Should New Hampshire’s largest public utility sell off its fossil-fuel-burning power plants? That is the question the state Legislature decided the Public Utilities Commission should answer.

Both the House and Senate passed the bill yesterday that calls on the commission to determine whether it’s in the best economic interest of Public Service of New Hampshire’s customers for the utility to sell off some or all of its generating facilities, which include Merrimack Station, Schiller Station and Newington Station.

The bill will now go to the governor’s office for final signature. And if passed, the PUC – made up of three commissioners appointed by the governor and confirmed by the Executive Council – should begin proceedings by the first of next year.

The commission’s decision will likely impact consumer rates. Although almost none of the stakeholders involved, including PSNH, opposed the bill to give the decision to the PUC, opinions are divided on which option is best for the state’s electric customers.

PSNH officials have said divestiture, or the selling off of its generating fleet, is not in the best interest of its customers. The utility, the only one in the state that owns and operates its own generation facilities, did not oppose the bill because the PUC is the proper forum for the decision, said the company’s vice president of generation, Bill Smagula.

But PSNH contends that its fleet of power plants is an important part of New Hampshire’s energy mix at a time when the market is largely dependent on a volatile natural gas supply.

“For some period of time retaining generation . . . is important to meet customers’ needs,” Smagula said. For several months over this winter, it was more economical for PSNH to run its fossil-fuel power plants than to purchase electric power, generated by natural gas, off the open market, said PSNH spokesperson Martin Murray. That was due, in part, to a lack in pipeline infrastructure, he said.

“We’re on the verge of a high-risk period. Nobody is building anything and we’re without really a solution in sight,” Smagula said. PSNH’s plants that run about 40 to 50 percent of the time, Smagula said, provide insulation from natural gas volatility and “closing the plants, it just doesn’t add up to me.”

For consumer advocate groups and other power providers, it’s a different story.

“We have to ask, how much does an insurance policy have to cost to be of value,” said New Hampshire’s consumer advocate Susan Chamberlin. “From my perspective, it’s not fair for consumers to have to pay for plants that are really old and rarely run,” she said.

As the costs to maintain and operate PSNH’s fleet of power plants have risen, customers have migrated away from PSNH to purchase power from other retailers, said Michelline Dufort, who represents EmpowerNH, a coalition of environmental and consumer organizations, business and trade groups, and power providers that support both the bill and divestiture. That trend is unsustainable, because as more customers leave, the increasing costs are spread out among a smaller rate base, she said. The phenomena has been dubbed a “death spiral.”

Dufort said she doesn’t see market conditions changing anytime soon that would reverse the trend.

“The costs of those power plants and additional investments that may be required . . . continue to be a major burden for PSNH customers,” she said. “The divestiture process would put an end to that burden, put limits around how much customers have to pay and set an endpoint for it.”

A staff report put together by the PUC and released in April concluded that over the long term there will continue to be a disparity between PSNH’s default service rates and market prices. The report said PSNH’s default service customers “would be better off under a divestiture of the PSNH assets if the stranded costs were recovered from all customers.”

The issue of so-called stranded costs are a question mark in the equation. In the case of a sale, the stranded costs represent the difference between the price the plants would fetch on the open market and their value on PSNH’s books. According to the April PUC staff report – based on analysis by La Capra Associates – that difference is in the $400 million range. Someone, usually the ratepayers, covers that cost.

It would be worked out during the PUC’s review and would depend on many factors, Chamberlain said. They include how much money the plants would get in a sale, whether default customers or all PSNH customers would pay the stranded costs, and the outcome of an ongoing docket at the PUC to determine how much cost the company will recover for a $422 million scrubber it installed at Merrimack Station.

“That’s where the devil’s in the details,” said Sen. Jeb Bradley, a Wolfeboro Republican who sits on the Senate’s Energy and Natural Resources Committee.

The PUC will need to work through all of those variables during its review. By March 31 of next year the commission must submit a progress report to a legislative oversight committee, according to the bill’s language.

“This is a major step forward,” Bradley said. “I think there will have to be a collaborative process . . . to create a winning solution for everybody.”

Iberdrola Renewables made the announcement Tuesday that it would drop its proposal to develop the 75.9-megawatt Wild Meadows wind farm.

“While we continue to make significant progress resolving various outstanding issues at our Groton wind farm, our experience with that situation combined with the current political and regulatory climate in New Hampshire leave us no choice but to end our efforts to develop and invest $150 million at the potential Wild Meadows wind farm,” said company spokesperson Art Sasse in an emailed statement. The company didn’t comment further than the two-paragraph statement.

Ibredrola owns two of the three wind farms already in operation in New Hampshire: the 24-megawatt, 12-turbine Lempster Wind Power Project and the 24-turbine Groton Wind farm. The latter has run into issues over its fire suppression system with the state’s Site Evaluation Committee, which is in charge of permitting large-scale energy projects.

The Wild Meadows project had faced opposition from local residents and some environmental groups.

“We are relieved to hear the developer has dropped its plans,” said Appalachian Mountain Club Vice President for Conservation Susan Arnold in a written statement. “While we recognize that renewable energy needs to be part of the state’s energy mix, this project as proposed would have been incompatible with the surrounding landscape, marred scenic views and negatively impacted a region valued for outdoor recreation and spiritual renewal.”

Ibradola’s decision to desert its proposal due to the political climate was met with divided response from other companies seeking to develop their own wind projects in the state.

EDP Renewables North America, looking into developing a 50-megawatt wind farm of about 25 turbines in the Groton area, is still committed to bringing clean energy to the state, said company spokesman Adam Rentz.

“We believe that New Hampshire is an extremely viable state,” Rentz said. The company recognizes the permitting process can be a long one, he said, and that each state’s requirements are unique.

“With that in mind, you have to temper your expectations . . . we have to make sure we do it right early on because we’re going to be with everyone for a long time,” he said. “We’re sticking the course in New Hampshire.”

Eolian Renewable Energy CEO Jack Kenworthy said he shares Ibredrola’s concerns.

“There have been several attempts in recent legislation to pass moratoria on wind energy in the state, either explicitly or de facto,” he wrote in an email. “Although those have not come to pass, there is continued pressure for the wind industry and wind supporters to defend against new legislation that would increase uncertainty, time and cost to permit wind energy facilities.”

In 2013, the Site Evaluation Committee rejected Eolian’s application to develop its proposed 30-megawatt Antrim wind farm due to aesthetic impacts. Kenworthy said he supports constructive changes to the state’s permitting process that “provide for a fair and timely permitting process.”

“Utility-scale terrestrial wind faces several challenges in New Hampshire,” according to a draft state energy policy released May 1 and put together by Navigant Consulting under the direction of the New Hampshire Legislature.

One challenge, tied to national policy, is the expiration of the production tax credit earlier this year. But perhaps the most notable, the report said, are the challenges related to the siting of wind projects.

“Areas with the most promising wind resources may be undesirable because of their proximity to residences, the visual impact . . . and the noise they generate,” the report states.

Those are issues the state Legislature is trying to tackle this session, and lawmakers said it is all about balancing the benefits of wind power with the well-being of residents.

During a committee of conference Tuesday, lawmakers worked out final language on a bill that would give the Site Evaluation Committee guidelines to consider when permitting large-scale wind projects. They include the project’s visual impacts, health and safety impacts, sound impacts, and its effect on the environment, among others. The bill will appear on the House and Senate floors for final votes next week.

Rep. William Baber, a Dover Democrat who participated in the bill’s committee of conference, said he hopes the legislation would benefit wind farm developers by providing stability “so they have some assurance that it’s not just left to arbitrary decision-making process.”

It is unfair to say the state’s political climate is not receptive to wind energy, he said.

“I think the Legislature has sent a strong message that renewables are an important part of our future and wind is actually one of the more economical and environmentally friendly options,” he said. “That doesn’t mean siting of the wind farms should be done without thoughtful oversight.”

Sen. Jeb Bradley, a Wolfeboro Republican who also sat on the committee of conference, said it is important to protect residents who live in close proximity to wind turbines from the negative aspects, such as shadow flicker, noise and decline in property values. He said wind developers in the state need to do a better job of mitigating those factors.

Wind “is a tiny amount of our overall power needs that is generating huge controversies in the areas where developers want to locate them,” Bradley said. “While I am not saying we shouldn’t be developing wind, there needs to be that balance.”