Herndon: Today's Savings, Tomorrow's Bill: The Real Stakes Of HB 1733

By Henry Herndon, NH Journal

If you save money today but someone else pays tomorrow, is it really a savings?

Before the New Hampshire Senate, HB 1733 poses a defining question about the future of the state’s electric market. The bill seeks to realign default service with the original intent of restructuring by limiting practices that shift risk to customers, distort pricing, and undermine competition.

In 1996, New Hampshire enacted the nation’s first electric restructuring law, grounded in the state constitution’s commitment to free and fair competition. The goal was to lower costs and improve efficiency by fostering competitive wholesale and retail markets while maintaining reliability and environmental protection.

The law established three key guardrails for utility default service: minimize customer risk, avoid undermining competitive markets, and mitigate price volatility while preventing deferred costs. These principles remain central to the energy debate in Concord.

So how did we get here? In response to the sharp increase in electricity prices following Russia’s invasion of Ukraine in 2022, the Public Utilities Commission (PUC) began directing utilities to procure a significant portion of default service supply—now up to 50 percent—from day-ahead and real-time wholesale markets (often called the “spot market”).

This shift introduced the use of “proxy pricing,” in which utilities estimate future market prices rather than locking in fixed-price contracts.

Unlike traditional fixed-price procurement, proxy pricing relies on forecasts that are later reconciled against actual market costs. When those estimates miss the mark, the difference is carried forward and later recovered from customers. Early data suggest customers will begin paying for this past winter’s price spikes starting this fall.

Proxy pricing raises concerns across all three statutory guardrails.

First, it shifts risk from suppliers to customers. Under fixed-price contracts, suppliers bear the risk of price volatility. Under proxy pricing, customers ultimately pay the difference when market prices exceed projections.

Second, it distorts pricing and undermines competition. Because utilities can reconcile under-collections after the fact, default service rates may appear artificially low in the short term. Competitive suppliers, which must price products without that backstop, are placed at a structural disadvantage.

Third, it creates deferred costs. When utilities under-collect, those costs are carried forward—sometimes for months or even years—and recovered from future customers, raising concerns about fairness and cost shifting.

Recent developments highlight these risks. Utilities are now beginning to recover costs incurred as far back as 2024, and significant winter price spikes are expected to result in additional upward adjustments in upcoming rate periods. At the same time, new wholesale market costs—such as those associated with ISO New England’s Day-Ahead Ancillary Services Initiative—are further widening the gap between projected and actual costs.

By allowing costs to be deferred and socialized over time, utilities are shifting costs from current to future customers. Why should future customers pay for the cost of serving past ones?

HB 1733 addresses these issues in two ways. First, it prohibits shifting supply costs into delivery or stranded-cost charges. Second, it limits utilities from procuring default service for residential and small customers directly from the spot market.

Together, these provisions are intended to restore a clearer separation between competitive supply and regulated utility service while reinforcing cost transparency and market integrity.

The PUC and Department of Energy make the case for further study, citing ongoing work to refine proxy pricing. They also warn that limiting procurement options could reduce flexibility and foreclose savings if fixed-price contracts carry high risk premiums.

There are also concerns about customer behavior and market stability. Like a pendulum, deferred cost recovery pushes customers away when rates rise and pulls them back when rates fall. These swings make the market less stable and increase market risk premiums.

HB 1733 forces a choice about the role of default service in New Hampshire’s market.

Should our energy marketplace prioritize stability, predictability, and risk mitigation for customers? Or should it pursue potentially lower short-term prices by exposing customers to greater market risk and relying on after-the-fact cost reconciliation?

New Hampshire’s restructuring law provides a clear framework for answering that question. The outcome of this debate will shape not just how default service is procured, but how well the state’s competitive electric market functions in the years ahead.

Henry Herndon is the executive director at Community Power Coalition of New Hampshire. He wrote this for NHJournal.com.

This story was originally published by the NH Journal, an online news publication dedicated to providing fair, unbiased reporting on, and analysis of, political news of interest to New Hampshire. For more stories from the NH Journal, visit NHJournal.com.