DR 98-093
                 New Hampshire Electric Cooperative, Inc.
                           Power Cost Adjustment
                 Report and Supplemental Order Approving 
                     Increase in Power Cost Adjustment
                         O R D E R  N O.  22,991 
                              August 3, 1998

         APPEARANCES: Dean, Rice and Kane by Ann Davidson, Esq.
     on behalf of the New Hampshire Electric Cooperative, Inc.; Office
     of Consumer Advocate by Kenneth E. Traum on behalf of residential
     ratepayers; and Todd M. Bohan and James J. Cunningham Jr. for the
     Staff of the New Hampshire Public Utilities Commission.
               On May 26, 1998, New Hampshire Electric Cooperative,
     Inc. (NHEC) filed with the New Hampshire Public Utilities
     Commission (Commission) a request and supporting testimony and
     exhibits to increase its Power Cost Adjustment (PCA) factor from
     $0.01613 to $0.02670 for effect July 1, 1998 through December 31,
     1998.  NHEC also filed short term rates for purchases from
     Qualifying Facilities (QF).  The proposed short term QF rates are
     based on the avoided energy rates of each of the four utilities
     from which NHEC purchases power.  A duly noticed hearing was held
     before the Commission on June 16, 1998.  
          A.   NHEC
               In its pre-filed testimony, NHEC proposed an increase
     in its PCA factor from the current charge of $0.01613 per kWh to
a charge of $0.02670 per kWh effective on all bills rendered on
and after July 1, 1998.  The $0.01057 per kWh increase in the PCA
factor equates to an overall average revenue increase of 6.7
          NHEC's forecasted power cost requirement for the six
month period is $31,325,134.  In accordance with Order No.
21,812, the forecasted power costs do not include any costs or
revenues associated with those NHEC ski areas served under
special contract pursuant to tariffs on file with the Federal
Energy Regulatory Commission.  In addition to the projected power
cost requirement, there is an expected under-recovery of $435,277
as of June 30, 1998, which yields $31,760,411 of expected power
costs to be recovered during the July through December 1998 PCA
period.  Removing $24,600,555 of these costs, which are already
included in base rates, leaves a balance $7,159,856, which when
divided by the forecasted sales of 268,515,176 kWh's, yields a
PCA rate of $0.02666 per kWh before interest.  Adjusting for
interest on the under-recovery results in an additional $0.0004
which is added to $0.02666 to arrive at the proposed PCA factor
of $0.02670 per kWh for the 6-month PCA factor.  
          The NHEC estimates a customer using 500 kWh per month
on Residential Rate D will see an increase in rates from $82.52
to $87.86. 
          The NHEC testified the increase in the PCA is caused by
several factors; 1) an increase in PSNH's Wholesale Fuel and
Purchased Power Adjustment Clause (FPPAC) surcharge that
contributes $0.00408 per kWh to the PCA increase, 2) the addition
of Maine Yankee litigation costs to the PCA that contributes
$0.00103 per kWh to the increase, and 3) the under-recovery
balance forecast that contributes $0.00378 per kWh to the
     B.   OCA
          The OCA did not file testimony, but questioned NHEC's
witness about PSNH deferred costs, QF rates and the potential PCA
impact if QF power rates were to displace PSNH APRA power rates,
trigger impacts for the PCA, if any, and legal costs.    
          C.   STAFF
               Staff did not file testimony in the proceeding but
     questioned the Company witness about NEPOOL allocations, deferral
     of costs of Maine Yankee and deferral of PSNH wholesale power
     costs and legal costs amounting to an estimated $277,000 that are
     included in the PCA filing.  At the conclusion of the hearing
     Staff placed its positions on the record.  
               Staff argued that legal costs should not be included in
     the PCA because legal costs are administrative costs and not
     direct power costs.  Staff contended that only power costs should
     be considered for recovery in the PCA and that legal costs are
     generally considered for recovery in base rates.  Staff concluded
     that based on information provided by the Company, the PCA
     factor, when adjusted to exclude $277,000 for legal costs, is
     reduced by $0.00103 from $0.02670 per kWh to $0.02567 per kWh. 
     The reduced PCA factor of $0.02567 per kWh equates to a reduction
     in the overall average revenue increase from 6.7 percent to 6.1
               Staff recommended that the Commission approve the
     proposed PCA rate as modified to exclude legal costs.  Regarding
     QF rates, staff recommended that the proposed QF rates be
               The PCA factor is based on the forecasted costs of
     power, which are not included in base rates, less any over- or
     under-recovery from the prior PCA period.  These costs are then
     divided by the expected energy sales for the upcoming time period
     to arrive at the appropriate rate.  Under RSA 378:3-a,I fuel
     adjustment charges are defined as those just and reasonable costs
     that cover increases and decreases in the costs of purchased
     electric power.
               We find the proposed PCA factor just and reasonable
     with the exception of the attorney's fees incurred with regard to
     Maine Yankee.  We agree with Staff that the removal of these
     costs from the PCA factor is appropriate.  Although the
     Commission authorized the recovery of expenses for attorneys fees
     and consulting fees through the PCA factor in another NHEC case,
     80 NHPUC 428 (1995), that case is distinguishable because the
     expenses related to securing lower cost power.  In addition, in
     that case the Commission indicated that in general these types of
     costs are more appropriately recovered in a base rate proceeding. 
               In the case at hand, the expenses which NHEC seeks to
     recover do not relate to purchasing power; they relate instead to
     contesting contractual obligations.  Under RSA 378:3-a,I, fuel
     adjustment charges are defined as those which cover increases and
     decreases in the costs of purchased electric power.  We do not
     believe in this case that there is the necessary nexus between
     these legal fees and power purchases to justify their inclusion
     in a fuel or power adjustment clause.  Rather, we believe these
     are the type of costs incurred in contractual disputes that are
     part of the normal operating expenses of a utility that should be
     included in and recovered through base rates. 
               Based upon the foregoing, it is hereby 
               ORDERED, that the New Hampshire Electric Cooperative
     Inc. is authorized to collect a Power Cost Adjustment (PCA)
     factor of $0.02567 per kWh; and it is 
               FURTHER ORDERED, that the short term avoided cost rate
     for qualifying facilities is set as follows for this PCA period
     at the respective delivery points:
          Public Service Company of NH       Base Energy    8.153¢
                                             FPPAC               .607¢
          Central Vermont Public Service     Base Energy    1.923¢
          New England Power Company          Base Energy
                                                On-Peak   2.685¢
                                                Off-Peak  1.669¢
                                                All Hours  2.087¢
                                             Fuel Clause    varies
          Green Mountain Power Corp.         Base Energy    3.96¢
                                             Fuel Charge    varies
               By order of the Public Utilities Commission of New
     Hampshire this third day of August, 1998.
        Douglas L. Patch    Bruce B. Ellsworth        Susan S. Geiger
            Chairman           Commissioner            Commissioner
     Attested by:
     Claire D. DiCicco
     Assistant Secretary