NU creates a $30 million fund for customers hit hardest by storm
Northeast Utilities today announced $30 million in rebates for the 230,000 customers left in the dark for at least a week after the Oct. 29 snowstorm, triple the original offer made three weeks ago to cope with the public-relations disaster.
At the suggestion of Gov. Dannel P. Malloy, the rebate program will be overseen by Kenneth R. Feinberg, the lawyer who administered the victim compensation funds established after the 9-11 attacks and the BP oil spill in the Gulf of Mexico.
Eligible customers who file claims by Jan. 31 will receive a minimum of $100 and a maximum of $200, depending on how many claims are filed.
The initial effort would have provided an average of just $43, if reserved for the hardest-hit customers of NU’s embattled subsidiary, Connecticut Light & Power. It was criticized by customers and received tepidly by Malloy, who had pointedly dismissed the $10 million as a first step.
“As we heard from our customers and had discussions with Gov. Malloy and his staff, it became clear that the original sum we proposed, $10 million, was insufficient,” said Charles W. Shivery, NU’s chairman and chief executive officer. “While this storm was unprecedented, we set very high expectations for the performance of Connecticut Light and Power. Clearly, we did not meet a number of those expectations.”
Malloy praised the utility for upping its initial offer.
“I see this as a meaningful attempt on their part to give some financial relief to the residential customers who were most inconvenienced as a result of an extended power outage. And I think they’re to be commended for committing up to $5 million to the not-for-profit groups that always step up in Connecticut’s time of need,” Malloy said.
“Having said that, I realize there will be a lot of people who were out of power for a significant amount of time who can’t apply for this money, and who will be unhappy as a result,” he said. “It’s not a perfect solution, but let’s remember that this was an unprecedented storm that caused an unprecedented amount of damage.
“I also want to be clear,” Malloy said, “that nothing that’s being announced today is going to change whatever measures may be required based on what we learn as a result of the reviews and investigations that are being conducted into CL&P’s response to the storm. We still need to find out what went wrong, why it went wrong and what can be done to fix it. And every possible ‘fix’ remains on the table.”
The utility’s second effort was designed with the help of Feinberg, who has been dubbed the nation’s “compensation czar” for his previous roles. For BP, Feinberg took the job of independent administrator of a $20 billion fund. This effort will be more modest.
“This is very ministerial, very straight forward,” Feinberg said by telephone from his office in Washington, D.C. “The power user has to affirmatively apply. This is not automatic. If a claimant does not opt into the program, the claimant will not receive the credit.”
Those seeking a rebate need not give up other legal claims for damages.
“This is, in a sense, a form of reparations, an attempt by the utility to demonstrate its regret at what happened by providing a credit to eligible power users who were inconvenienced,” Feinberg said.
Marie T. van Luling, NU’s vice president of communications, called the rebates “a gesture,” not the end of NU’s efforts to rebuild its relationship with its CL&P customers.
“This was not about getting some major PR lift,” she said.
Van Luliing had no precise answer for how NU settled on $30 million, calling the process “more art than science,” though most recipients will receive a payment equal to about one or two monthly electric bills.
The average monthly electric bill is $93, with NU responsible for about 25 percent of the cost, she said. Since deregulation, NU and CL&P are responsible only for the cost of delivering electricity, not generating power.
“Feinberg gave us the guidance it needed to be simple, it needed to be efficient, and it needed to be fair,” she said.
Feinberg’s administration of NU’s new fund presumably gives it a degree of independence and distance from NU’s management. He will work without a fee.
The fund is intended for those who still were without power at noon on Saturday, Nov. 5, a week after heavy snow began to fall on trees still holding a full canopy of leaves.
Shivery said Feinberg’s involvement was suggested by Malloy, whom Feinberg says called him directly. Malloy told him he was familiar with his work handling compensation not only after 9-11 and for BP, but for the victims of the Virginia Tech shootings and the collapse of a stage at the Indiana State Fair.
“He had done his homework,” Feinberg said.
In addition to the payments to customers, about $5 million of the fund will be reserved for three charities: Operation Fuel, the Connecticut Food Bank and Foodshare.
But the $30 million will not limit NU’s potential exposure to other damage claims or action by regulators, who are examining whether CL&P had adequately prepared for two major storms in the space of less than three months.
It took CL&P nearly 13 days to restore power to all of the 831,000 customers — 70 percent of its entire 1.2 million customer base — after the October storm. And it took nine days before power had been restored to all of the 671,000 residences and businesses that lost power after Tropical Storm Irene hit on Aug. 27 and 28.
The debacle already has cost the job of Jeffrey Butler, who had been the president of CL&P.
And the inquiries into the utilities preparation and response continue, playing out against the merger of NU with NStar, the utility that powers Greater Boston. Critics have questioned whether NU undercut spending on storm preparations to boost earnings in advance of the merger.
Malloy directed Witt Associates, a Washington, D.C.-based risk management firm led by James Witt, former Federal Emergency Management Agency director, to conduct an independent inquiry into the storm response.
The governor also has created a state panel to review the matter and endorsed an investigation launched by Attorney General George C. Jepsen.
Applications for the rebates can be made beginning December 7 by calling 888-566-9257 or checking online at cl-p.com. All applications must be received by 5 p.m. January 31, 2012. Credits will begin to be applied to the customer’s February billing statement.
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