Lamont, lawmakers say no electric rate increase coming
“Maybe shareholders are going to pay a price. I think you are going to find senior executives could pay a price. I do not put all this on the backs of the (customers), especially if ... the utilities did not do all appropriate (steps) necessary to limit the damage and get everyone on as soon as they possibly could.” Gov. Ned Lamont
Two Connecticut lawmakers and Gov. Ned Lamont dismissed the prospect of any immediate increase in electric rates, after Lamont signed the “take back the grid” bill into law on Wednesday that promises to hold utilities accountable for their storm readiness.
Led by the Energy and Technology Committee of the Connecticut General Assembly, lawmakers delivered the bill in a special session last month, less than two months after Tropical Storm Isaias decimated the state’s grid. Many customers and public officials had derided the power restoration efforts of Eversource and the United Illuminating subsidiary of Avangrid.
Under the new law, the Connecticut Public Utilities Regulatory Authority will pivot its electric-rate approval procedures to a “performance-based” method, under which PURA will assess past service levels in determining future prices that customers pay for electricity. In any outages lasting more than four days, Eversource and Avangrid would have to cover customer costs of up to $250 in replacing food and medicine if PURA decrees better preparations would have gotten the power back on sooner.
The utilities could also be exposed to penalties of up to 4 percent of the annual revenue they generate from the Connecticut grid.
The law specifies any penalties cannot come from amounts billed customers, meaning the costs are not part of the so-called rate base. It also allows PURA to cap what Connecticut ratepayers contribute to the compensation of utility executives.
Eversource CEO Jim Judge warned the company would likely request higher rates going forward to cover any extra costs from minimum staffing levels or bigger penalties it might face in the event of any extended outages.
But Sen. Norm Needleman, D-Essex, co-chairman of the energy committee, pushed back on that idea Wednesday. “The utilities saying that they were
going to change everything they do to avoid any penalty at all were ludicrous, as far as I was concerned — they were propaganda,” he said.
The governor went even further.
“Will rates go up for users? I turn that right on its head,” Lamont said in Hartford after ceremonially signing the bill into law. “Maybe shareholders are going to pay a price. I think you are going to find senior executives could pay a price. I do not put all this on the backs of the (customers), especially if ... the utilities did not do all appropriate (steps) necessary to limit the damage and get everyone on as soon as they possibly could.”
The bill, now law, passed overwelmingly with Republican and Democratic support in both the state House and the Senate.
Eversource and Avangrid spokespersons did not say whether the utilities would seek to fold any costs from the new law into future rates they ask PURA to approve.
“We look forward to working with PURA to ensure that the new measures enacted give Connecticut electric customers access to safe, reliable and affordable energy,” stated Eversource spokesman Mitch Gross, in an email response to a query on the company’s plans under the new law.
Avangrid spokesman Ed Crowder noted what he termed as “sensitivity to customer rate impacts” on the part of lawmakers drafting the legislation, and said the company will work with PURA toward the goal of no “undue impact or burden” on customers in complying with its provisions.
Eversource investors appeared to shrug off the new Connecticut rules, with shares up 16 percent in the last two weeks to $91.40 at Wednesday’s close, the stock’s highest closing level since April. Eversource’s Connecticut grid operations contributed profits of $411 million last year, about 45 percent of the company’s total profits from electric, water and natural gas operations in Connecticut, Massachusetts and New Hampshire.
Until now, PURA has approved rates based on an analysis of utility’s projected spending needs, while allowing a guaranteed rate of profits. On Wednesday, Needleman, D-Essex, echoed the stance of his Energy and Technology Committee co-chair Rep. David Arconti, D-Danbury, that the law is flexible enough that rates should not increase.
“There’s room in the bill for ... PURA to allow exceptions,” Needleman said. “We don’t want a mandate — if we have a Category 3 hurricane, nobody expects that there’s going to be restoration in 96 hours — but we want them to do better than they’ve done.”
PURA has existing inquiries under way to determine whether to impose penalties on Eversource and Avangrid for their Isaias response, and whether to reset rates to their July levels. PURA suspended rate increases in August after customer bills shot up as a result of hot days and more people staying home during the COVID-19 pandemic.
For Needleman, the wrecking ball that was Isaias showed far more investment is needed to withstand storms, to include those packing sustained winds at hurricane force. He added he expects additional scrutiny in the legislative session that begins next January, while acknowledging any future requirements could end up being underwritten by customers.
“How we get there, how that money is spent prudently, I can’t tell you — but they need to come up with a plan to harden the grid,” Needleman said. “Some of that work could impact rates — hopefully they won’t — but the money that we spend up front is less time we’re going to have to take for outage restoration.”