DR 97-246
                 New Hampshire Electric Cooperative, Inc.
                           Power Cost Adjustment
             Order Approving Increase in Power Cost Adjustment
                          O R D E R   N O. 22,829
                              January 9, 1998
         APPEARANCES: Dean, Rice and Howard by Robert E. Dunn,
     Jr. Esq. on behalf of the New Hampshire Electric Cooperative,
     Inc.; Kenneth E. Traum for the Office of Consumer Advocate; James
     Cunningham and Thomas C. Frantz for the Staff of the New
     Hampshire Public Utilities Commission.
               On November 26, 1997 New Hampshire Electric
     Cooperative, Inc. (NHEC) filed with the New Hampshire Public
     Utilities Commission (Commission) tariff changes to its Power
     Cost Adjustment (PCA) for effect January 1, 1998 through June 30,
     1998.  Supporting testimony and exhibits were included in NHEC's
     filing.   NHEC also filed 2nd Revised Page 46, Rates for
     Purchases from Qualifying Facilities (QF).   The short term QF
     rates proposed are the avoided energy rates of each of the four
     utilities from which NHEC purchases power.
               At a duly noticed hearing before Peter Kelley, Hearings
     Examiner, on December 16, 1997, NHEC Rate Analyst, Heather K.
     Saladino, testified in support of NHEC's proposed Power Cost
     Adjustment (PCA) factor.
          A.   NHEC
               In its pre-filed testimony, NHEC proposed an increase
     in its PCA factor from a credit of $0.00612 per kWh to a
surcharge of $0.01934 per kWh effective on all bills rendered on
and after January 1, 1998.  The $0.02546 per kWh increase in the
PCA factor equates to an overall average revenue increase of
18.7%. It is equal to the forecasted power costs which are not
included in base rates, less any over-recovery from the prior PCA
period, divided by the expected energy sales for the PCA period. 
NHEC based its PCA factor on a twelve-month period.  Due to the
end of a base rate recoupment surcharge, the overall average
revenue effect is 18.1%. 
          NHEC's forecasted power cost requirement for the twelve
months of 1998 is $61,547,002 which does not include any costs or
revenues associated with those NHEC ski areas served under
special contract.  An expected over-recovery of $552,350 as of
January 1, 1998 and the over-recovery of $55,987 from the base
rate surcharge which ends December 31, 1997 yields $60,938,665 of
expected power costs to be recovered during 1998 of which
$50,238,623 is collected through base rates.  The short-fall,
$10,700,042, divided by the forecasted 1998 sales of 550,624,205
kWh, yields a PCA rate of $0.01943 per kWh before interest on the
over-recovery is subtracted to arrive at the proposed PCA factor
of $0.01934 per kWh based on a 12-month PCA factor.  The effect
on a Residential Rate D customer who uses 500 kWh per month would
be to increase the customer's monthly bill from $71.73 to $84.12. 
          The increase in the PCA is due primarily from the
increase in wholesale power costs purchased from Public Service
Company of New Hampshire (PSNH) under the Amended Partial
Requirements Agreement (APRA), as filed at and approved by the
Federal Energy Regulatory Commission (FERC).  PSNH supplies over
90% of NHEC's power needs.  Under the APRA, the base energy rate
from PSNH to NHEC will increase on January 1, 1998 from $0.0706
per kWh to $0.0802 per kWh.  The base energy effect yields an
increase by itself of approximately 1 cent per kWh to the PCA
factor.  PSNH also has proposed to increase its wholesale Fuel
and Purchased Power Adjustment Charge (FPPAC) to NHEC from a
credit of $0.00947 per kWh to a surcharge of $0.00210 per kWh for
the period of January 1, 1998 through June 30, 1998.  NHEC in its
pre-filed testimony expected the wholesale FPPAC rate to remain
in effect throughout 1998.  The wholesale FPPAC change
contributes over 1.1 cents per kWh to NHEC's proposed PCA
          Other factors contributing to the PCA increase include
the replacement power costs associated with the Maine Yankee
nuclear power plant outage and subsequent permanent shut down. 
NHEC has a 0.7356% entitlement in Maine Yankee.  Replacement
capacity and energy are met from PSNH under APRA rates.  The
additional $4,600.000 of replacement capacity and energy adds
0.836 cents per kWh to NHEC's PCA costs.  
          Offsetting the increased power costs by $2,000,000 is
NHEC's discontinuance of its Maine Yankee payments on the grounds
that the sponsors of Maine Yankee have violated the purchase
power contract between Maine Yankee and NHEC.  NHEC stated that
it is escrowing the funds it would have paid to Maine Yankee
pending the final outcome of the dispute. The Company seeks
Commission approval to book those Maine Yankee costs as a
regulatory asset which it would pay to Maine Yankee if ordered to
by the FERC. 
          At the hearing, NHEC proposed to amend its filing to
reflect a six-month PCA factor.  The change reduces the net
increase in the PCA factor to $0.02225 per kWh for a net PCA
factor of $0.01613 per kWh, an increase of 15.7% on average
annual revenue including the end of the base rate surcharge as of
December 31, 1997. 
     B.   OCA
          The OCA did not file testimony, but questioned NHEC's
witness about its increase in costs associated with membership in
the New England Power Pool (NEPOOL), the non-payment of Maine
Yankee's bills to NHEC and the termination of the wholesale
contract with Central Vermont Public Service Company (CVPS). 
NHEC filed to terminate its wholesale contract with CVPS in 1994
due to the high cost of the CVPS contract and the one-year notice
provision in the contract.  Later, after a bid solicitation for
power to the delivery points served by CVPS, NHEC awarded CVPS a
new wholesale contract at substantially reduced power costs.
          The OCA favored NHEC's proposal to modify its PCA
filing based on a six-month factor.  The effect of the change
results in a rate increase of 15.7%.    
          C.   Staff
               Staff did not file testimony in the proceeding but
     questioned Ms. Saladino on a number of power cost issues,
     including NHEC's proposal to place the PCA factor in effect for
     12 months rather than the usual six month period for PCA filings,
     the effect of PSNH joint dispatch savings on the PCA calculation,
     whether NHEC has analyzed if PSNH has over-earned under the
     APRA's Return-on-Equity Collar provision, the accounting
     treatment for the Maine Yankee costs not being paid by NHEC and
     the increase in NHEC's yearly dues as a New England Power Pool
     (NEPOOL) member from $500 to $120,000.  Staff also questioned the
     status of NHEC's solicitation for QF power to replace PSNH power
     both as part of the APRA directly and as part of the replacement
     capacity and energy associated with the Maine Yankee outage and
     shut down.  NHEC believes QF power could be used for both
     purposes pending a favorable decision by the FERC. 
               Based on our review of the record and the Hearing
     Examiner's report, we find that NHEC's amended proposal to
     increase its net Power Cost Adjustment factor to $0.01613 per kWh
     is appropriate for the period January 1, 1998 through June 30,
     1998 and is in the public interest. The vast majority of the
     power cost increase is due to increases in costs from PSNH,
     NHEC's primary power supplier, under FERC approved wholesale
     rates.  Although we are disturbed by the magnitude of the
     increase, and we encourage and support NHEC's efforts to reduce
     its power costs, the PCA factor we are approving today is
     determined largely by contract under FERC's jurisdiction.  
               We will approve NHEC's proposal for a six-month PCA
     factor as well as allow it to defer recovery of the costs
     associated with the Maine Yankee shut down pending a final
     decision from the FERC. Should a FERC decision direct NHEC to pay
     Maine Yankee, NHEC will be allowed to recover those costs in a
     manner to be determined at that time.  
               We will direct NHEC in its next PCA filing to include a
     description of the ISO-New England costs NHEC is incurring from
     PSNH and what measures, if any, it is taking to mitigate those
                    Based upon the foregoing, it is hereby 
               ORDERED, that a Power Cost Adjustment factor of
     $0.01613 per kWh is APPROVED for all bills rendered on and after
     January 1, 1998 and shall remain in effect until the Commission
     orders otherwise; and it is
               FURTHER ORDERED, that the rates paid to Qualifying
     Facilities are APPROVED as filed in 2nd Revised Page 46; and it
               FURTHER ORDERED, that New Hampshire Electric
     Cooperative, Inc. file a tariff in compliance with this order by
     January 19, 1998. 
          By order of the Public Utilities Commission of New Hampshire
     this ninth day of January, 1998.
        Douglas L. Patch    Bruce B. Ellsworth        Susan S. Geiger
            Chairman           Commissioner            Commissioner
     Attested by:
     Thomas B. Getz
     Executive Director and Secretary