DR 97-059
                  Public Service Company of New Hampshire
                       Investigation into Base Rates
                        Prehearing Conference Order
                         O R D E R   N O.  23,080
                             December 8, 1998
         APPEARANCES: Gerald M. Eaton, Esq. for Public Service
Company of New Hampshire; Morrison & Foerster, L.L.P. by Andrew
D. Weissman, Esq. for Cabletron Systems, Inc.; Anne Ross, Esq.
for the Retail Merchants Association; McLane, Graf, Raulerson &
Middleton by Steve V. Camerino, Esq. for Great Bay Power
Corporation; Assistant Attorney General Wynn Arnold, Esq. for the
Governor's Office of Energy and Community Services; Gary Gilmore
for the Campaign for Ratepayers' Rights; Charles Clough for
Freedom Partners; O'Neill, Grills & O'Neill by Peter Grills, Esq.
for the City of Manchester; Hon. Jeb Bradley; Dean, Rice and Kane
by Mark Dean, Esq. for the New Hampshire Electric Cooperative;
Henry Veilleux for the Business and Industry Association of New
Hampshire; Michael Holmes, Esq. for the Office of Consumer
Advocate on behalf of residential ratepayers; Eugene F. Sullivan
III, Esq., for the Staff of the Public Utilities Commission. 

         This proceeding was initiated on March 31, 1997, upon
the filing by Public Service Company of New Hampshire (PSNH or
Company) of a Notice of Intent to File Rate Schedules with the
New Hampshire Public Utilities Commission (Commission) pursuant
to N.H. Admin. R., Puc 1603.02.  On May 2, 1997, PSNH filed
testimony, exhibits, schedules, work papers and the filing
requirements of Puc Chapter 1600 supporting an increase in base
         Subsequently, on May 9, 1997, PSNH filed a motion with
the Commission which, among other things, requested that the
Commission suspend the proceedings in this docket to allow a
mediation process relative to Docket No. DR 96-150 to move
forward.  By Order No. 22,605, issued May 25, 1997, the
Commission granted the motion and stayed its investigation of the
base rate filing.  This stay was lifted by the Commission in its
Order No. 22,669, issued on July 23, 1997.
         Pursuant to RSA 378:27, temporary rates were
established by the Commission in its Order No. 22,784, issued on
November 6, 1997. Under this temporary rate order, rates for the
period July 1, 1997 through November 30, 1997 were set at the
level of permanent rates then in existence.  For the period from
December 1, 1997 forward, rates were lowered by approximately
6.87 percent, to be reconciled back to July 1, 1997.
         The procedural schedule was again suspended and the
proceeding stayed by the Commission at the request of the New
Hampshire Public Utilities Commission Staff (Staff).  Staff had
requested the suspension pending receipt of an anticipated
decision by the New Hampshire Supreme Court on questions
submitted by the Commission in the Restructuring Docket, DR
96-150, related to the 1989 "Rate Agreement" between PSNH and the
State of New Hampshire.   
         On October 20, 1998, the Secretary and Executive
Director of the Commission, Thomas B. Getz, notified the parties
to this proceeding that the Commission had not intended that the
previously granted suspension last for an extended period, and
that the Commission was concerned about the effect a long delay
would have on the proceeding.  Accordingly, the Commission
determined that on November 17, 1998, Staff and the parties
should meet to discuss resuming the Rate Case in the absence of a
ruling from the Supreme Court, and submit a recommendation on how
to proceed to the Commission.  In addition, the Commission
directed Staff and the parties to hold a technical session to
address issues of updating discovery, accounting for known and
measurable changes and proper use of test year data. 
         On November 5, 1998, a petition was filed by Cabletron
Systems, Inc. (Cabletron), and supported by a number of other
parties, requesting a reduction in temporary rates and
establishment of an expedited procedural schedule for completion
of the pending rate case.  By letter from the Executive Director
of November 10, 1998, the Commission notified the parties that it
would cancel the technical session and hear argument on the
petition on November 17, 1998.

         At the November 17, 1998 hearing, argument was heard by
the Commission on the issue of the appropriateness of reducing
the current temporary rates, and on setting an expedited
procedural schedule.  At the end of the hearing, the Commission
     requested that parties file pleadings setting forth their
     position on revising the current temporary rates, the need to
     revise the test year data and a recommended schedule for
     resumption of the base rate investigation.  Pursuant to this
     request, pleadings were filed by PSNH, Cabletron, the Office of
     Consumer Advocate (OCA), the Governor's Office of Energy and
     Community Services (GOECS), the Business and Industry
     Association, the City of Manchester, and the Staff.
         In their submissions, several intervenors have
     requested that the Commission reduce PSNH's base rates
     immediately.  The Office of Consumer Advocate suggests that
     adjustments derived from PSNH's accounts, without needing further
     evidence, would permit a base rate reduction of 5 percent.  OCA
     argues that additional reductions could be warranted after some
     further factual investigation.  Cabletron and the parties who
     support its petition urge the Commission to institute immediate
     reductions of 20 to 40 percent in PSNH's base component of rates. 
     These parties variously argue that the following items justify
     their claims:
         1)   Rate base reductions relating to the Acquisition
              Premium, Small Power Producer (SPP) deferrals, and
              non-Fuel and Purchase Power Adjustment Clause (FPPAC)
              utility plant;
         2)   Increased retail sales levels;
         3)   Non-FPPAC O&M expense decreases resulting from
              lower North Atlantic Energy Service Company (NAESCO)
         4)   Lower equity returns appropriate for the
              Acquisition Premium and SPP deferrals;
         5)   Discounts on Special Contracts;
         6)   Prior over-collections of temporary rate levels;
         7)   Lower cost of capital on a going forward basis;
         8)   Imprudence disallowances for rate base associated
              with power plants that arguably should have been sold.
         In response, the Company strongly disagreed with this
     analysis and argues that these claimed bases for reduction in
     rates are mere "folderol."  The Company also raises the threshold
     question of whether the Commission has the legal authority to
     change temporary rates once such rates have been set in a rate
     case proceeding.
         The GOECS proposed that the Commission defer
     consideration of whether to revise temporary rates until after
     the Company has filed updated accounts. 
         The proponents of establishing new or revised temporary
     rates argue that the Commission's comprehensive authority to
     establish or modify rates in order to ensure that rates are just
     and reasonable, avoid excessive charges to customers, and serve
     the public interest, along with the specific grants of authority
     to alter or modify prior orders and terminate existing temporary
     rates, provide the Commission the requisite authority to modify
     temporary rates.  The Company argues that the Commission is a
     statutorily created body endowed with only those powers expressly
     granted to it by the Legislature.  According to the Company, the
     Commission's authority is unambiguously limited by the plain
     meaning of RSA 378:27 and RSA 378:29 which require the temporary
     rates to remain in effect for the duration of the proceeding.
         Some of the issues raised by those seeking lower
     temporary rates have potential merit.  On the other hand, the
     Company has advanced sound arguments to suggest that some of the
     proposed reductions are more properly FPPAC issues than base rate
     issues, and has offered plausible responses to other reductions. 
     Additionally, some of the potentially valid non-FPPAC issues
     raised by the intervenors could require extensive evidentiary
     hearings to address adequately. 
         The Commission is mindful of the need to conclude the
     base rate case and institute new permanent rates for PSNH as soon
     as possible.  The City of Manchester and others argued that a
     proceeding on temporary rates would inevitably cause a delay in
     completing the permanent rate case.  With this concern in mind,
     the Commission will defer its determination of whether to hold
     hearings on any additional reductions in temporary rates until
     after the Company has submitted an updated filing and schedules
     on January 29, 1999, as provided in the permanent rate case
     schedule below.  We note that we have previously established a
     reconciliation date of July 1, 1997 for permanent rates to ensure
     that whatever rate is ultimately determined to be appropriate
     would be reconciled to that date, affording protection to both
     customers and the Company.
         Upon receipt of the updated filing, the Commission will
     review it to determine whether it is advisable to open further
     proceedings on revised temporary rates or whether it is
     preferable to proceed on the permanent rate case without adding
     the burden of additional proceedings on the parties.  Any
     proceeding involving further revision to temporary rates would be
     held in parallel with the schedule outlined below for the
     permanent rate case.  Our primary objective is to conclude the
     rate case as quickly as possible, consistent with the need to
     develop a sound record on which to make a decision, and to
     provide the parties the process required by law.  Accordingly, we
     will not look favorably upon any requests for extensions of the
     deadlines set forth herein.  This is especially so given that the
     June 1, 1999 effective date for any rate change is meant to
     coincide with the beginning of the next FPPAC period.
         We reserve the right to require PSNH to post a bond,
     pursuant to RSA 378:30, should circumstances require.  At this
     time, we will adopt and order as an additional reasonable
     protection the recommendation of several parties that interest be
     included on any over- or underrecoveries of base rates, at an
     appropriate interest rate to be determined during the hearings
     set out below.
         We adopt the recommendation of the OCA that the test
     year be the period of October 1, 1997 through September 30, 1998,
     based upon actual data, pro-formed as necessary for known and
     measurable changes after that period.  PSNH shall only be
     required to update and refile its testimony and schedules
     concerning rate-base and operation and maintenance expenses.  An
     update to the cost-of-service study previously filed is not
     necessary at this time.
         Pursuant to RSA 363:17 and RSA 363:30 VI, we have
     designated the Commission's General Counsel as "Presiding
     Officer" for the limited purposes of discovery and schedule
     disputes in the first instance, so that parties who are unable to
     resolve such matters after good faith negotiations can have a
     speedy resolution, subject to an appeal to the full Commission.
         The schedule in this case is as follows:
     PSNH files updated testimony
     and schedules based on test
     year 10/1/97 to 9/30/98
     1/29/99 - same day delivery to
     all parties
     Rolling discovery on revenue
     requirements testimony and
     rolling responses (10 day
     turn-around, 5 days to lodge
     1/29 - 2/22 to propound
     discovery  (technical sessions
     to be scheduled as necessary)
     Intervenor and Staff testimony
     on revenue requirements
     3/8/99 - same day delivery to
     all parties
     Rolling discovery on
     Intervenor and Staff revenue
     requirements testimony and
     rolling responses (10 day
     turn-around, 5 days to lodge
     3/8-3/26 to propound discovery 
     (technical sessions to be
     scheduled as necessary)
     Rebuttal testimony from all
     4/2 - same day delivery to all
     Settlement Conference
     4/6 - 9:00 a.m.
     Prehearing conference:
     Establish list of issues;
     schedule of witnesses;
     presentation of
     cross-examination; preliminary
     list of exhibits; rule on any
     outstanding motions
     4/6 - 1:30 p.m.
     Deadline for submission of 
     settlement agreement, if any
     4/12-4/16, 4/19-4/23   9:00
     a.m. - 5:00 p.m.
     Briefs: pursuant to page limit
     and issues outline 
     Reply Briefs: pursuant to page
     limit and issues outline
     Deliberations and Final Order
         Based upon the foregoing, it is hereby 
         ORDERED that the suspension of the procedural schedule
     granted pursuant to the Secretarial Letter of June 16, 1998 is
     set aside, and a new procedural schedule is established as set
     forth above; and it is 
         FURTHER ORDERED that consideration of the Petition of
     Cabletron to Reduce Temporary Rates is deferred pending receipt
     and review of the revised filings and schedules of PSNH; and it
         FURTHER ORDERED, that the parties are to recommend to
     the Commission by January 4, 1999, suggested dates for the
     holding of technical sessions to discuss the revised data,
     testimony and rebuttal testimony to be filed pursuant to the
     schedule set forth above; and it is
         FURTHER ORDERED, pursuant to RSA 363:17 and RSA 363:30
     VI, that the Commission's General Counsel is appointed Presiding
     Officer for the limited purpose of hearing discovery and schedule
         By order of the Public Utilities Commission of New
     Hampshire this eighth day of December, 1998.
       Douglas L. Patch     Susan S. Geiger       Nancy Brockway
           Chairman           Commissioner        Commissioner
     Attested by:
     Thomas B. Getz
     Executive Director and Secretary