Biomass: New Business Model Needed

On September 18, the House sustained the Governor’s veto of a bill that would provide additional subsidies to keep several wood-burning power plants afloat. Last year, a Senate bill that did the same thing did pass despite the Governor’s veto. That bill had several flaws including one I wrote about in a Minority report in the House Calendar: “But this new plan suffers from four major flaws: 1) It violates federal law by ordering state utilities to pay more than an avoided cost price for electricity sold in an interstate grid market…” That law was challenged by the New England Ratepayers Association, and today the Federal Energy Regulatory Commission (FERC) ruled that this NH law does indeed violate the Federal Power Act (FPA). FERC wrote: “The order grants the New England Ratepayer’s Petition, finding that Senate Bill 365 (SB365) is preempted by the FPA.”

The full text of the order goes on to explain that, “SB 365 requires utilities to offer to purchase the net output of eligible biomass and waste facilities at a state-established rate. As explained [later], this requirement establishes a rate for wholesale sales of electric energy in interstate commerce, which intrudes on the Commission’s exclusive jurisdiction over wholesale sales of electric energy in interstate commerce. We therefore conclude that the rate established by SB 365 is preempted by the FPA.”

This ruling means NH cannot enforce the law it passed last year. This saga provides a good example of how complex our state energy environment has become.

It also means that the state’s wood-fired electricity plants need to find a new business model. They can no longer rely on subsidies from electricity ratepayers to make up the difference between what it costs them to make power versus what they can sell it for on the New England grid.

This development puts pressure on the forest products industry to find new uses for low-grade wood.