NH Sawmill Rate

Background In the early 1990s Sawmills were faced with rising electricity costs and began considering (and in some cases installing) electric generation equipment and disconnecting from the utility. At that time, utility prices at PSNH were in the midst of several years of 5.5% rate increases; and with attractive diesel prices, sawmills viewed generation as a way to avoid a costly demand charge that was part of their electric bill.

PSNH realized if it lost sawmill customers then it would be losing a significant amount of energy sales and the fixed cost portion of its business would be borne by a smaller customer base. In other words, PSNH’s remaining customers would be paying more for a kWh of electricity. As a way to stem this tide, PSNH worked with the sawmill owners and came up with a rate named Rate SGD (later named Rate SR). This rate provided a 75% demand discount and was available to sawmills who could install generation at a cost that had a payback of less than five years. Rate SR had a five year term and to receive the 75% demand discount, sawmills had to agree not to install generation during the term of the special rate. The generation evaluation was conducted by PSNH and each sawmill that applied for Rate SR had its electrical energy consumption modeled using the same generation modeling process. Rate SR became available in 1994 and virtually all of the sawmills that applied passed the economic test confirming generation was viable and signed onto Rate SR.

Several mills for whatever reason did not apply for Rate SR right away. Over the next few years some of those sawmills applied and since conditions were still favorable for the mills to install generation, they were eligible for Rate SR and signed onto the rate. This continued for 3 five year cycles with the last mills signing onto Rate SR in 2005.

By the 2005/2006 time frame the cost of PSNH electricity had been declining. The major event was the restructuring of the electric utility industry in New Hampshire which resulted in an immediate rate reduction. Gradual rate reductions also occurred with the recovery of stranded costs that are in the rates; stranded costs had a high of 3.4¢/kwh but dropped to the current level of .98¢/kwh. These factors coupled with increasing diesel costs caused the economic analysis of sawmill generation to show that PSNH electric service was the least cost option. Therefore, sawmills were not qualifying for the Rate SR discount.

By 2005 the first group of sawmills reaching the end of their latest five year term found they no longer qualified for Rate SR. Other sawmills still in the midst of their five year term received the benefit they were entitled to under the five year agreement. While this seemed unfair to some mills, it was simply a timing issue where mills no longer on the discounted rate had already benefited from full five year cycles and those on the rate had not completed their cycle yet.

Because PSNH's stranded cost component had become a minor portion of its cost of electric service by 2006, those sawmills on Rate SR at that time were receiving a benefit greater than the cost of service and were actually causing the stranded cost part of PSNH's rate to be higher than it otherwise would have been absent the rate. This meant that Rate SR was a cost to all of PSNH’s customers. As a result, this rate was closed to new applicants when rates were filed and approved during PSNH’s 2006 rate case. Sawmill customers receiving service under Rate SR were allowed to continue to receive the benefit of the rate for the remainder of their five year term. Current Options Today sawmills have several options available to help control their electric consumption and costs.

Competitive Market Purchase power from the competitive market. A direct result of restructuring of the electric utility industry was the opportunity for electricity consumers to purchase their power from competitive suppliers. On the PUC website, http://www.powerischoice.com/pages/biz_01.html electricity consumers (businesses) can find a list of companies positioned to sell electricity to them.

Buying Group Form a buying group to aggregate load to gain economies of scale and purchasing power. Under NH State law electricity consumers with similar characteristics (e.g. demand frequency, load requirements, etc.) can pool their electricity needs and purchase electricity. The following website has information on forming a buying group, http://www.powerischoice.com/pages/buygrp01.html

Interruptible power Many sawmills have the luxury of having an interruptible load. This characteristic is an asset they can derive value from directly with their electricity supplier or utility or through a third-party service. Contact your electricity supplier or utility or a third party administrator to negotiate a value for this service.

Energy Efficiency Grants There are two sources of funds to assist mills with energy efficiency improvements. The first is their utility. Most utilities have grant programs to assist customers with the installation of energy efficiency equipment or the replacement of inefficient equipment. To explore this option contact your local utility.

The second source of funds for energy efficiency upgrades is from the State’s participation in the Regional Greenhouse Gas Initiative (RGGI). Utilities burning fossil fuels pay into the RGGI fund. Money from this fund can be used for the development of new qualifying renewable energy projects and the installation or upgrading of energy efficient equipment at existing businesses. If interested in applying for these funds the contacts are at the following website, http://www.puc.nh.gov/Sustainable%20Energy/contactinfo.htm

Capacitors Installing capacitors to improve power factor is another option available to lower your electric costs. Such a purchase and installation may be covered, in part through the RGGI grant program described above.