Public Service of New Hampshire

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Public Service of New Hampshire

1000 Elm Street
P.O. Box 330
Manchester, New Hampshire 03105-0330
(603) 669-4000
Fax: (603) 634-2367
Web site:

Wholly Owned Subsidiary of Northeast Utilities
Employees: 1,258
Sales: $850 million (1996)
SICs: 911 Electric Services

Public Service Company of New Hampshire (PSNH) is the states largest electric utility, providing service to over 400,000 homes and businesses. As a wholly owned subsidiary of Northeast Utilities, a holding company based in Connecticut, PSNH is part of New Englands largest electric system. PSNH serves three-quarters of the state in 198 communities covering 5,445 square miles. The principal business of the company is the generation, purchase, transmission, distribution, and sale of electricity. PSNHs three fossil-fuel facilities and nine hydroelectric facilities generate 1,110 megawatts of electricity.

The Forerunners: 1850 to 1925

As in many other states, the forerunners of electricity in New Hampshire were the water wheels powering the grist, lumber, and textile mills that spurred the development of industry. Gas lights and horse-drawn street cars were soon introduced to meet the needs of the people in the towns formed around New Hampshire millsas well as for the growing population of the Portsmouth shipping center. Then came arc lights and trolley cars. The Nashua Gas Light Company turned on its first gas lights in November 1853 and the Manchester Horse Railroad in 1877 carried its first 16 passengers in ten-foot cars.

By 1882 Thomas A. Edison had put into operation the worlds first two commercial electric generators, one in London and another at Pearl Street Station in New York. Meanwhile, the New England Weston Electric Light Company of Boston had arranged to build a generating station in Manchester, New Hampshire, on the property of the Amoskeag Manufacturing Company. Weston Electric turned on the first electric street lights in Manchester on April 23, 1882two weeks before the start-up of the Pearl Street Station. In 1885 the Manchester Electric Light Company bought all the Weston property in the city and in 1901 merged with the Manchester Traction, Light and Power Company. PSNH records indicate that 39 of the pioneer electric companies that later became part of the company had been in the electric business before 1900 and that another 15 had been incorporated before that date. Two specific developmentsthe operation of the first alternating-current generator and the industrial use of electric power and alternating currentopened the way for the evolution of PSNH.

Founding and Early Years of PSNH: 1926 to 1932

According to Everett B. Sackett, author of Fifty Years of Service: A History of Public Service Co. of New Hampshire, investment houses were the buyers and sellers of utility companies. The most active of these investment houses was Samuel Insulls Middle West Utilities (MWU) in Chicago. Insull had bought most of the competing electric companies in the city and set electricity prices low enough to lure customers from the gas companies. Insulls activity increased the volume of sales and thereby created economies of operation, but larger amounts of capital were needed to fund expanded operations. Insull then organized Middle West Utilities (MWU), which functioned as both an operating company and a holding company to raise money by selling securities backed in part by the securities of the operating companies and in part by accounting legerdemain, wrote Sackett.

At times, to raise new capital Insull bought companies far removed from his Chicago base of operations. For example, MWU reached out as far east as northern New England to buy the Central Maine Power Company., Eventually Insull combined all his northern New England holdings by forming the New England Public Service Company (NEPSCo) as a holding company that owned all, or nearly all, the common stock of its subsidiaries, one of which was the Public Service Company of New Hampshire (PSNH).

In the early days of the industry, small electric companies emerged almost overnight and then sought to consolidate. PSNH, for instance, had been incorporated in August 1926 as a consolidation of five New Hampshire electric companies. PSNH eventually consolidated Insulls holdings in New Hampshire, thereby acquiring properties in the southern and western parts of the state. Through its contacts with NEPSCo, PSNH could then bring eastern and northern New Hampshire into a statewide system. After its founding and up to December 1943, PSNH acquired the franchises and utility properties of 25 other electric and/or gas companies in New Hampshire. The company then hastened to unify its holdings by lacing the state with utility lines.

One of the ways PSNH promoted the sale of its product was to make central-station power available to rural areas. According to the companys 1928 annual report, many of the newly installed electrical rural lines had been made in response to an insistent demand for a higher standard of living and increased comfort on the farm.

PSNH also attracted new companies into the state by offering them free trials of electrical applications. According to the companys annual report cited above, if PSNH had spare generating and line capacity at the time of a companys desire for trial use, granting the request would assist in bringing new industries into the territory. A 1929 survey conducted by PSNH and local chambers of commerce found that 18 new industries employed 3,300 employees within the PSNH territory.

To promote domestic use of electricity, PSNH even experimented with an active-room rate for small houses and apartments: the company billed the customers in proportion to their needs, and at the same low rate applied to larger establishments. Initially PSNHs business included the gas, electric railway, and steam businesses. By 1931, however, the number of gas meters had fallen to 10,960 while electric meters had increased to 51,270; use of the automobile had cut into the street-railway business; and the handful of customers buying steam required the use of only one of the generating plants.

Depression, Storms, and World War II: 1929-45

Insulls Middle West Utilities at first weathered the economic upheaval brought on by the 1929 stock-market crash and even came to the aid of the city of Chicago and of some troubled industries. Insull, however, had made some imprudent decisions and could not fend off a group of New York bankers determined to gain control of his $3-billion empire. In 1932 he resigned all his corporate positions. The collapse of the Insull companies occasioned a government investigation of how utility companies were financed and brought about the passing of the Public Utility Holding Company Act of 1935. Thus, NEPSCo was severed from MWU but remained the owner of its regional subsidiaries, which included PSNH.

1926 had been a good year for New England business, but there was gnawing economic worry about growing competition from southern textile mills. The greatest threat to PSNHs continued growth was the closing of Manchesters Amoskeag Manufacturing Company, the largest cotton mill in the world. With a view to developing the abandoned establishment, PSNHs Schiller and a group of Manchester business leaders formed a new corporation, Amoskeag Industries, Inc. Emboldened by PSNHs purchase of 18 percent of Amoskeags stock and the offer to pay for water-power developments and the electrical-distribution system, local industries raised enough additional money to finance renovation of the mill. By year-end 1937, due in large part to PSNHs involvement, 40 companies had bought or leased space in the mill buildings and were employing about 4,000 workers. Thus, PSNH emphasized its continuing concern for creating jobs in New Hampshire.

Over and above dealing with economic storms, in 1936 PSNH also had to cope with ice jams and the worst flood in New Englands 300-year history. Moreover, the hurricane of September 1938 proved so devastating that electric service was interrupted statewide and not fully restored for several weeks. PSNH could cope with these natural disasters because it had acquired the Jacona, a government ship converted into a floating power plant anchored at Portsmouth. The Jacona generated one-third of the steam, and represented one-sixth of PSNHs total generating capacity. On March 17, 1945 the U.S. government seized the ship for use in the war effort.

From 1929 to 1945, except for a minor setback in 1938, PSNH annually generated and sold an increasing amount of electricity. Residential customers average use increased without a break, from 453 KWHs in 1932 to 1,012 KWHs in 1945. The average cost per KWH for domestic consumers moved steadily downward from 7.48 cents in 1932 to 4.45 cents in 1945 (in 1945 dollars).

Company Perspectives:

PSNH and its employees share a deep conviction that the defining factor separating a business leader from other successful businesses is a sincere commitment to serving the needs of its community. As a statewide company that provides electricity, a product essential to everyday life, PSNH addresses the economic, educational, environmental and social needs of its community. PSNH believes that this pledge fosters the personal development of its employees and the sense of teamwork that assures productivity and corporate success.

Hydroelectric Power, NEPOOL, Nuclear Energy: 1945-74

By 1966 PSNHs sale of industrial power was 333 times what it had been in 1948 while the gain in domestic use of electricity (due mainly to electrical heating in homes) was twice that much. At year-end 1966, electricity was used to heat 19,276 homes and 1,309 establishments. PSNH slowed down its marketing efforts and discontinued its complimentary wiring of buildings for heat. According to historian Sackett, in 1948 the companys 31 hydroelectric plants, with a rated capacity of 77,500 KWs, were matched by six fuel-burning plants having a capacity of 76,250 KWs. New England was running out of undeveloped water power. Furthermore, the generating stations situated on New England rivers could not always produce at optimum capacity because of erratic stream flow. For example, the Amoskeag installation at Manchester could operate at its maximum level only 17 percent of the time in an average year. Maine still had an undeveloped amount of power, but a 1955 law forbade exportation of power to other states. By 1973, PSNH had retired 41 of its hydroelectric plants.

A rapid rise in demand for power (which had more than doubled from 1945 to 1951), obliged PSNH to add new generating facilities. In 1948 the company replaced the Jacona with another floating power plant, the Resistance, which had been built and used by the government in World War II. After extensive repairs, the Resistance generated 30,000 KWs of electricity, thereby merely replacing the Jacona. PSNH then planned the construction of a fully integrated 40,000-KW mercury binary-cycle plant that became known as the Schiller Plant. This station, the first of its kind in the country, used a unique mercury-based process to generate power; required only three-fourths of the fuel needed by former methods for producing a comparable amount of electricity; and, according to historian Sackett, was said to be the most efficient fuel plant in the world. The first unit of the Schiller plant was dedicated in 1950. By 1970 three additional units also were functioning.

Use of electricity increased as fast as PSNH could build additional generating stations and transmission facilities. By 1968 the company was adding new electrical companies and withdrawing its involvement in fields other than electricity. The gas business had been sold in 1945 and the steam business was stopped in 1949. By 1940 the electric-trolley activity, once a major part of PSNH operations, had become unprofitable and the company switched to operating buses. After World II, the lifting of gasoline restrictions led to increased use of automobiles for transportation and PSNH sold its bus lines in 1954.

In 1941 PSNH had registered a 70-percent gain in revenue; however, in 1950 the company was overwhelmed by a 90-percent increase in production costs, especially for the purchase and transportation of coal. Repeatedly, the company implemented rate increases and tried to control costs by joining other utilities to study and implement the use of atomic power. According to PSNHs 1954 annual report, the regions major utilities had organized the Yankee Atomic Electric Company to explore the unknown and unlimited potentialities of the concentrated energy possessed by atomic fuels. In 1971 PSNH also joined other investor-owned power companies in New England to form the New England Power Pool (NEPOOL) to share the construction and operational costs of developing the Big-11 power loop. This loop was a network of 345-kilovolt (KV) transmission lines tying together the systems of the 11 pool members. (A kilovolt is a unit of 1,000 volts). Membership in NEPOOL was later opened to all New England utilities, regardless of ownership.

The Seabrook Plant and Aftermath: 1972 to 1988

The use of nuclear energy, therefore, was already a proven technology in some parts of New England. As early as 1968 PSNH had considered building an 860-megawatt atomic plant at Seabrook, but financial conditions had obliged the company to shelve the plans. Unexpected world events, however, fostered further study. For example, the newly established Organization of Petroleum Exporting Countries (OPEC) raised the price of oil to previously unknown heights. Oil that had cost 40 a gallon in October 1970 was priced at 270 a gallon in 1974! Faced with the threat of economic starvation and blackmail posed by OPEC, wrote Chris Herbert in the May 1996 issue of New Hampshire Business Revue, the U.S. government discouraged the use of fossil fuel. To encourage use of alternate resources, in 1978 Congress passed the Public Utilities Regulatory Policy Act.

By January 1972 PSNH had decided not only to build a plant at Seabrook but also to have it consist of two 1,150-megawatt units, to be completed in 1979. PSNH was to own 50 percent of the $1.3-billion project and share the remaining investment with other New England utilities. In January 1974 the New Hampshire Site Evaluation Committee, the Public Utilities Commission (PUC) and other regulatory bodies had issued the basic permits, but intervenors in the case succeeded in having the New Hampshire Supreme Court overturn these permits. After repeated appeals and re-hearings PSNH received its construction permit in July 1976and experienced its first protest at the planned site.

There followed a decade of other protests at the site, inside regulatory chambers, and in New Hampshire and Washington courtrooms. The 1979 accident at the Three Mile Island nuclear-power plant in Pennsylvaniato name but one event that triggered concern about ecological and safety issuesplayed a significant role in these protests. So did delays imposed through public intervention, slow regulatory approvals, and two significant labor strikes. PSNH had to borrow money to meet ever-escalating costs. In 1978 the company had been authorized to charge customers for the carrying costs on the money it was borrowing to build the Seabrook plant. However new legislation soon stated that PSNH could not recover any investment in the Seabrook Station until the plant provided electricity to its customers. Without CWIP charges (known as stranded costs), PSNH had to borrow even more heavily at a time of high interest rates. The New Hampshire Public Utilities Commission (NHPUC) ordered PSNH to reduce its ownership in the plant from 50 percent to 35.6 percent. In March 1984 the joint owners canceled Seabrook Unit II and formed New Hampshire Yankee, a separate division of PSNH, to manage the construction of Unit I and bring it into operation.

Seabrook Unit I was completed in July 1986 at a cost of $4.5 billion but did not go into full operation until August 19, 1990, at which time PSNH had not yet recovered any of the construction costs. Seabrooks final cost was $6.6 billion and PSNHs share of the debt was $2.9 billion. In May 1986 PSNH asked the NHPUC for a two-step rate increase; however, the agency ruled against the request. In a final effort to remain solvent, PSNH appealed NHPUCs decision by filing for a 15-percent emergency rate increase and asked the New Hampshire Supreme Court to suspend the Anti-CWIP law. On January 26,1988, the court ruled that the Anti-CWIP statute was constitutional and prevented PSNH from receiving the emergency rate increase. Two days later, on January 28, PSNH filed for protection under Chapter 11 of the U.S. Bankruptcy Code and became the first investor-owned utility since the Great Depression to declare bankruptcy.

Chaos, Restructuring, and Continuous Service: 1988-97

The declaration of bankruptcy ended PSNHs long downward spiral but did not win public support for the company or for the Seabrook Station. Later, in a 1996 editorial printed in The Keene (N.H.) Sentinel, Guy MacMillin observed that the decisionssome good, some badthat brought on the bankruptcy could be traced to previous generations of New Hampshire politicians and legislators. He pointed out three factors that had contributed to the bankruptcy. First, up until the moment of bankruptcy, state regulators and legislators had encouraged the Seabrook nuclear project. Second, the New Hampshire governor and the legislature, certainly aware that PSNHs electric rates were among the highest in the country, had accepted the seven-year annual rate increases and the stipulation for recovery of stranded costs that were part of the NU deal. Third, according to MacMillin, state regulators and the legislature had required that PSNH buy very expensive electricity from small wood-fired and hydroelectric power plants to encourage those technologies and thereby guard against a future oil shortage or nuclear-power collapse.

It was not surprising, therefore, that what ensued after the bankruptcy was a power struggle between the state of New Hampshire, PSNH management, and the Federal Bankruptcy Court. Exercising its exclusive right to reorganize after bankruptcy, in December 1988 PSNH chose to abandon state jurisdiction under NHPUC and restructure under the Federal Energy Regulatory Commission (FERC). According to the PSNH document New Hampshires Energy Partnership, FERC had a favorable record of allowing utilities to recover costs and increase rates as a result of investments in abandoned generating plants. The states Anti-CWIP law, on the other hand, would have prevented PSNH and its investors from recovering any investment made in the Seabrook station.

By the spring of 1989 little progress had been made; the state transformed the bankruptcy into an auction open to the competing reorganization plans of other utilities and major parties. Connnecticut-based Northeast Utilities (NU), one of the six major bidders, announced its plan in January 1989 and PSNH endorsed it in December of the same year. The plan was based on the revenues provided under a rate agreement that provided for seven annual increases of 5.5 percent from 1990 through 1996. The first 5.5 percent base-rate increase went into effect January 1990. The rate agreement projected that there would be no increase to rates in 1997, 1998, and 1999, and included a special mechanism for adjusting rates up or down, according to the cost for fuel and purchased power over the term of the agreement.

The rate agreement assured the $2.3 billion of new revenue needed to finance the two-step plan to reorganize PSNH. On May 16, 1991, PSNH completed step one, thereby ending its 39-month bankruptcy. Step two was completed June 5, 1992 and PSNH became a fully owned subsidiary of Northeast Utilities. NU paid approximately $2.3 billion to satisfy the bankruptcy claims of creditors and shareholders of PSNH; acquired responsibility for PSNHs 35.6 percent ownership of Seabrook; and established a new subsidiary, the North Atlantic Energy Corporation (NAEC), which had Seabrook as its only asset. NU then owned all the stock of both PSNH and NAEC.

Throughout the bankruptcy proceedings PSNH offered uninterrupted service to its customers. The company continued to honor its commitments to its employees, to protect the environment, and to support various civic and social activities. PSNH also continued the publication of The New Hampshire Economic Review, first published in 1970 as a compendium of statistics about the advantages available to businesses in New Hampshire. From 1994 onward, PSNH collaborated with the New Hampshire Department of Resources and Economic Development to increase jobs and commerce opportunities, providing funds annually for special projects, such as trade shows and the states Export Marketing Grants program. PSNH also devoted substantial resources to meeting the requirements of the Clean Water Act and the Clean Air Act.

In 1995 PSNH retrofitted its coal-fired Merrimack Stations 320-megawatt Unit 2 in Bow with an emissions-cleansing Selective Catalytic Reduction (SCR) system, thereby becoming the first power plant in the United States to use that technology. The SCR system, a state-of-the-art technology brought in from Germany, treated the nitrogen oxides (NOx) before they left the plant by converting them into non-polluting, natural elements. According to a PSNH newsletter, the SCR system slashed the production of smog-producing NOx emissions by 65 percent, the largest single-source reduction in New England. The Environmental Protection Agency awarded PSNH an Environmental Merit Award for importing this innovative technology. Over the years PSNH received numerous other commendations and awards for community and civic involvement, for contributions to education and economic development in the state, and for its involvement in protecting the environment.

Toward the 21st Century

As the time approached for ending the seven-year period of rate adjustments, the New Hampshire legislature was discussing a bill to reduce PSNH electric rates (among the highest in the country) and to end electric monopolies as early as 1997. The subsequent law, effective May 21, 1996, directed the NHPUC to develop a statewide plan for restructuring electric utilities. In April and again in October of that year PSNH proposed a plan, dubbed Customers First, to provide near-term rate relief for all customers and introduce choice of electric-energy suppliers within a reasonable time frame. On February 28, 1997 the NHPUC issued its orders in a document titled Restructuring New Hampshires Electric Utility Industry: Final Plan, which established interim stranded-cost charges for PSNH and set January 1, 1998 as the date by which all customers would choose an electric company.

In sum, PSNHs history is a microcosm of the evolution of electric utilities. During the two preceding decades, deregulation had changed the operating climate for banks, brokerage firms, and the telephone and the airplane industriesamong others. In the mid-1990s, more than half the states in the nationincluding the New England States, New York, Pennsylvania and Californiawere considering electric-utility deregulation. Although PSNH was faced with the obligation to restructure under trying circumstances, it already had proven its ability to change. According to PSNH President and Chief Operating Officer William T. Frain, Jr., no one has the corner on brilliance when it comes to restructuring this [electric] industry. The complexities are extraordinary. As the 21st century drew near, PSNH was geared to weathering these complexities. The company planned to be among the first states in the nation to synchronize PSNHs mission with deregulation of the electric industry in New Hampshire.

Further Reading

Frain, William T., Jr., Customers First: A Plan for New Hampshire, PSNH Newsletter, October 1996, pp. 1-7.

Hamm, Klaus, Panel: End Electricity Monopolies, Concord (N.H.) Monitor, March 1, 1997, pp. Al, A8.

, PSNH and Governor May Negotiate; Utility Wants to Suspend Rate Request, Concord (N.H.) Monitor, May 10, 1997, pp. A1, A8.

Herbert, Chris, An Electric Transformation: How Did N.H. Get to Deregulation in the First Place? New Hampshire Business Review, May 24, 1996, pp. 1A, 10A-11A.

MacMillin, Guy, The PSNH Offer, The Keene (N.H.) Sentinel, April 30, 1996, p. 10.

Meadows, Donella H., Deregulation: Lessons Learned, Dialogue (PSNH Newsletter), January 1997, p. 3.

New Hampshires Energy Partnership: The Bankruptcy and Reorganization of New Hampshires Largest Electric Utility, Manchester, N.H.: PSNH, 1991, 24 pp.

The New Hampshire Economic Revue, Manchester, N.H: PSNH, 1996, 32pp.

Protecting New Hampshires Environment: Cooperating to Preserve a Fragile Species, NH Matters (PSNH Newsletter) Winter 1995, p. 4.

Public Service of New Hampshire, Business NH Magazine, May 1977, p. 14.

Sackett, Everett B., Fifty Years of Service: A History of Public Service Co. of New Hampshire, Manchester, N.H.: PSNH, 52 pp.

Gloria A. Lemieux

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