Matt,any idea what impact this might have on the slight changes you mentioned can be made to the PPA?
Mr. Franz who is the economic expert on behalf of the NH PUC isn't recommending acceptance of the PPA for the following reasons;
Franz testimony
Q. Do you believe the economic benefits described in Dr. Shapiro’s testimony will occur if the PPA is approved as filed?
A. No, I do not. The reason is not that Dr.Shapiro’s analysis is seriously flawed or that the model is fundamentally flawed, though tests have shown the RIMS II model can overstate results as compared to other models, but rather that Dr. Shapiro makes no provision for the fact that this contract’s prices are above market. These above market costs will result in higher energy service costs, which will be passed on to PSNH’s Energy Service customers, if approved by the Commission.
Based on Mr. McCluskey’s testimony, the above market estimates of energy and Renewable Energy Certificates (RECs) over the life of the project will total approximately $550 million. On a levelized basis, Mr. McCluskey estimates the levelized cost of the Laidlaw project to be $162 per MWh. Every $10 per MWh of over-market costs associated with this project increases electric rates by approximately $4.8 million per year. If the over-market costs attributable to the proposed PPA are on the order of $55 per MWh as claimed by Mr. McCluskey, resulting in an annual above-market cost of about $26 million, then the perceived economic benefits of the project are not benefits at all, but costs borne by PSNH ratepayers taking Energy Service from PSNH as well as indirectly by New Hampshire’s businesses and households based on the inter-dependencies of the economy.
Stated another way, creating a subsidy for this project or any other, for that matter, doesn’t create wealth for the economy as a whole. It simply transfers wealth. Above market payments for electricity leave the total electricity-using group with less income
6for businesses to invest in other projects or for households to save or spend on products and services.
Q. Are there other issues that were not addressed in the testimony of Dr. Shapiro that could mitigate economic effects she estimates?
A. An important issue left unanswered is what effect this project could have on the other biomass generators currently operating in New Hampshire, especially those located near Berlin. I have not analyzed whether approval of this PPA and the construction and operation of Laidlaw would result in the closing of one or more of those facilities, but if that were to occur, the overall economic benefits of this project would be further reduced.
Q. Do you have an estimate of what the economic effect on New Hampshire would be if the PPA between PSNH and Laidlaw results in over-market costs of $50 - $60 per MWh per year?
A. Yes, based on a data response from Staff to PSNH. Staff Set-06, Q-Staff-009, Dr. Shapiro was asked to estimate a hypothetical increase in electric rates. The question was a follow-up to Staff Set 4, Q-Staff-012. Dr. Shapiro responded by using the results from a recent economic study done in 2008 by Dr. Ross Gittell, titled the “Economic Impact in New Hampshire of the Regional Greenhouse Gas Initiative (RGGI); An Independent Assessment.” Dr. Gittell used a different model, the REMI model, to estimate a scenario in which it was assumed that New Hampshire did not join RGGI. REMI was used to estimate the economic effect based on increased electric rate increases only. He reported those effects as changes to Gross State Product and employment. Dr. Gittell’s estimate of a $10 million increase in electric rates decreased Gross State Product by $4.95 million 7and reduced employment by 65.5 jobs. Obviously, the greater the above-market cost of the PPA, the more deleterious the economic impact on the State as a whole.
Q. Please provide your recommendation.
A. Based on my review of the economic effects contained in Dr. Shapiro’s testimony and the testimony provided by Mr. McCluskey that demonstrates the substantial over-market costs of the PPA, essentially a wealth transfer from ratepayers to Laidlaw and its affiliate, PJPD Holdings, LLC, I cannot recommend that the Commission approve this PPA as filed.
Q. Does this conclude your testimony?
A. Yes it does.
