Eversource Energy is asking Connecticut lawmakers to authorize $700 million in borrowing to blunt the impact of losses from Tropical Storm Isaias, the COVID-19 pandemic and the rollback of a recent rate increase.
The securitization pitch to Gov. Ned Lamont and select lawmakers comes a week before the General Assembly is expected to convene a special session on bipartisan legislation requiring regulators to devise a new system of performance-based rate-setting.
“No shot,” Rep. David Arconti, D-Danbury, co-chair of the legislature’s Energy and Technology Committee, said of the Eversource proposal. “For them to even offer that at this time is a joke.”
Arconti said Eversource broached the idea in material sent to him and his co-chair, Sen. Norm Needleman, D-Essex, on Sunday. Jim Judge, the Eversource chief executive, followed up in separate meetings Tuesday with Lamont and the lawmakers.
The theory behind securitization plans is simple: Rather than hit ratepayers with a big increase due to extraordinary losses by a utility, spread out the impact over time through borrowing that Eversource would call “rate reduction bonds.”
No shot. For them to even offer that at this time is a joke.”
But the details are complex, and lawmakers said Eversource’s proposal asks Connecticut’s part-time legislature to take on a task that belongs to PURA, the Public Utilities Regulatory Authority. Such a pitch to PURA would be subjected to a painstaking and public review over months.
“It’s a complicated issue,” Needleman said. “Normally, I would never agree to the idea of taking routine expenses and securitizing them — bonding them. We may be facing extraordinary losses here, but this is not the moment to look at that.”
Eversource did not raise the issue in its testimony last week during a hearing on the proposed energy legislation. “That’s another big issue,” Needleman said.
Arconti said the financial impact of COVID-related delinquencies — Connecticut was the among the states that suspended shut offs due to unpaid bills during the pandemic — is a significant industry-wide issue and one that PURA must address.
“That’s what PURA is for,” Arconti said. “Just to legislate this away, that would set a terrible precedent.”
The legislation references three open cases before PURA, including the regulators’ investigation into how Eversource and United Illuminating responded to the Isaias, the tropical storm that blacked out more than one million customers. Arconti said the legislative language, if accepted, effectively would end the inquiry.
Securitization is a tool already available to PURA, but Eversource said additional legislation was needed in this case. Mitch Gross, the spokesman for Eversource in Connecticut, said the company disagreed with the assessment that the legislation would be prescriptive on PURA, not permissive.
“At the legislative hearings we committed to working on ways to find solutions to the high bills customers are experiencing during COVID. Any such proposals would ultimately need to be filed with PURA for public review and approval,” Gross said. “We will, of course, have additional discussions as appropriate, but legislation is required for securitization.”
Judge, who is based in Boston, spent Tuesday in Connecticut. He and two senior executives met the governor and his chief of staff, Paul Mounds, at the Capitol, then drove to Essex, where the Eversource contingent met Needleman and talked to Arconti via a video call.
In a summary given to the lawmakers, Eversource emphasized the benefit to customers, saying “Securitization of these costs will reduce customer rate impacts by 65 percent over the next six years.”
It was accompanied by 11,200 words of suggested legislative language.
While securitization never was raised by Eversource during either of two hearings recently held by the Energy and Technology Committee, Gross said the proposal was consistent with the company’s promise to work with “legislators and regulators to develop creative solutions to reduce rate impacts on our customers.”
“One possible solution is to take the costs associated with recent, and future, rate increases and spread them over 20 years,” Gross said. “This approach would provide immediate rate relief to customers during this unprecedented time of COVID-19.”
Asked for the governor’s assessment of the proposal, an administration spokesman offered neither praise nor criticism.
“Gov. Lamont received Eversource’s proposal, which was also shared with the leadership of the General Assembly’s Energy and Technology Committee,” said Max Reiss, the governor’s communications director. “Gov. Lamont remains focused on supporting legislation that holds our utilities accountable and protecting ratepayers.”
Eversource has had a difficult summer, with customers complaining of higher bills and poorer service.
A July 1 rate adjustment coincided with a heat wave and higher residential electricity usage due to people working from home during the pandemic. Residential electric usage increased 36% from May to June and June 2020 was 26% higher than June 2019, and Eversource said that trend continued into July.
Then came Isaias on Aug. 4. The storm knocked out power to more than 1.1 million customers — with a peak of more than 632,000 outages at one time — and damaged nearly 21,700 locations, including 8,900 fallen trees and 500 miles of downed wires. Some customers were without power for nine days, but Eversource defended its response, given the damage.
The Energy and Technology Committee’s proposed energy bill, among other things, would set standards for compensating customers after blackouts.
Needleman said the measure is bipartisan, supported by the committee’s two Democratic co-chairs and its two ranking Republicans, Sen. Paul Formica of East Lyme and Rep. Charles Ferraro of West Haven. Needleman said he will resist any amendments that would be unacceptable to his GOP colleagues.
“I have great respect for the chairs for that,” Formica said of the bipartisan approach. “We’ve been working that way for while.”
But Senate Minority Leader Len Fasano, R-North Haven, said he was wary of taking up an energy bill that was inspired in large measure by outrage over a blackout.
“What gives me concern is this is a knee-jerk reaction to an issue. Whenever we do a knee-jerk reaction, we never get it right,” Fasano said. “I understand people want to have a vote on it, so they have a flag to wave in the election.”
Lamont is expected to issue a call for the special session by Friday. It will not include the issue of police accountability, despite Republican calls for a wholesale rewrite of the law passed in special session in July, as opposed to minor revisions sought by some Democrats.
School construction financing and absentee ballots also are expected to be on the agenda.
House Speaker Joe Aresimowicz, D-Berlin, said registrars of voters are looking for new rules on when ballots can be counted, given the high percentage of votes expected to be cast by absentee due to the COVID pandemic. The caucus leaders have agreed to consider changes.
“We’ve been contacted by registrars concerned about the amount of absentee ballots received under the current rules,” Aresimowicz said. “We’ve been trying to figure out as leaders what kind of relief we can bring to them.”