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NH governor vetoes biomass subsidy amid FERC jurisdiction questions

New Hampshire legislation requiring Eversource Energy to buy electricity from the state's six biomass power plants has been vetoed by Gov. Chris Sununu.

Local media reports confirm that Sununu vetoed H.B. 183, which aims to create a new category of "baseload renewable energy credits" for Eversource — the only affected utility — to purchase, as a means of supporting the state's forest industry. In June, the bill passed the state House of Representatives 222-123 in a vote that concurred with its passage in the Senate.

"This is a blow to the North Country," bill supporter Sen. David Starr, a Republican, said in a statement. "Our biomass and timber industries are vital industries that provide good jobs. We also have families who are large landowners that support our tourism industry that will no longer have a way to manage their land without the biomass power plants."

"We need to override the H.B. 183 veto," Starr added.

H.B. 183 effectively sought to implement a ratepayer-supported biomass subsidy previously created by S.B. 365, which became law in September 2018 after lawmakers overrode a previous veto by Sununu. However, in a March ruling, the state public utilities commission refused to require utilities to buy generation under the statute until the Federal Energy Regulatory Commission weighs in on the subsidy.

In a November 2018 FERC petition, consumer lobbying group New England Ratepayers asserted that the subsidy is unconstitutional because the Federal Power Act prohibits a state from setting wholesale electric rates through a state legislative statute. The ratepayer group further alleged that the subsidy violates the Public Utility Regulatory Policies Act and FERC regulations that prevent a state from setting a rate for wholesale power produced by qualifying facilities that exceeds the purchasing utilities' avoided costs, or what it would have cost the utility to produce the power itself or buy it elsewhere.

Senate Majority Leader Dan Feltes, a Democrat, told the New Hampshire Union Leader in May that H.B. 183 seeks to achieve S.B. 365's goals by sidestepping the pending litigation issues by crafting a new subsidy along the lines of renewable energy credits created in New York and Illinois that have withstood federal court challenges. In addition, the latest bill would give the PUC the necessary authority to implement the subsidy and resolve any contract disputes between Eversource and biomass generators.

S.B. 365 also required electric distribution companies Eversource and Unitil Corp. to buy the entire output of seven power plants within their service territories — six wood-fired biomass power plants in Eversource's territory and a waste-to-energy power plant in Unitil's territory — with a combined capacity of 117 MW at a cost of approximately $25 million annually for three years.

In contrast, H.B. 183 would require only Eversource to purchase 101.2 MW of biomass generation from the six wood-fired power plants for three years at an estimated cost of approximately $18.2 million. Because S.B. 365 has not been implemented due to litigation, the six biomass plants are currently idling in shutdown.

The governor's office did not respond immediately to requests for comment but Sununu, a Republican, said in his previous veto message of S.B. 365 that the subsidy was expected to boost the revenues of wood product suppliers by 3.5% at the most.

"Like last year's version, this one is unconstitutional on preemption grounds," D. Maurice Kreis, New Hampshire's Consumer Advocate, remarked on Twitter. "Applicable federal law protects ratepayers. Gotta be a better way to help forest products industry."

In a statement in favor of lawmakers overriding H.B. 183's veto as well, Jane Difley, president of the Society for the Protection of New Hampshire Forests, or Forest Society, said the biomass subsidy is needed to ensure "sustainable harvesting as a means to keep forests as forests."

"Given that 65% of the standing timber in New Hampshire is low-grade wood, it's important to landowners to have a market for that wood as they manage their woodlands," Difley explained. "As the paper industry has receded, the biomass market has become more important."