DR 98-005
                  Public Service Company of New Hampshire
         1998 Conservation and Load Management Pre-Approval Filing
                 Order Providing for Limited Expansion of 
               1998 Conservation and Load Management Program
                          O R D E R   N O. 22,999
                              August 17, 1998

         APPEARANCES: Catherine E. Shively, Esq. for Public
     Service Company of New Hampshire; David W. Marshall, Esq. for the
     Conservation Law Foundation; Stephen Judge, Esq. and Wynn E.
     Arnold, Esq. for the Governor's Office of Energy and Community
     Services; Michael Holmes, Esq. and James Anderson, Esq. for the
     Office of the Consumer Advocate; and Eugene F. Sullivan, III,
     Esq. for the Staff of the New Hampshire Public Utilities
               By Order No. 22,905 (April 28, 1998) in Docket
     DR 98-005, the New Hampshire Public Utilities Commission
     (Commission) approved a Stipulation entered into by Public
     Service Company of New Hampshire (PSNH), the Office of the
     Consumer Advocate (OCA) and Commission Staff (Staff).  The
     Governor's Office of Energy and Community Services (ECS) and the
     Conservation Law Foundation (CLF) did not sign the Stipulation
     because both parties believed that the C&LM budget was too low 
     to provide optimal cost-effective programs.  
               PSNH, OCA and Staff agreed through the Stipulation that
     PSNH's 1998 Conservation and Load Management (C&LM) Pre-Approval
     Filing, as set forth in PSNH's January 30, 1998 filing, should be
     approved at a funding level of $2,399,355 and with minor program
     modifications.  However, the Commission also directed Staff to
     convene a meeting of the parties to see if they could reach an
     agreement on a limited expansion of the 1998 C&LM Program to
     include regional and/or national market transformation programs
     that are consistent with the position stated in the Commission's
     Electric Restructuring Rehearing Order in DR 96-150, Order No.
     22,875 (March 20, 1998), regarding energy efficiency.  The
     Commission stated that the limited expansion of PSNH's program
     was consistent with the position taken in the Rehearing Order
     regarding market transformation programs; however, it was
     inconsistent with capping funding levels for energy efficiency
     programs.  The Commission found that PSNH represents a unique
     situation because PSNH's funding level for its C&LM programs is
     minimal compared to other utilities and because PSNH's
     relationship with Northeast Utilities, Inc. (NU) may provide PSNH
     with an opportunity to be involved in regional programs.  The
     Commission reminded the parties and Staff that any expansion of
     PSNH's 1998 C&LM Program was limited to market transformation
     initiatives and asked the parties and Staff to report the results
     of their efforts to the Commission within thirty days.
               Subsequent to Order No. 22,905, the parties and Staff
     engaged in four technical sessions.  The first meeting was held
     on May 13, 1998 at which the parties and Staff determined that
     further discussions were necessary.  At the May 22, 1998 meeting,
     the Executive Director of the Northeast Energy Efficiency
     Partnerships, Inc. (NEEP) attended to discuss regional and
     national market transformation initiatives.  On June 3, 1998, the
     parties and Staff discussed a proposal for a limited expansion of
     the C&LM program developed by PSNH.  On June 15, 1998, the
     parties and Staff discussed a proposal developed jointly by ECS
     and CLF.  At the end of the June 15, 1998 meeting, the parties
     and Staff were still unable to reach consensus regarding a
     limited expansion of the program; therefore, the parties and
     Staff agreed to file with the Commission by June 22, 1998 the
     proposals developed by PSNH and jointly by CLF and ECS and
     comments and/or supplemental testimony.  The parties and Staff
     also requested that the Commission schedule a hearing to consider
     the proposals and testimonies regarding a limited expansion of
     PSNH's C&LM program.
               On June 22, 1998, PSNH filed its market transformation
     options and comments on the proposal and recommendations by ECS
     and CLF.  ECS and CLF filed its proposal and recommendations. 
     The OCA submitted a position paper.  Staff filed supplemental
     testimony.  By secretarial letter dated June 24, 1998, the
     Commission determined that, consistent with Order No. 22,905, a
     hearing was necessary to address market transformation
     initiatives with regard to PSNH's C&LM program and scheduled the
     hearing for July 9, 1998.  On July 1, 1998, ECS filed a Motion
     for Full Intervention and testimony.  ECS obtained concurrence of
     the other parties with respect to its intervention and
     participated fully in the proceeding.  Consequently, the
     intervention of ECS is reasonable and has been effectively
     granted by the Commission.  The hearing commenced on July 9, 1998
     and was resumed and completed on July 13, 1998. 
          A.   PSNH
               On June 22, 1998, PSNH filed with the Commission a
     proposal detailing three scenarios for supporting market
     transformation initiatives.  Scenario 1 would allow PSNH to:
     participate in a regional efficient motors replacement program
     whose development has been facilitated by NEEP; calculate a home
     energy rating; and, become an ENERGYSTAR  Partner by entering
     into an agreement with the U.S. Department of Energy and the U.S.
     Environmental Protection Agency.  This scenario could be
     implemented with no additional funding.
               Scenario 2 proposed implementation of a residential
     lighting program.  NU's affiliates in Connecticut and
     Massachusetts are supporting a national and regional effort
     through a direct mail catalog which offers state-of-the-art
     residential high efficiency lighting products which generally are
     not available in retail stores.  PSNH proposed two options under
     this scenario: PSNH could mail the catalog directly to its
     residential customers at a cost, including product subsidies, of
     $500,000, or, as an alternative, PSNH could make the customers
     aware of the availability of the catalog through a bill insert
     which would require customers to request the catalogs.  Under
     that alternative, PSNH anticipated a lesser number of required
     catalogs and estimated that the resulting cost of the bill
     insert, including subsidies, is $300,000.  
               Scenario 3 proposed implementation of a high efficiency
     clothes washer program.  PSNH estimated that it could participate
     in this program for the remainder of 1998 for approximately
     $200,000.  PSNH proposed offering a $100 rebate per washer for
     residential customers using electrically heated hot water and a
     $25 rebate for customers heating water with other energy sources. 
               PSNH described in its June 22, 1998 filing that it
     could reallocate approximately $310,000 from the existing 1998
     budget to fund an expansion of its C&LM program.  PSNH noted that
     due to some delay in program approval, there are legitimate
     uncertainties as to whether PSNH would spend all of its 1998 C&LM
     budget.  Program expansion necessitating expenditures greater
     than $310,000 would require additional funds.
               ECS and CLF proposed a package of regional market
     transformation initiatives for PSNH that would require additional
     funding of $953,500.  ECS and CLF basically endorsed the three
     scenarios offered by PSNH with the following provisions.  ECS and
     CLF recommended that the lighting catalog be directly mailed to
     residential customers for a total program cost of $500,000.  ECS
     and CLF believe that this alternative will yield a greater
     customer participation rate and may increase the program's
     cost-effectiveness and its market transformation potential.  ECS
     and CLF also recommended a flat $100 rebate per unit under the
     clothes washer initiative regardless of the type of energy used
     to heat the water.  Further, ECS and CLF recommended that PSNH
     increase its penetration rate of 300-500 washers to 750 for the
     remainder of 1998.  
               In addition to their support of the scenarios offered
     by PSNH, ECS and CLF also proposed that PSNH participate in
     NEEP's Commercial and Industrial (C&I) Unitary HVAC program at a
     cost of $60,000 and in NEEP's C&I Lighting Remodeling program at
     a cost of $34,000 to assist in this program's market research and
     evaluation and the development of lighting design guidelines. 
     ECS and CLF also recommended that PSNH become a member of the
     Consortium for Energy Efficiency for $5,000.
               ECS and CLF stated that their preferred funding for any
     increase in PSNH's C&LM budget is to add the increment to base
               The OCA stated that it supports PSNH's Scenario 1 and
     that any other proposed market transformation initiatives should
     be evaluated in the context of the New Hampshire Energy
     Efficiency Working Group (Working Group) created by the
     Commission in its Rehearing Order.  The OCA supports a separate
     line item on customer bills for all C&LM costs which would vary
     by customer class based on the costs incurred to serve that
          D.   STAFF
               Staff also recommended that the Commission implement
     PSNH's proposed Scenario 1.  Staff stated that Scenario 1 affords
     the Commission the opportunity to allow PSNH to expand its
     program to include market transformation initiatives without
     affecting the issues currently being addressed by the Working
     Group or increasing rates. 
               Staff recommended that should the Commission direct
     PSNH to expand its 1998 C&LM program to an extent that warrants
     an increase in PSNH's budget, then the increased costs should be
     funded through a class specific C&LM surcharge mechanism.  Staff
     stated that further C&LM costs should not be buried in base
     rates.  Staff averred that a C&LM surcharge provides a better
     mechanism for accounting for variations in spending and sales
     forecasts, the major causes of over- and under-collections. 
     Further, Staff stated that in an appropriate proceeding, it would
     take the position that the $1.7 million currently in base rates
     should be transferred to the C&LM surcharge.  
               Staff testified that the proposals offered by PSNH and
     jointly by CLF and ECS do not take into consideration Lost Fixed
     Cost Recovery (LFCR).  Staff illustrated the cumulative effect of
     PSNH's LFCR and how LFCR represented a significant portion of
     PSNH's C&LM budget at the end of the fixed rate period.  Staff
     stated that neither PSNH nor ECS and CLF estimated the amount of
     LFCR associated with their proposals and that under current
     standards, PSNH would be entitled to request the LFCR associated
     with any additional programs.
               After careful consideration of the testimony and
     exhibits offered at the hearings, we have determined that PSNH's
     1998 C&LM Program shall be expanded in the following manner. 
     PSNH shall implement Scenario 1 and Scenario 2, with the option
     of the bill insert at a budget level of $300,000, both as
     described in PSNH's June 22, 1998 filing.  Further, PSNH shall
     also implement the clothes washer initiative, but at the budget
     level of $379,500 and with a flat $100 rebate per washer as
     recommended by ECS and CLF.  The determination to include the
     clothes washer initiative is based on testimony offered at the
     hearings that the $100 rebate, as used in the Northwest, was
     phased out in three years.  The phase-out of the rebates is
     consistent with our statement in the Rehearing Order that
     "efforts during the transition toward market-based DSM programs
     should focus on creating an environment for energy efficiency
     programs and services that will survive without subsidies in the
               We agree with Staff's position that in this case it is
     not appropriate to continue to have C&LM costs paid by customers
     through base rates and we believe that the best way to handle
     C&LM charges is to unbundle those expenses from the rest of base
     rates.  As we move toward competition, customers should see the
     various costs of providing service, including any costs spent on
     energy efficiency programs.  However, rather than implementing
     unbundling in this case, we direct Staff to file its
     recommendation in PSNH's base rate proceeding (DR 97-059) to
     remove the $1.7 million currently in base rates for C&LM and to
     establish a separate surcharge.  To the extent that increased
     dollars are spent on C&LM through this docket, it should be paid
     for through a separate C&LM surcharge that would be established
     in the base rate proceeding.  We note that by the time the
     proceeding in DR 97-059 is concluded, the Commission will
     probably have a better idea of how much will actually be spent on
     energy efficiency programs in 1998.  The Commission can then
     require PSNH to unbundle C&LM costs, set up a separate surcharge
     and perhaps provide for recovery of costs needed to fund this
     expansion, if necessary.
               PSNH indicated that it anticipates an underspending of
     C&LM programs of approximately $310,000.  This reallocation of
     funds supports the residential lighting program we approved
     above.  At this time, however, the Commission is not approving
     any increase in rates for the limited expansion related to the
     clothes washer initiative.  We recognize that should PSNH spend
     its entire budget as approved in Order No. 22,905 and the
     additional $379,500 we have authorized as a temporary measure
     through this order, then it may be necessary to provide for
     recovery in a subsequent proceeding for the undercollection
     caused by this expansion.  
               We encourage PSNH to try to minimize administrative
     costs related to its C&LM programs.  PSNH's market transformation
     programs should focus on customer education and rebates that are
     part of an individual program.
               Further, nothing in this order should be construed by
     any person or party participating in the Working Group as
     establishing precedent regarding any of the issues brought forth
     in this proceeding or to be addressed by the Working Group.  The
     directives we have issued in this order are temporary measures
     needed to bring resolution to this docket.  This is a difficult
     time to address energy efficiency programs because of the
     transition to what the Commission hopes will be retail
     competition in a relatively short period of time.  The Working
     Group will address many important issues and we look forward to
     reviewing their recommendations.
               Based upon the foregoing, it is hereby 
               ORDERED, that PSNH shall expand its C&LM program for
     the 1998 program year as detailed above; and it is
               FURTHER ORDERED, that there shall be no increase in
     rates as part of this docket and that any undercollection caused
     by this limited expansion of the 1998 C&LM program shall be
     reconciled in some other proceeding; and it is 
               FURTHER ORDERED, that ECS is granted full intervention
     in this proceeding.
               By order of the Public Utilities Commission of New
     Hampshire this seventeenth day of August, 1998. 
       Douglas L. Patch    Bruce B. Ellsworth    Susan S. Geiger
           Chairman           Commissioner        Commissioner
     Attested by:
     Thomas B. Getz
     Executive Director and Secretary