Frustrations over Connecticut’s high cost of electricity and concerns over its ability to adequately regulate Eversource, the state’s largest distributor of electricity, are fueling a bipartisan effort to revise the complex rules of utility regulation for the second time in three years.
On Tuesday, the legislature’s Energy and Technology Committee will hold a hearing on two measures intended to give regulators more discretion over rate setting and to shift responsibility for some costs from ratepayers to shareholders, including compensation for executives and lobbying at the state Capitol.
Giving tacit and at times open encouragement to this effort is Marissa P. Gillett, the Maryland regulatory lawyer hired four years ago by Gov. Ned Lamont to chair the Public Utilities Regulatory Authority and bring an outsider’s perspective to an agency long dominated by former legislators.
She has been a disrupter in the quiet and close world of utility regulation, a willing provider of information and advice to lawmakers and a likely source of aggravation at Eversource, the Boston-based company that distributes electricity to most of Connecticut’s businesses and homes.
“Frankly, I would be upset if they didn’t view my take as adversarial,” Gillett said in an interview.
Eversource officials sat stone-faced as Gillett recently told lawmakers that a $103 million settlement the company negotiated with the Lamont administration in 2021, which was hailed by the governor who hired her, was instead another missed opportunity to examine Connecticut’s largest utility.
In Gillett’s view, the settlement resolving Eversource’s liability for mishandling its response to Tropical Storm Isaias evinced a bad habit of relying on negotiated settlements rather than formal rate proceedings that would allow the Public Utilities Regulatory Authority a deeper dive into the utility’s inner workings and finances.
Aside from resolving questions of liability, the deal also “satisfies the rate review requirements” of state law, short-circuiting a pending rate case.
“The fact that I’m going into my fourth year or fifth year here before you and have not seen a rate case from our largest utility in the state is a travesty. I honestly believe that,” Gillett told lawmakers.
She was a speaker at the first of two informational hearings called by the Energy Committee in a legislature animated by a recent spike in electric rates in Connecticut, a state that regulates only the cost of distributing electricity to homes and businesses, not the source of its supply.
And the unregulated supply costs, typically responsible for no more than half a monthly electric bill, now comprise nearly 70%, inflated by the price of natural gas, the fuel that generates the biggest share of electricity in the New England wholesale market. Neither PURA nor Eversource control supply costs.
“The hard part for the legislature is, basically, bills go up, people scream at us, and there’s really not a heck of a lot we can do about it,” said House Speaker Matt Ritter, D-Hartford.
Gillett believes greater oversight, over time, might produce efficiencies, transparency and lower costs.
Legislators thought they required such oversight in 2020, passing the “Take Back Our Grid Act” in a special session after Tropical Storm Isaias. Among other things, it directed PURA to establish performance-based regulation, or PBR in utility parlance, that is tied to specific goals and metrics, not simply the cost of providing service.
Douglas P. Horton, the Eversource vice president who oversees distribution rates and regulatory requirements, said the utility is supportive of PBR, which still is under development by PURA in consultation with states that are making the same shift, as well as the utilities.
“Obviously, there’s always room for us to find opportunities to be better and to do better, but we really do as a company and as a leadership team try to keep the bar very high for us, and for our employees, and for our leadership,” Horton said. “So it’s not something that we’re shying away from by any stretch.”
Gillett’s recent remarks to lawmakers made clear two things: She believes Eversource, which distributes electricity to all but 20 of Connecticut’s 169 cities and towns, needs far greater oversight than it has received during the administration that employs her; that view is not shared by her two colleagues at PURA.
By 2-1, they outvoted her to accept the settlement negotiated with Eversource on behalf of the Lamont administration by the state Department of Energy and Environmental Protection (DEEP) and signed off by the attorney general and the office of consumer counsel.
Gillett objected then in a four-page dissent to “an over-reliance on settlement agreements,” arguing “we have sacrificed valuable opportunities to conduct bottom-up reviews of our utilities’ operational and financial records.”
In comments to lawmakers this month, Gillett reiterated an opinion she acknowledged might rankle some in the energy world, not saying who precisely it would trouble most — officials in industry, government or both.
“I have been hugely vocal, probably to the displeasure of many, about my displeasure with the use of settlements and the fact that that keeps the utilities out from before us,” Gillett said.
That seemingly put her at cross-purposes with Katie Dykes, the commissioner of DEEP. Dykes, who preceded Gillett as chair of PURA and played a role in recruiting her to Connecticut as her successor, played down any conflict.
“I think she’s doing a terrific job,” Dykes said. “We’re really fortunate to have her here in Connecticut.”
Legislators and others who speak to Lamont on energy issues say the governor has a high opinion of both Dykes and Gillett and understands the inevitable tensions and disagreements between the administration’s top energy adviser and the state’s top regulator.
In an unusual organizational scheme, PURA is part of DEEP, a change made during the administration of Gov. Dannel P. Malloy.
“As far as the dynamic between Katie and Marissa, I think it reflects the natural dynamic we created 12 years ago, when we put PURA underneath DEEP,” said Rep. Jonathan Steinberg, D-Westport, co-chair of the Energy Committee. “The great news for Connecticut is they’re both very bright, capable professionals who are really a blessing for the state right now. The fact that they disagree on things, I think, is not surprising. They’re both strong individuals.”
Rep. Holly Cheeseman, R-East Lyme, a member of the Energy Committee, said lawmakers applauded Gillett’s independent streak and generally are supportive of anything she does to control the cost of electricity in Connecticut, which is the highest in the continental U.S.
“And if it ruffles some feathers, so be it,” Cheeseman said.
But lawmakers of both parties, as well as consumer advocates, also said that PURA should not be part of DEEP. Democrats and Republicans have filed bills to force their separation.
“I think subordinating PURA to DEEP has subordinated the interest of ratepayers,” said Sen. Ryan Fazio, R-Greenwich, the ranking Senate Republican on the Energy Committee.
Eversource had no comment on its relationship with Gillett, but the company disputed her assessment that its finances and performance are less than transparent as a consequence of not undergoing the examination of a rate case since 2014.
“We’re fully regulated on the distribution side,” said Horton, the Eversource regulatory officer. “Every aspect of our business is subject to scrutiny by our regulators, both in real time and after the fact.”
In the case of the Storm Isaias settlement, the utility agreed to pay $75 million in credits to ratepayers for lost service and $10 million in customer assistance, drop an appeal of a $28.4 million fine related to the storm and agree to freeze its regulated base distribution rates until Jan. 1, 2024.
It also addressed lingering grievances about Connecticut’s loss of influence since the merger of Northeast Utilities, the locally controlled owner of Connecticut Light & Power, with NSTAR, a utility that served central and eastern Massachusetts. The renamed Eversource Energy is based in Boston, with subsidiaries that provide electricity, natural gas and water in Connecticut, Massachusetts and New Hampshire.
As part of the settlement, Eversource agreed to improve the hiring and training of line workers in Connecticut and create a new position, president of CL&P, who would be based in Connecticut with the sole focus of overseeing electric operations in the state. Horton said some of those provisions generally were outside the realm of a rate case.
Lawmakers say the settlement terms were not the issue.
“The dollars and cents of it were pretty good,” said Sen. Norm Needleman, D-Essex, co-chair of the Energy Committee.
But Needleman and his House co-chair, Steinberg, as well as Republicans on their committee, said Gillett’s complaints about repeated settlements hampering regulators are persuasive. With a new rate case not possible until 2024, a decade will have passed since the last one.
“They can’t do their job unless they can get their nose underneath the tent,” Steinberg said. “And it just strikes me it is one more [way] in which the utilities have skillfully utilized our regulatory framework for their benefit and not necessarily for that of consumers.”
Needleman and Steinberg added, however, their goal is to set parameters on the use of settlements and not eliminate them, a position more comfortable for Claire E. Coleman, the state consumer counsel, and John Erlingheuser, who advocates for consumers as a lobbyist for AARP.
“I’m gonna split the baby a little bit, because I think settlements are a good tool,” said Coleman, who took office after the Storm Isaias settlement. But she said she understands Gillett’s desire to create “pro-consumer legal precedent” with rate-case decisions that withstand a utility challenge in court.
Erlingheuser, who calls Gillett the best regulator he’s seen in his 20 years of advocacy on utility issues, had a similar opinion.
“Settlements are an important tool that exists, but I tend to agree with the chairman that we go through [rate] proceedings for a reason,” he said. “I’m a firm believer when you have a proceeding for a regulatory body, everything is out in the open.”
A bill that would have set some limits on the use of settlements was approved in committee last year but never came to a floor vote. Fazio, the ranking Senate Republican, said the current political environment is more conducive to passage this year.
“I think it’s highly likely that you would see a reform passing into law this year, given that both the Democratic leadership on the committee and Republican leadership on the committee agree with the chairwoman broadly on that topic,” Fazio said.
Anger towards Eversource and PURA
Legislative displeasure over electric rates and utility regulation is evident in dozens of bills proposed in the early weeks of the 2023 legislative session, some perhaps intended as more of a pointed message than a serious proposal. One would subject electric and natural gas rates to a vote of the General Assembly.
Another would limit PURA commissioners to two four-year terms, which could remove Gillett’s two long-serving colleagues, Michael Caron and John W. Betkoski III. And there are multiple versions of bills that would set parameters on the use of the settlements decried by Gillett.
Needleman, the lead sponsor of the term-limits bill, said his proposal is no reflection on either Betkoski or Caron but a desire to ensure that regulators and the regulated do not become overly close.
“They’re both really solid guys. I just think that they had been here for a long time, one a lot longer than the other, and I have no opinion beyond that,” Needleman said.
A co-sponsor, Sen. Saud Anwar, D-South Windsor, who is not an Energy Committee member, was less sanguine.
“As a community member and as an average citizen of the state of Connecticut, at times I feel that PURA is a rubber stamp for whatever Eversource or the utility companies ask for,” Anwar said. “It almost feels to me that there was nobody fighting on my behalf.”
Betkoski has been a commissioner for 26 years, Caron for 10. If Lamont wants a change at PURA, he could remove Caron at any time and Betkoski on March 1, when his latest term expires. Caron noted the governor already has the discretion to make changes. Betkoski declined comment.
Caron’s second four-term actually ended nearly two years ago, in June 2021. He can continue to serve indefinitely without a formal reappointment, unless Lamont decides to name a successor.
Both are former House members; Betkoski a Democrat and Caron a Republican. PURA’s potential as a patronage destination was highlighted by an awkward interlude in 2019, when a provision inserted in the budget authorized the governor to name two additional commissioners, a deal the administration cut with Senate Democrats.
One intended beneficiary was Nick Balletto, whom Lamont had removed as Democratic state chair. But Balletto was placed on the Liquor Control Commission, and the additional PURA spots went unfilled.
House Minority Leader Vincent J. Candelora, R-North Branford, filed a bill this year challenging the governor to either fill the spots, let lawmakers do it, or admit they are not necessary and repeal the expansion provision.
“PURA is a significant institution. Appointments just should not go vacant, and I understand the history behind the expansion,” Candelora said. “But you either appoint individuals or come up with legislation to reduce the membership. But leaving those positions vacant doesn’t to me set the right tone for the public.”
The governor’s office offered no insight about Lamont’s view of Needleman’s term-limit proposal, whether Caron and Betkoski would continue to serve, if the two never-filled positions are necessary, or whether he will ever fill them.
“We have not yet reviewed Senator Needleman’s bill but are looking forward to doing our due diligence,” said Adam Joseph, the governor’s communications director. “Currently, the administration is focused on filling out the cabinet and the confirmation process. We anticipate turning to other executive nominations and appointments in the near future.”
Lamont is on record as being opposed to splitting PURA from DEEP, a policy issue on which Gillett is circumspect.
“Ultimately, we defer to the administration on whether they think PURA should be part of DEEP. Certainly there have been questions about how other states are structured. And I’ve provided information about how that occurs,” Gillett said.
Gillett noted that PURA is required by state law to follow certain directives from DEEP, regardless of whether the authority is outside the agency or within. But she said there is room under the law for her to speak freely to lawmakers, even if she’s occasionally at odds with the administration.
“I feel like I have free rein to advise on how the distribution companies should be regulated and how they should do their business,” Gillett said. “When it expands to things that are more under DEEP’s jurisdiction — whether it’s energy supply, how we interact with the regional grid operators — I defer those questions to Commissioner Dykes.”