Freedom Energy Case Puts 1978 Law to the Test

CONCORD — New Hampshire has had a law on the books since 1978, allowing small hydroelectric power plants to sell electricity directly to a small number of end users, cutting the utility out of the middle except for the cost of transmission.

See original Union Leader Article By Dave Solomon Here
The law, known as the Limited Electrical Energy Producers Act (click to view it),was designed to encourage small-scale and diversified sources of power, to decrease the state’s reliance on other sources which, according to the law “may from time to time be uncertain.”

In all the years since, the law has never been put into action. But the folks at Freedom Energy Logistics, an energy broker serving large commercial and industrial clients, want to change that.

The Auburn-based company, founded soon after the state’s electricity market was deregulated in 2004, has been pushing the envelope on deregulation under the direction of its chief executive August Fromuth and attorney James T. Rodier for years.

Since the 1990s, the two men have been trying to find ways to do an end-run around the utility companies and connect power producers to customers. Now they’re going to go where no one else has wanted to tread since the days of leisure suits.

They’ve filed a petition with the Public Utilities Commission, asking regulators to authorize the direct purchase by Freedom Energy of five kilowatts of power from the Fiske Hydro Project in Hinsdale to help power FEL offices in Auburn.

The energy would be transmitted from Hinsdale to Auburn over power lines owned by Eversource, which would charge a fee for the transmission and would deduct the five kilowatts from the electric bill it sends to FEL.

Five kilowatts is only a fraction of the electricity needed to light, cool and otherwise operate the offices of FEL, but that’s not the point. The idea is to create a test case that will force the PUC to finally rule on the mechanics of how the law could actually work.

If the petition succeeds, it will open the door for many other large users who want to try the same thing, but have not had the stomach for the lengthy and costly regulatory process. In a state where businesses are trying to find every possible angle to lower electricity costs, the notion that this idea could catch on is not that farfetched.

Rodier says the 37-year-old statute could open a pathway for renewable power to be sold directly to customers.

“We’ve got these clients who are very interested in doing this,” said Rodier, “but they know there will be a challenge from Eversource, so no one wants to be the ones to go in and make this happen. We are normally a broker, someone who helps customers buy wholesale, so for us this is a bell-cow transaction. If it works, the others will follow.”

Never tested in court

It’s not as if the law has just collected dust for three decades. In 1995, the PUC ruled it a valid exercise of state powers and not preempted by federal law, addressing only the constitutional question but not authorizing any particular arrangement.

The law, which has never been tested in court, applies only to power plants that produce no more than 5 megawatts of power with renewable resources, which can be sold directly to no more than three end users. It’s a very tightly drawn prescription designed to encourage renewables under limited circumstances.

In December, Freedom Energy asked the PUC for a declaratory ruling as to how the law might apply, now that the state has a deregulated energy market, enabling customers to buy their power from any number of sources. The PUC denied the petition because it did not contain a specific proposed transaction. So Fromuth and Rodier, working with Fiske, came up with one.

Fiske Hydro is refurbishing its hydroelectric dam on the Ashuelot River in Hinsdale, increasing the generating capacity from 160 kilowatts to 535 kilowatts. A $225,000 grant from the state’s renewable energy fund awarded last year goes a long way to covering the total cost of $362,000.

The Granite State Hydropower Association, Eversource and Unitil have all filed as intervenors in the case, and at a May 6 pre-hearing conference agreed to a schedule that should lead to a hearing on the merits by late summer.

“The state’s energy policy is to encourage distributed renewable energy,” said Rodier, “so with all of that going on, it seems a good place to start is a law that goes back to 1978.”