CMEEC ratepayer advocate had a busy first quarter

During his first three months as the state’s municipal electric energy consumer advocate, Bill Kowalski has weighed in on several issues involving the Connecticut Municipal Electric Energy Cooperative, persuading its board of directors to change positions on key issues, and sparking debate on one potentially costly proposal.

Kowalski, of Durham, a former attorney for the state Office of Consumer Counsel, was appointed in December as part of a state law strengthening oversight of CMEEC. The law was passed in the wake of public outcry over CMEEC-hosted trips to the Kentucky Derby for four years for dozens of board members, top staff, family members and public officials that cost more than $1 million.

CMEEC, owned by six member municipally owned utilities including Norwich Public Utilities, Groton Utilities, Bozrah Light & Power, Jewett City Department of Public Utilities and two Norwalk utilities, is the only cooperative in Kowalski’s jurisdiction.

Since January, Kowalski has attended several CMEEC full board and committee meetings, has met with mayors and first selectmen in member towns and has answered inquiries by several ratepayers.

Kowalski intervened directly in February, when the board voted to hire Blum Shapiro to conduct the state-mandated five-year forensic audit of CMEEC. Blum Shapiro is CMEEC’s annual audit firm, and critics questioned whether the firm would find problems in a forensic audit that it didn’t find in annual audit.

Kowalski successfully advocated for the CMEEC board to issue a new request for proposals for a forensic audit and distribute the proposal to more audit firms. Part of the discussion on the audit was scheduled for a closed-door session, but the board agreed to Kowalski’s request that part of the discussion be held in open session, “increasing operational transparency,” Kowalski wrote in his first-quarter report.

Increasing CMEEC transparency was a major goal of state Sen. Heather Somers, R-Groton, who wrote much of the new law. Somers said last week that Kowalski is doing exactly what she envisioned for the position.

“I’m very happy that we have an advocate for the ratepayers, another set of eyes watching CMEEC,” Somers said.

Somers said Kowalski is a “very good intermediary” on CMEEC operations, but she is awaiting the completion of the forensic audit and the response to it as a real “watermark” for change in the operations.

“He’s doing a great job, and I’m interested in seeing him follow the new RFP process for a new forensic auditor,” Somers said.

Richard Sobolewski, supervisor of technical analysis at the Office of Consumer Counsel, said Kowalski has been very busy and has met with office staff several times thus far.

“Bill did a really good job identifying the issues,” Sobolewski said. “He seems spot-on with the type of issues that needed to be addressed.”

CMEEC CEO Drew Rankin said CMEEC has welcomed Kowalski’s involvement and actively includes him in discussions of issues.

“His input is appreciated and considered just as all other participants,” Rankin said.

Kowalski submitted his quarterly report to the state legislature and to the CMEEC board last week. He sparked a debate with the CMEEC board Friday over one potentially expensive proposal to compare CMEEC’s wholesale power price to those of other publicly owned cooperatives throughout the country.

At each meeting, Rankin gives a detailed comparison on how CMEEC’s wholesale power price compares to investor-owned Eversource’s wholesale rate. CMEEC strives to be at least 30 percent lower than the Eversource rate, called the “regional benchmark.” Kowalski questioned whether it’s a proper comparison, since Eversource is a for-profit, taxable entity that likely always will have higher costs.

CMEEC board members argued that Kowalski’s proposal to compare wholesale rates with 57 public power companies across country is contrary to his role of saving ratepayers money. CMEEC staff has estimated it would cost $50,000 in staff time to obtain the comparable rate information — if it’s even possible.

NPU General Manager and CMEEC board member John Bilda argued that the state’s effort to make sure the Kentucky Derby trips never happen again is adding other costs to the cooperative’s operation.

“What’s happened as a result is, it’s like we’re blowing up an ant hill with a nuclear bomb in terms of cost,” Bilda said to Kowalski at Friday’s meeting. “We have driven so much cost into the organization now as a result of this. And if we’d like to move on, I’d like you to advocate for ways that we can lessen the cost burden now as a result of this.”

Bilda did not give specific costs mandated in the state law, but the law requires CMEEC to pay the $70,000 first-year and $50,000 future years’ cost of the municipal ratepayer advocate, as well as pay for the five-year forensic audit. The law also added ratepayer representatives from each of the six member utility towns to the board, and CMEEC pays non-utility employee public board members $600 per meeting attended, with lesser amounts for telephone participation and committee meetings attended.

Bilda said if the board were asked to vote on the proposed new benchmark comparisons, he would vote against it. But Kowalski said the issue would not be put to a vote. He has been working with Rankin and CMEEC General Counsel Robin Kipnis on the issue. They suggested that rather than do a nationwide comparison, CMEEC stick to similar-sized public power entities in New England as the only relevant comparison.

Kowalski said obtaining the rate information from other utilities would be paid for by CMEEC through staff time. Subsequent analysis of the data would be paid for through his $70,000 budget.

Rankin defended the Eversource benchmark as the only relevant comparison in Connecticut, because without CMEEC, ratepayers would be served by Eversource. But Kowalski said a comparison to public power utilities that don’t have shareholder expenses and taxes might be more appropriate.

Rankin said later on Friday that comparing CMEEC wholesale net cost to other public power utilities would not be relevant or appropriate, as significant differences in market variables exist across the country.

“For example, New England energy cost is consistently 50 percent to 65 percent higher than the national average,” Rankin said in an email response to questions. “Despite this volatile and high-priced energy market, we have been able to deliver on our mission and save our member customers $159 million since 2013, as well as millions more for non-member customers.”

The benchmark issue will continue to be debated in the coming months, along with the rewriting of CMEEC’s bylaws and ethics code. Kowalski persuaded the board at a January ethics committee meeting to remove a provision that allowed CMEEC to cover expenses for spouses to attend CMEEC functions.

An issue arose in the bylaws over an indemnification clause that calls for CMEEC to pay legal costs of employees and board members in litigation cases. Kowalski suggested the initial language was too broad and suggested a series of changes.

Kowalski and board members agreed that the current state law on indemnification of boards and employees is complex and difficult to interpret. Board members asked him to approach the state legislature to try to change the 1997 law.

“It’s a good start,” Kowalski said of his first quarter on the job. “We’re making progress. I think the board has been receptive to the intent of the position and the goals of what we’re trying to implement here.”

Michael Boucher, a CMEEC and Groton Utilities gadfly who attends many CMEEC meetings, provided Kowalski a critique of his quarterly report and activities.

“Your level of expertise is amazing and much appreciated,” Boucher wrote to Kowalski. “As a ratepayer, I am way out of my league, so much so it becomes ever clearer reading your comments and concerns. Thank you very much for all that you have accomplished to date.”

But Boucher remained skeptical about CMEEC ethics policy changes, unless there is “a procedure to enforce the policy and hold those accountable who violate the policy,” he wrote.