Connecticut electric bills, already among the nation’s highest, will increase yet again as a new set of utility regulators comes to grips with a problem its predecessors pushed aside for years: How to pay the state’s biggest electric utility for the more than $1 billion it has spent on storm damage.
The bill, which Eversource has been trying to collect for years, hit $1.5 billion at the end of November and is growing by $8 million a month with carrying costs like interest on the hundreds of millions of dollars the company has borrowed to repair damage since the tab started running in 2018.
Eversource is trying to jumpstart the storm damage discussion with an extensive filing to a newly reconstituted Public Utility Regulatory Authority. Gov. Ned Lamont expanded the authority to five commissioners from three last fall and replaced Chairman Marissa Gillett, whose acrimonious relationship with the utility industry some colleagues have said contributed to the run up in storm costs.
Crews from Canada arrived in Connecticut in 2020 to help local electric crews. After widespread complaints about Eversource outages following a tropical storm, 33 trucks and 80 electrical workers who arrived from Canada met in a parking lot in East Hampton with an Eversource official to discuss their assignments after more than 600,000 Connecticut customers lost power.
The $1.5 billion in storm costs isn’t the only expense likely to push up electric bills in the coming year. After eight years without asking for a rate increase, Eversource, the state’s largest distributor of electricity with 1.5 million customers, has notified PURA that it intends to apply for rate hearing and likely increase within months.
PURA last granted Eversource a rate increase after a hearing in 2018. Movements in rates that customers have seen since, both up and down, occurred within the rate structure set then and were approved by PURA in response to changing market conditions and state policies, like those subsidizing green energy programs.
What analysts predict will be an almost certain request for a rate increase could create a shock for customers, depending on how the new PURA combines it with payment for storm damage.
“The Company currently expects to file a request for a distribution rate change by mid-year
2026,” Eversource said in its PURA filing earlier this month. “This application for a rate amendment will be a significant filing, as the Company is currently operating substantially below its authorized rate of return and PURA has previously directed numerous important policy initiatives to be included in this docket.
“Layering the review and/or recovery of storm costs on top of that docket will not be beneficial to customers or to other stakeholders participating in the docket.”
In its filings with regulators, Eversource lays out in detail, over hundreds of pages of memos, affidavits and charts, what it has spent and hopes to collect for storm damage. Similar documentation of its request for a rate increase will follow at the time of the application, a company official said.
As quasi-judicial regulators, PURA officials have said they cannot discuss matters before the authority
What is known now about rates is that Eversource last appeared before PURA on a rate case in 2018 and, as is the case with other state utilities, the company says it has been operating below its authorized return on equity, which is a ceiling on profitability set by PURA.
A crew from Vision Utilities pulls the remnants of a damaged utility pole out of the ground on Old Field Road in Southbury on Christmas Eve. The company was contracted by Eversource to aid the state’s power restoration efforts. Lineman on the team, who come from across the U.S. won’t be spending Christmas with their families this year. (File)
Like the other utilities, Eversource blames financial underperformance in Connecticut on what it calls a succession of irregular and illegal regulatory decisions by PURA under the leadership of Gillett, who resigned in October during a nasty, years-long fight with the utility industry.
The tension has eased between the utilities and regulators since Gillett’s resignation and a ruling last month in a utility suit that affirmed all of the industry allegations against PURA. One of the parties to the suit, Avangrid subsidiary United Illuminating, complained last year that its return on equity had fallen so low that investors could make more money buying a certificate of deposit.
Gillett supporters claimed throughout the dispute that she was protecting ratepayers from greedy, monopolistic, investor-owned utilities.
Eversource waited eight years until 2026 to apply for a rate increase because it didn’t trust Gillett, according to people familiar with company thinking. Based on recent rate cases involving subsidiaries and other utilities, the company feared an application to Gillett for an increase would result in a punishing but unjustified decision that would cause more financial damage, scare away investors and increase borrowing costs.
Gillett’s response, according to people who spoke with her, was to deny Eversource the ability to bill customers for its ever increasing storm expenses — unless and until it agreed to appear before PURA for a rate hearing, a comprehensive, year-long, multi-million dollar financial examination. The people who spoke with Gillett said she planned, among other things, to search Eversource financial reports for evidence that it billed customers for unauthorized expenses.
In its latest filing with PURA, Eversource is pressing the regulators to move quickly on storm damage repayment to both cut off the multi-million interest costs and mitigate a double shock to customer bills.
Among other things, the company is urging PURA to mitigate the impact of storm damage on customers by stretching the payments over decades rather than years, using a new law that allows the regulators to securitize the costs. Securitization would convert the debt to bonds and sell it to inventors. Eversource estimates that securitization would increase average customer bills by $1 to $2 a month over 20 years or so, depending on the bond issue.
Without securitization, storm costs — to which utilities are entitled by law to recover through customer rates — would have to be paid off in six years. The shorter repayment term could mean an increase in the average electric bill of as much as $10, according to observers in and out of the utility industry.
Eversource also said repeatedly in its filing that it is willing to negotiate a settlement of the storm damage total, meaning it is willing to take a loss by discounting the amount it is owed in order to get the debt off its books quickly. There has been some talk of a settlement between the utility and government officials outside of PURA but no definitive result, officials on both sides of the question said.
“In a settlement context, the Company is ready, willing and able to work with the interested parties to craft a solution that will best serve the interests of customers, both in terms of supporting safe and expeditious restoration of power after catastrophic weather events and in terms of cost efficiency and mitigated bill impacts,” Eversource said it its filing.
At issue in the discussions are 43 storms between 2018 and November, in addition to the costs of staging storm responses, which can mean paying line crews from other states to arrive on scene for storms that may or may not materialize.
Eversource customers already are paying for storm damage through a fee on customer bills that goes into a storm reserve fund, a kind of rainy day fund against catastrophic damage. But the $60.5 million annual customer contribution is unable to keep pace even with interest costs.
The company complains in its filing that PURA’s refusal to entertain any discussion of the mounting storm costs in recent years is responsible for what will be a bigger than necessary bump in customer bills.
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“PURA’s deliberate and manipulated delay over the past two years, coupled with a refusal to increase the contribution from customers to replenish the Storm Reserve in the meantime, is costing customers dearly.,” the company said. “It is imperative that PURA take action now … so that the Company can work with stakeholders to try to put together a strategy for alleviating rate shock for customers and mitigating both the level of costs to be borne by customers and the ultimate bill impacts.”
Eversource is asking that PURA immediately begin the work that will result in securitization of about $1.28 billion in storm costs that accrued between 2018 and 2023, because nearly all the work required to verify those costs by PURA and the state Office of Consumer Counsel is completed.
The company asks in its filing for a final verification of the expenses, which it already has had reviewed by the independent consultant PricewaterhouseCoopers, by the end of March. At that point, the company said it can begin converting the debt to bonds.