by Chuck Douglas
Bow Times July 2015
For decades now, Bow residents have been hearing about the likely shut down of PSNH’s (now Eversource) Merrimack coal fired power generation station, its continued devaluation and its eventual sale to an entity that may only buy it, run it for three years then sell it to China for scrap value.
This sale of generating assets in our state really began back in 1996 when the NH Legislature ordered the NHPUC to develop a statewide restructuring plan to implement electric retail choice for all customers by January 1, 1998. The Commission issued a restructuring plan in February 1997, although its implementation was slowed by subsequent litigation that constrained the Commission to consider only voluntary filings of settlement agreements or compliance plans. As a result, electric utilities in New Hampshire restructured at different times and in somewhat different ways. Several electric operating utilities in the state, Liberty, NH Electric Coop, and Unitil did sell off their generating assets and now must put their electricity on the open market from a mix of alternative energy sources.
Forty years ago, PSNH assets in Town made up about 75% of the tax base. After several reductions in assessments and normal depreciation, coupled with normal growth of the non-utility tax base, that proportional tax base figure is now around 15% for all assets.
Last year, a PSNH generation asset and valuation report commissioned by the New Hampshire Public Utilities Commission (NHPUC) and conducted by La Capra Associates of Boston was released. This report looked at all of the PSNH generation assets in New Hampshire, including their three fossil fueled plants, both combustion turbines and their nine hydroelectric sites. The Net plant value of the entire fleet of generation came in at $660 million. Of that number, assets located in Bow were initially valued at approximately $500 million.
However, after many formulas were applied, including operating expenses, discounted cash flow analysis, potential revenues, and uncertainty in the electric supply market, the net plant value for Bow assets became $10 million.
Over the years PSNH, which serves 70% of the electric customers in New Hampshire, sold its remaining share of the Seabrook Nuclear Power Plant. Due to failed attempts in electric restructuring in California (and the Enron debacle) and at the urging of our state legislature, PSNH retained ownership of its fossil and hydro generation facilities. Now that electric restructuring and choice is more mature and more options for alternative electric generation have become available, the legislature has decided it is time for PSNH to divest itself of all generation facilities. To be sure, parameters have been set for those who wish to buy these assets. If the plant is sold, the buyer must agree to pay the existing taxes to Bow but for only three years.
History tells us what a sale of generating assets might look like: A single company could come in and purchase all of PSNH’s generation facilities in the State, collect revenues under current contracts then close any facility it wished after meeting the terms of the sales contract. There is history to support such an action because this is what happened at the Brayton Point coal generation facility in Somerset, Mass. Brayton Point was sold in August 2013 as part of a larger purchased package. Even after a $1 billion investment in plant upgrades, the new owners announced the plant will close in 2017.
Total valuation for Bow is $1,054,318,690 according to page 11 of the 2014 Town Report. The plant is assessed for $108,000,000 or about 10% of our tax base with a credit of $25,500,000 for an air pollution control exemption granted by the State. That leaves the net assessed value at $82,500,000 according to our town contract assessor.
If that is lowered to $10,000,000 that would be a tax base reduction of $72,500,000 or 7% of the total value of properties. If your house is assessed at $300,000 and the tax rate three years from now were to be $31 a thousand that $9,300 tax bill would go up 7% or $651 more. For the elderly and those on fixed incomes, that is quite an impact. Fiscal restraint is in order for Bow.