Survival Strategy for an Aging Coal Plant: New Hampshire's 'Big Dig'

What do you do with an aging coal-fired power plant that’s about to be woefully out of step with environmental laws?

If you’re New Hampshire’s largest utility, you throw hundreds of millions of dollars at it, raise your customers' rates, and make sure the legislature does nothing about it.

Some of the New Hampshire’s best-known businesses are up in arms right now over the skyrocketing costs of upgrading PSNH’s 41-year-old Merrimack Station power plant. They aren’t calling for the plant to be shut down, though that may turn out to be the only cost-effective option.

What the business leaders want is a legislative review of the costs, which have almost doubled in two years, to determine if the project to reduce mercury emissions from the coal plant is in the ratepayers best interest. They’re in a race against time to make that happen.

On Monday, the state’s Department of Environmental Services is expected to issue a permit PSNH has been waiting for so it can move on contracts and construction. The permit will likely be appealed, but approval is all PSNH needs to legally get the cement trucks rolling.

Opponents have other routes they can still take to fight the project, both in the courts and in the Capitol. On March 13, the New Hampshire Senate Energy, Environment and Economic Development Committee will hold a hearing on a bill that would order the project review business leaders are calling for. Even if PSNH starts work on the project, the legislature could decide to revoke the utility's ability to recover its construction costs from ratepayers.

The Unintended Blank Check

The Merrimack Station saga started two years ago when New Hampshire lawmakers ordered PSNH to install scrubbers that could capture, at minimum, 80 percent of the mercury emitted from the power plant in Bow, N.H. The businesses were on board – no one wanted more mercury getting into the state’s fish and endangering human fetuses.

At the time, PSNH estimated that the project would cost $250 million.

Now, the utility says it needs at least $457 million.

Jaws dropped all across New Hampshire when news of that 83 percent cost increase came out in an SEC filing last August.

PSNH is a regulated public utility. By law, it can charge its ratepayers to get a 9.67 percent rate of return on its investments. Adding the scrubbers at a cost of $457 million means PSNH will be getting an extra $20 million to $25 million a year – for equipment that likely won’t keep the plant in compliance with clean air regulations for very long.

A group of business leaders, including Stonyfield Farms CEO Gary Hirshberg, inventor Dean Kamen and Timberland President Jeffrey Swartz, want the state to take a second look at the scrubber project and determine if it is still in the public interest, in light of its increased costs and recognition of the urgent need to address climate change. The upgrades won’t do anything to reduce carbon emissions while the coal plant pumps away for the next 20 years.

Their request seems reasonable, but lawmakers have been slow to act on it.

That may be guilt. The state legislature is partly responsible for what some people are privately calling New Hampshire’s Big Dig. The poorly staffed legislature relied on PSNH’s expertise when it wrote the 2006 legislation requiring PSNH to install the wet flue gas desulfurization system at Merrimack. It also failed to cap PSNH’s spending, effectively giving the utility a blank check from the ratepayers.

Challenging the 800-Pound Gorilla

PSNH is a powerful force in New Hampshire business and politics, and it is adamantly against any effort to review the project now.

Challenging PSNH can feel risky for businesses that rely on the utility for their operations, as Hirshberg explained: