RANDOLPH, N.H., JAN. 28 -- Public Service of New Hampshire, the state's major electric utility, today sought bankruptcy protection, a victim of its inability to recover any of the costs of its $2.1 billion investment in the stalled Seabrook nuclear power plant.
It was the first time since the Depression that a large investor-owned public utility has become insolvent.
A PSNH spokesman in Manchester said the company sought protection from its creditors by filing under Chapter 11 of the federal bankruptcy law, which allows a firm to halt debt payments while seeking to reorganize its financial affairs. The spokesman said service to PSNH's 360,000 customers would not be interrupted as a result of the filing.
The $5.2 billion Seabrook plant, located on the Atlantic coast, has been bitterly opposed by a number of environmental groups and was delayed by numerous legal actions. The plant was also the site of repeated demonstrations and attempts to block its construction.
Those problems, along with construction and management difficulties, left the project years behind schedule and billions of dollars over budget when it was finished in mid-1986.
PSNH owns a 35 percent interest in the plant, which has never received a license from the federal Nuclear Regulatory Commission to go into operation. The latest obstacle has been the requirement for completion of an emergency evacuation plan in a 10-mile radius around the plant. Several towns in nearby Massachusetts, within the radius, have refused to cooperate, and Massachusetts Gov. Michael Dukakis has backed their stand.
The PSNH bankruptcy was precipitated this week by a New Hampshire Supreme Court decision upholding a 1979 state law prohibiting a utility from earning any return on its investment in a generating plant until it is in commercial operation.
PSNH had asked the state Public Utility Commission for a 15 percent, $71 million rate increase based on its investment in Seabrook. The commission had asked the state's high court for a ruling on whether it could legally grant the request.
The utility had sought the higher rates as a last resort after repeated efforts to reorganize had failed. PSNH was already in default on more than $40 million in interest payments on several hundred million dollars worth of its debt, with other interest payments due Feb. 1 and 15. Trustees for the debt holders had filed suit in both state and federal court seeking to attach PSNH property.
From the beginning, Seabrook was a huge undertaking for a utility the size of PSNH. Other New England utilities own the other 65 percent of the plant, but PSNH was in charge of planning and construction until very late in the building process.
Along the way, some of the other owners, including two Maine utilities ordered to do so by their state regulatory commission, disposed of their interests. Others have had problems financing their shares, in part because of skepticism or outright opposition from their regulators.
To hold up its end of the mounting construction costs, and unable to raise rates to help pay for the plant, PSNH turned repeatedly to Wall Street. It has about $800 million worth of unsecured debt outstanding, and hundreds of millions of dollars more in second- and third-mortgage bonds.
As part of its recent unsuccessful effort to restructure its debt load, the utility offered to exchange part of its debt for common stock. Had the proposal been accepted by the debt holders, they eventually could have controlled the company.
Meanwhile, PSNH still has to pay about $3.5 million a month as its share of the cost of maintenance and security at the unopened plant.
New Hampshire Gov. John Sununu said in a statement, "I regret that this situation has occurred, but as I understand it there are a host of alternatives that can be explored to protect both the ratepayers of New Hampshire and the state's energy supply." Sununu has been an outspoken backer of Seabrook for years.
With so many years without a major utility bankruptcy, investments in operating electric utilities have been regarded as unusually safe. In past decades, the utilities had effective monopolies to provide power within their service area.
But the industry's monopoly status has been broken down by the ability of many major customers to generate their own power -- with the utilities forced by federal law to buy any excess the former customer has to sell. Meanwhile, many electric utilities, like PSNH, have found themselves pushed to the wall to finance huge investments in long-delayed nuclear plants.
Still, no other major utility has been forced to file for bankruptcy since the 1930s. Metropolitan Edison Co., owner of the twin nuclear plants at Three Mile Island in Pennsylvania, was effectively insolvent after one of the reactors partially melted down in 1979. But in that case, the Pennsylvania Public Utilities Commission allowed the company to raise rates to cover its higher costs, such as for the purchase of substitute electricity, rather than force the utility into bankruptcy court. The commission said it had decided the cheapest alternative for the utility's customers was to keep it out of bankruptcy.
But here it has been a different story. Since so much of PSNH's problem centers on its huge debt load, bankruptcy protection -- which could lower the company's interest expense drastically -- is seen by many customers as the cheapest way out for them.