PORTSMOUTH, N.H. (AP) – Public Service Company of New Hampshire has proposed replacing one of its coal- and oil-burning boilers in Portsmouth with one that burns wood, a move that could reduce pollution and bolster the market for low-grade wood.

The utility says replacing one of three 50-megawatt boilers at Portsmouth’s Schiller Station would reduce pollution by more than 380,000 tons annually.

The project is being considered because of new laws in southern New England that require utilities there to derive some of their power from cleaner, renewable energy sources, like wood. The laws allow utilities to meet the requirement by buying credits from out-of-state companies that use renewable energy.

Public Service intends to earn credits burning wood and sell them to the utilities in southern New England to pay for its $70 million project. The utility estimates a combination of new incentives for renewable and “green” energy could end up saving ratepayers $17.7 million in the first three years.

Regulators review the project this month. They and environmentalists are cautiously optimistic about the project.

“It could be substantial,” said Tom Frantz, director of the Public Utility Commission’s electric division. “At first blush, it’s a project that has a lot of potential benefits.”

Deborah Donovan, an energy analyst with the Union of Concerned Scientists, knows of no utilities that have switched from coal-fired boilers to ones that can take all wood.

In Massachusetts, every utility will have to derive 1 percent of its energy from renewable sources this year, and 7 percent in 2012. In Connecticut the percentages are even higher: 6 percent in 2004 and 10 percent in 2012.

Utilities that don’t use renewable energy can meet their quotas by buying credits from utilities with renewable energy to spare.

That’s where Public Service hopes to pay for its project. It can qualify for credits to sell because it contributes its power to a common New England grid.

Meanwhile, the new boiler could open up other new sources of revenue, company officials said. It would be more efficient than the current coal boiler, which could mean the company, by generating more low-cost power to sell, could bring in more than $600,000 a year in additional revenue.

The boiler would bring Public Service closer to complying with the state’s Clean Power Act, which could save the utility $1.4 million annually in credits the utility would not have to buy to meet those requirements. And a bill before Congress would provide tax credits to wood burning projects like Public Service’s in use by December of 2005.

The utility still needs to have its plan certified by Massachusetts and Connecticut, a process which company officials say is underway.

Even assuming the plan is approved by both states, the commission wants to make sure the utility can cover its costs.

The timber industry wants to make sure a good amount of the 400,000 tons of wood the boiler will use per year comes from New Hampshire.

So far, Public Service has said it would use New Hampshire wood whenever it is economical to do so, but it has made no promises.

The Timberland Owners Association is worried much of the wood could come from forests in northern Massachusetts and Maine that are closer to the Seacoast plant than many in New Hampshire.

AP-ES-09-07-03 1357EDT

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