies have applied to the state Public Utilities Commission to either be an electricity supplier or a broker, joining the 14 suppliers that have already received that approval and the 55 power aggregators that are already approved to operate in the state.
New Hampshire residential and small-business customers seem to be continuing their migration away from Public Service of New Hampshire to competitive suppliers, even as some larger customers have shifted back to PSNH as the price of natural gas peaked this winter. The shift has given the utility a greater percentage of the electricity sold in the state, even as residential customers and smaller business flee in increasing numbers.
According to PSNH’s latest report, at the end of last year some 30,000 PSNH residential customers (about 7.1 percent of the total) received their electricity from other suppliers, compared to about 2,000 (0.5 percent) at the end of 2011.
Some 15,700 small businesses -- over a fifth of all small business customers in New Hampshire and consumers of about two-fifths of the load -- have left PSNH. That’s a 50 percent increase compared to the previous year.
ENH Power, the Maine-based company that is the largest alternative electricity supplier in New Hampshire, claims those counts are on the low side or are outdated. It boasts that it had 40,000 customers in the state at the end of the year -- a total it expected would reach 55,000 toward the end of March. If true, ENH alone would already be servicing more than one out of 10 residential and small-business customers in the state.
The fact that several well-capitalized companies are in or are entering the market shows what was at stake during the Resident Power/PNE fiasco: the possible unsettling of a burgeoning market. And it was one of the reasons regulators were so concerned and feelings were so raw during the hearing, despite a tentative settlement with PUC staff that would result in Resident Power/PNE sending out a $9.50 check to some 7,200 customers affected by the default.
During the hearing, PSNH used the occasion both to defend itself and strike back by releasing a prepared statement. In it, the utility charged that PNE made a decision to “walk away from its obligation to its customers” and that “PSNH staff and this commission have been left to clean up the chaos and confusion that PNE and Resident Power have created.”
Replied Gus Fromuth, managing director of Resident Power/PNE after the hearing: “They are willful, arrogant people. PSNH had the chance to do the adult thing, and they didn’t do it.”
The regulatory brawl was the aftermath of the stunning collapse of PNE -- the first competitive supplier PUC approved to serve residential customers -- as a result of a spike in the cost of electricity generated by natural gas earlier this winter. Cheap natural gas has been the driving force of a competitive energy supply market in the first place, especially considering that PSNH still owns its own generating facilities, including an increasingly expensive coal plant in Bow and another in Portsmouth.
A combination of a cold spell and the havoc caused by a massive winter storm led to a sixfold increase in the cost of electricity on the spot market between Jan. 30 and Feb. 10.
As a result, “PNE was unable to continue to meet its financial obligations with ISO-New England,” according to the Resident Power/PNE filing, leading the manager of the region’s power grid to suspend PNE from supplying electricity to Resident Power customers.
PNE tried to transfer its 8,800 customers to FairPoint Energy (a company marketed by FairPoint Communications but actually owned by Crius Energy trust, a publicly held company based in Toronto), but ISO-NE suspended PNE after the transfer of nearly 1,200 customers. PNE had offered to pay PSNH to speed up the transfer before the default, according to its March 20 filing, but “PSNH ultimately refused.”
“PSNH's position regarding Resident Power's alleged inability to aggregate the former PNE accounts, while profitable to PSNH, was harmful to customers who were subjected to higher rates while on default service,” according to the filing.
But PSNH attorney Robert Bersak disagreed with that version of the facts. PSNH could not make the transfer all at once without manually entering all of the data for thousands of customers, and it simply didn’t have the resources to do it.
Over the three-day Presidents’ Day weekend, PSNH had been undertaking “a tremendous effort requiring a substantial amount of time and resources, which was costly to PSNH,” Bersak said. That cost, he said, was $40,000.
Bersak also disputes that PSNH profited from the switchover, arguing that it had to pay more on the spot market to service these customers.
Fromuth retorted that PSNH was “illegally” holding on to $100,000 in customer payments to PNE following the crisis.
But those disputes are for another day.
The PUC hearing at the end of March was held over charges that Resident Power/PNE did not disclose to its customers its financial default, didn’t give advance notice of the transfer to FairPoint or PSNH and didn’t adequately reveal the relationship between aggregator Resident Power and supplier PNE.
The agency’s staff also alleged that PNE enrolled commercial customers without PUC approval. Indeed, one filing revealed that many of Resident Power’s customers were actually small businesses, which the PUC staff claimed they had no right to sign up. But PNE disputed that charge, arguing the regulations serving both are similar. The company, however, is applying officially for the right to sign up new commercial customers and has paid ISO-NE the $1.3 million shortfall that launched the whole crisis to begin with.
It also agreed to deposit $200,000 in two separate escrow accounts.
The company would be refunded one of the $100,000 deposits after it paid back the 7,200 customers who ended up having to pay PSNH’s default rate. The negotiated $9.50 rate is supposed to be the rough equivalent of the extra amount paid for a month.
The other $100,000 is double the amount of the deposit usually required by PUC of power suppliers.
Fromuth said the companies would be back in operation as soon as the commission approves the settlement. He said that the company will have to recapitalize by raising another $5 million or so to handle what is rapidly becoming a bigger business. And he believes customers will come back as well.
“The bad news is behind me, and the good news is ahead of me,” he said.
The companies will face an increasingly crowded field.
Gulf Electricity, based in Framingham, Mass., quietly filed its application on March 3 and will be making an announcement in May, according to spokesperson Derek Beckwith.
The Gulf Oil offshoot, which began in February 2012 in Maine and Connecticut, just moved into Massachusetts in October. It even provides electricity to Fenway Park.
“Gulf’s move into the electricity marketplace is a natural complement to our existing businesses,” said Gulf Oil President Ron Sabia in announcing the Massachusetts move.
Gulf won’t be selling electricity cards at Cumberland Farms stores, though it will use that convenient outlet to advertise the website where customers can sign up for power. But there are other synergies: new electricity customers could earn gasoline points with every kilowatt-hour used.
While Gulf recently entered the fray, Hess Corp., another oil company, has been there since 2010.
And while some companies mass-market electricity, either through outlets like convenience stores or through companies like FairPoint, others, like ENH, spread the word primarily through social media.
“We are growing every day,” said Emile Clavet, part-owner of ENH.
He said the Resident Power mess did confuse some people and led to some questions.
“It’s unfortunate that a company in our space has that type of trouble. It confuses people,” he said, adding that he now has to take the time to explain that his firm doesn’t speculate on the energy market and that customers should not be concerned that ENH won’t be able to buy power when things get dicey.
“When we get an enrollment, we go out and buy the power. We own it,” he said.
Despite the confusion in the wake of publicity over Resident Power/PNE, customers are signing up at the same rate as before the crisis, Clavet said.
Many suppliers use aggregators -- power brokers that often act similarly to insurance agents, helping consumers sort through a variety of products and pricing options offered by different companies.
That’s the model being used by First Point Power, a Rhode Island company that claims 100,000 customers in its home state, Massachusetts and Delaware and applied to serve New Hampshire customers March 1.
The company has a New Hampshire connection: Olympus Capital Investments – an affiliate of Olympus Power LLC, which owns a 15-megawatt biomass generation facility in Bridgewater -- is a minority investor.
The company also buys blocks of power from various national suppliers via fixed agreements. Such hedging, said First Point president and founder Peter Schieffelin will prevent it from getting into the kind of trouble that Resident Power and PNE found themselves in.
But in its application, First Point may be the victim of bad timing. It is asking the PUC to lower its escrow account requirement from $100,000 to $15,000. That’s the very payment that the PUC just required PNE to double.
“When you are just starting out, when you just have a handful of customers -- I’m just requesting that it matches up to the risk,” said Schieffelin.
However, if the PUC insists, the company will come up with the money, he said.
“We do want to do business in New Hampshire,” he said. “It’s a very attractive market right now.”Edit ModuleShow Tags