DR 96-150
           Order Nisi Vacating Portions of Interim Stranded Cost
           Orders Related to Wholesale Requirements Contracts  
                          O R D E R  N O. 22,986
                               July 22, 1998

     I.   BACKGROUND     
          By Order No. 22,514 (February 28, 1997), the New
     Hampshire Public Utilities Commission (Commission) issued a
     Statewide Electric Utility Restructuring Plan (Plan)
     pursuant to RSA 374-F.  On the same date, the Commission
     established interim stranded cost charges (ISC charges) for
     each jurisdictional utility consistent with the legal and
     policy decisions announced in the Plan and the factual
     circumstances of each utility.  
          The Plan included a legal analysis addressing,
     inter alia, claims by electric utilities that the Federal
     Power Act (FPA) requires the Commission to set stranded
     cost charges which are designed to recover all costs
     associated with wholesale purchase power contracts approved
     by the Federal Energy  Regulatory Commission (FERC).  The
     Commission determined that its jurisdiction had to be
     decided on a case-by-case basis, but that the FPA did not
     inherently prevent the Commission from disallowing the
     recovery of costs under certain circumstances. 
          The ISC orders pertaining to CVEC, GSEC and
     Unitil directed each of those companies to notify their
     affiliated wholesale requirements suppliers of their intent
     to terminate the foregoing contracts.  The Commission
     allowed GSEC and Unitil to fully recover the above-market
     portion of their wholesale power costs on an interim basis,
     but in the case of CVEC disallowed recovery of costs
     related to the requirements contract with its parent
     supplier, Central Vermont Public Service Corporation
     (CVPS). The Commission noted that CVEC should have
     provided notice to terminate the contract pursuant to its
     right to do so - and that by so doing, it would have fully
     mitigated the wholesale power costs from CVPS as of January
     1, 1998, the date the ISC charge was expected to have gone
     into effect. 
          In Order No. 22,875 (March 20, 1998), the
     rehearing order on restructuring, the Commission affirmed
     its decision to address on a case-by-case basis the
     above-described jurisdictional preemption claims by
     utilities.  The Commission noted that its order did not bar
     utilities from recovering unmitigatable costs associated
     with purchased power obligations; rather, the Commission
     decided to defer making final determinations on such
     questions until examining utility-specific claims on a
     case-by-case basis.  The Commission also reiterated  that
     utilities were expected to take all reasonable measures to
     mitigate or avoid incurring costs associated with existing
     wholesale contracts.   
          Recently, the FERC issued a decision concerning a
     dispute between PSNH and NHEC which affects a utility's
     continuing purchase obligation under a wholesale
     requirements contract. The fundamental issue addressed by
     FERC in that decision was whether NHEC must continue to pay
     for power to the degree needed to meet the energy needs of
     all of its retail customers - even after customers begin to
     purchase power from alternative suppliers pursuant to RSA
     374-F.  The FERC determined that the Amended Partial
     Requirements Agreement(APRA) obligates NHEC to purchase
     from PSNH only as much power as NHEC needs to serve those
     retail customers who remain its customers.  The FERC also
     rejected an alternative request by PSNH for wholesale
     stranded cost recovery under Order No. 888.                 We recognize that FERC's decision was limited to
     the  PSNH-NHEC requirements contract; however, the decision
     has obvious implications for other New Hampshire electric
     utilities with similar requirements contracts.  For
     instance, in the absence of a  contractual obligation to
     the contrary, the decision suggests that wholesale
     requirements customers are contractually obligated to
     purchase power only to the extent needed to serve their
     retail power supply customers.  This could mean that a
     wholesale requirements customer (such as NHEC, GSEC, Unitil
     or CVEC) may have no stranded cost liability to its
     wholesale supplier when retail customers of the
     requirements customer purchase power from alternative
     suppliers.  The decision also implies that it is
     unnecessary for utilities to terminate their requirements
     contracts in order to implement retail access in a manner
     that fully mitigates potential stranded costs as required
     by RSA 374-F.  Accordingly, we vacate 
     our prior directives to GSEC, Unitil and CVEC to provide
     notice of termination consistent with the terms of their
     wholesale requirements contracts.  However, we reiterate
     that utilities have a statutory obligation to take all
     reasonable measures to mitigate stranded costs.
          Based upon the foregoing and for good cause
     shown, it is hereby
          ORDERED NISI, that the directive to CVEC to
     provide notice to terminate in Order No. 22,509 is vacated
     unless the Commission orders otherwise; and it is
          ORDERED NISI, that the directive to Unitil to
     provide notice to terminate in Order No. 22,510 is vacated
     unless the Commission orders otherwise; and it is
          ORDERED NISI, that the directive to GSEC to
     provide notice to terminate in Order No. 22,511 is vacated
     unless the Commission orders otherwise; and it is
          FURTHER ORDERED, that the foregoing discussion
     supplements the Commission's prior legal analysis in the
     Plan and in Order No. 22,875; and it is
          FURTHER ORDERED, that the Executive Director and
     Secretary shall provide a copy of this Order Nisi to all
     parties and persons on the service list in this docket; and
     it is
          FURTHER ORDERED, that any interested person may
     submit their comments or file a written request for a
     hearing on this matter before the Commission no later than
     July 31, 1998;
          FURTHER ORDERED, that this Order Nisi shall be
     effective on July 22, 1998, unless the Commission provides
     otherwise in a supplemental order.
          By order of the Public Utilities Commission of
     New Hampshire this twenty-second day of July, 1998.         
       Douglas L. Patch    Bruce B. Ellsworth   Susan S. Geiger
           Chairman           Commissioner       Commissioner
     Attested by:
     Thomas B. Getz
     Executive Director and Secretary