Lawmakers look at utility overhaul
New bill would give PURA more power over rate setting, shift costs to shareholders: ‘Enough is enough’
Connecticut took a step Tuesday toward its second overhaul of electric utility accountability and regulation in three years with a bipartisan legislative committee vote to send to the Senate a complex and still-evolving bill.
Senate Bill 7 goes to the floor as an amalgam of at least three bills, two authored by Democrats and one by Republicans on an Energy and Technology Committee where party-line votes often give way to compromise and negotiation.
The handful of negative votes came from Republicans who praised the ambitions of the bill but declined to vote for a measure deemed “a work in progress” by the committee’s co-chair, Sen. Norm Needleman, D-essex.
“I am confident we will get to yes on this bill for everybody,” Needleman said.
The approval came in the committee’s last meeting before its Thursday deadline for acting on bills. The administration of Gov. Ned Lamont generally has endorsed many of the provisions, while reserving judgment until a final version is produced.
The session opened in January with the Democratic majority and Republican minority proposing competing bills aimed at addressing the high cost of electricity, the reliability of its generation, and the oversight by state regulators.
“The negotiations have been in good faith,” said Sen. Ryan Fazio, R-greenwich, who is in his first term as the ranking Senate Republican on the energy committee.
Senate Bill 7 is intended to give the Public Utilities Regulatory Authority more discretion over rate setting and to shift responsibility for some costs from ratepayers to utility shareholders, including compensation for executives and lobbying at the state Capitol.
At the start of the meeting Tuesday, Rep. Jonathan Steinberg, D-westport, the House co-chair, raised expectations for what negotiations will produce.
“I just want to comment for a moment, to impress upon all the committee members, just how consequential this bill is,” Steinberg said. “If you’re gonna go back to your constituents and say what did we accomplish the session, we have fulfilled, or we’re in the process of fulfilling, our obligation to hold the utilities accountable.”
Rep. Bill Buckbee, R-new Milford, the ranking House Republican, said legislators are driven by consumer frustration over electric costs, which are the highest in the continental U.S.
“I think that the people of the state have come to us and said, ‘Enough is enough,’” he said.
Legislators passed the “Take Back Our Grid Act” in a special session after Tropical Storm Isaias in 2020. Among other things, it directed PURA to establish performance-based regulation that is tied to specific goals and metrics, not simply the cost of providing service.
Senate Bill 7 is a recognition that the 2020 bill has not been as transformative as lawmakers hoped.
“What it is is a very significant regulatory enhancement bill. It is Take Back Our Grid, Part Two,” Needleman said. “We are hoping that at the end of this, we add some tools in the toolbox for our regulatory authority.”
The compromise bill offers a nod to Marissa P. Gillett, the PURA chair who dissented in the authority’s 2-1 vote to accept a $103 million settlement that Eversource negotiated with the Lamont administration in 2021 over its bungled response to Isaias.
She told lawmakers this year the settlement evinced a bad habit of relying on negotiated settlements rather than formal rate proceedings that would allow regulators a deeper dive into the utility’s inner workings and finances.
Needleman said the final version of the bill will set parameters for the use of settlements, but he offered little insight as to how.
“And that’s an ongoing conversation,” Needleman said. “I spoke to the attorney general, who’s speaking to his staff. I have not heard from the governor.”
Senate Bill 7 has elements of the Democrats’ Senate Bill 966 and the Republicans’ Senate Bill 123.
Katie Dykes typically speaks for the Lamont administration on energy issues as the commissioner of DEEP, the Department of Energy and Environmental Protection. She offered measured support for SB 966 in written testimony.
“DEEP supports many of the principles reflected in this bill, including ensuring that utility and utility executives’ compensation is based on performance and macroeconomic conditions; greater transparency on the cause of outages and the incidence of accidents; and clarity regarding which business expenses should be allocated to utility shareholders versus ratepayers,” she said.
Both SB 966 and SB 123 address “rate decoupling,” a mechanism that addresses the utilities’ disincentives to encourage energy efficiency and rooftop solar by ensuring utilities’ compensation is not strictly based on the amount of electricity they sell. Rate decoupling currently is mandated by state law.
In testimony, Dykes warned against giving PURA too much discretion in how to enforce rate decoupling.
“Divorcing a utility’s compensation from its volume of sales through revenue decoupling is considered one of the foundational aspects of a performance-based rate-making regulatory paradigm that seeks to encourage distributed energy resources,” Dykes said. “As such, giving PURA wide discretion to reverse revenue decoupling, without clear objectives or implementation guardrails, could have the potential to undermine demand reduction policies and programs.”
Connecticut has limited authority over the electric rates charged by Eversource and United Illuminating, regulating only the cost of distributing electricity to homes and businesses, not the source of its supply. More than half of consumers’ bills are the cost of generating electricity, which is set by a competitive market.
Elements absent from the compromise bill include language that would have reestablished PURA as independent of DEEP.