Electric rates for members of the Community Power Coalition of New Hampshire are higher, for the first time, than rates for customers with any of the state’s investor-owned utility companies.
As community power programs have grown in New Hampshire, their promise of lowering energy costs for households and providing more options for renewable energy have won over dozens of communities and nearly 200,000 customers. These programs allow towns and cities to supply electricity to their residents instead of a traditional utility company, while the utility company still delivers the electricity.
But throughout a winter of upheaval, the coalition, now the second-largest supplier of electricity in the state, experienced a loss of more than $8 million and parted ways with former Chief Executive Officer Brian Callnan.
The coalition’s recent financial issues illustrate the challenges facing the state’s fledgling community power programs and the obstacles standing between New Hampshire residents and more affordable power.
In March, the coalition raised their default rate in an effort to make sure their revenues covered costs. Now, their default rate – the lowest the organization offers– costs an average customer about $63 a month for power. The average customer at Unitil, Eversource, Liberty or the New Hampshire Electric Cooperative pays between $54 and $58.
Rates for power provided by the state’s legacy utility companies are changing in August, and the Community Power Coalition is planning to announce a new rate later this month. The coalition’s leadership says they’re addressing the issues that led to the organization’s financial challenges.
Carol Schutte, who organizes the community power program in Hampton Falls, said she was surprised when she heard about the losses over the winter. But, she said, she continues to trust the organization’s ability to move forward.
“I believe in community power,” she said. “It's not the cheapest rate at the moment, but in the long term, let's see what happens.”
Campton’s community power chair, Bill Sebastian, was not as confident that the program would be able to continue providing the lowest rates, given changes to the ways New Hampshire’s legacy utilities are buying power.
While Sebastian supports the goals of the Community Power Coalition, he says his community would need to withdraw if the program can’t provide lower prices than their default utility company.
“Ultimately, we got passed by pretty much unanimous consent at the town meeting because we said we would provide the lowest prices. And right now, community power can't really compete,” he said.
Henry Herndon, the acting general manager for the Community Power Coalition, said he doesn’t think the changes to energy markets and state policy have made community power impossible. It's true, he said, that utility prices are becoming more competitive – but he believes the coalition’s business model is strong.
“Having addressed some of the previous issues and challenges we have good confidence in the community power market continuing to deliver increased competition, give cities and towns greater choice, and help the market evolve,” he said.
The cost of power
Herndon said the organization is addressing the issues that led to an $8.4 million loss between August and January.
Essentially, he said, the coalition set their rates too low, didn’t protect themselves enough from the conditions of the market, and then had to purchase expensive wholesale power for their customers over the winter, when prices were exceptionally high.
To make up for costs exceeding their revenue, the coalition drew on their financial reserves – a stash of money that serves as a fund that can set up the organization to help develop local energy projects or meet other policy goals, but also as a kind of insurance that can be used to stabilize rates.
Under the coalition’s risk policy, the organization is required to set rates high enough that they can cover costs, and to purchase future contracts for power to make sure those costs are stable.
“This winter, we came to understand ways in which the organization had not fully adhered to its risk policies,” Herndon said.
Additionally, Herndon said that the forecasts for financial reserves that were submitted to the organization’s finance committee and the Board of Directors “did not disclose the magnitude of financial risk facing CPCNH due to unhedged exposure to market prices, as required by policy.”
Brian Callnan, the former CEO of the coalition, said he disagreed that the organization’s board was not informed about risk.
“One of the things that was great about [the coalition], just the structure of the organization, is it's public. And there's a lot of reporting requirements,” he said. “Decisions aren’t being made without having votes by committees.”
Callnan, who said significant health issues in his family were a major contributing factor in his decision to leave the coalition, departed from the organization in February. But looking back, he said, he sees one of the main challenges the organization faced was forecasting how much energy their customers would need as they went from having no customers in April 2023 to having almost 200,000 customers in 2024.
“CPCNH was growing, adding communities fairly quickly,” he said. “When you bring on a lot of load or a lot of meters pretty quickly, you kind of have to rely on information that’s given to you – the best information that you have.”
He attributed the organization’s need to dip into reserve funds, in part, to unfortunate timing – customers needed more energy than the coalition expected, and purchasing extra energy was especially expensive this winter, when prices in the wholesale market were at a near-record high.
To move forward, the coalition has raised their rates to cover the costs they’re anticipating and started minimizing the organization’s exposure to market prices. They’re updating their modeling and requiring external experts to verify the assumptions they’re using for risk management, implementing new reporting, and producing new training materials. They’re also planning to conduct an independent review of their operations and risk policy within the year, something Callnan requested before his departure.
A changing energy ecosystem
As the state’s regulated utility companies have started to use more “spot market” power, or power purchased in the shorter-term, instead of in long-term contracts, they have offered lower rates.
Utility companies are newly able to set rates without having already signed contracts for much of the power they need to provide for customers, waiting to purchase that power until closer to when it’s needed. If their current rates don’t cover the cost of that power when they need to buy it, they can raise future rates to make up the difference.
Herndon said traditional utility companies have an advantage that community power programs don’t: their ability to recover costs is guaranteed by the state.
The change in the ways utility companies are buying power could, over time, result in lower average rates. But, he said, utilities may have set their rates lower than their costs, just like the coalition, and they may need to recover those costs in future months.
Based on a recent decision from the Public Utilities Commission based on a request from Unitil, utility customers who don’t use community power will be responsible for paying those extra costs.
Herndon also argues that, given time to mature, community power programs bring other benefits – for example, developing local power generation that can reduce energy costs.
“There's a lot of innovation and value to be created,” he said. “The way in which costs can be driven down is not not necessarily as simple as just taking on market exposure.”
And, he said, he still believes the Community Power Coalition is doing what it set out to do: create more competition and drive down rates for everyone, regardless of who provides their power.
