Connecticut regulators agreed to allow Eversource to recover $861 million in deferred storms costs on Wednesday, cutting more than $500 million from the request filed by the company last year.
The Public Utilities Regulatory Authority voted unanimously in favor of a final decision settling how much money was owed to the company for its response to a series of “catastrophic” storms between 2018 and 2023. Those storms, which each cost the company more than $4 million, are treated differently from smaller storms that are included in normal rates.
The decision also paves the way for Eversource to begin the process of recovering those costs through the use of long-term low-interest bonds. Eversource has estimated that the process, known as securitization, will save customers $6 to $7 a month compared to a shorter pay-back period.
The vast majority of the cuts — nearly $400 million — were the result of PURA’s rejection of Eversource’s request to collect interest on its previously incurred expenses until after regulators were able to review and approve those appropriateness of those expenditures. (The company is allowed to begin accruing interest on those costs moving forward, starting with the release of Wednesday’s decision).
PURA also found fault with other expenses Eversource sought to recover, cutting millions of dollars for things such combining several smaller storms into one event, excessive food and lodging costs and chartering a private plane to fly out a crew of workers to respond to one storm in 2023.
Still, regulators approved nearly 90% of the actual costs that Eversource sought to recover from those storms, excluding interest payments. After accounting for about $191 million in payments that are already included within existing utility rates and a smaller amount of mutual aid from other utility companies, the total amount that will be collected through securitization is nearly $668 million, according to PURA.
In his comments during Wednesday’s meeting, PURA Chair Thomas Wiehl said the decision is one that “may, ultimately, please no one,” but was based a painstaking review of thousands of pages of records submitted by Eversource and other stakeholders.
“We must evaluate whether Eversource’s decisions were reasonable in light of the circumstances at the time,” Wiehl said. “In other words, it isn’t as simple as just looking back with perfect hindsight and deciding that we’d rather not pay for performance that could have been better.”
In a statement responding to the decision, Eversource spokeswoman Jamie Ratliff said it represented an “important step” toward the recovery of past expenses while also providing the company with direction to shape its response to future storms.
“Storm response is a process of continual improvement, and we look forward to applying what we’ve learned from this outcome to improve our process,” Ratliff said. “With affordability a main focal point here in Connecticut and across the nation, the authorization to securitize these catastrophic storm costs will allow us to remove those hundreds of millions of dollars from our recently filed rate review, resulting in a lower bill impact for customers.”
The case was separate from Eversource’s request earlier this month to increase its base distribution rates by around 11% starting in 2027. Regulators are still reviewing that request.
However, company officials had asked that PURA complete its review of the storm costs in time for the securitization process to be completed and baked into customers’ bills around the same that new rates take effect next year. Without securitization, those officials argued, next year’s rate hikes would have to be much steeper.
Critics of Eversource’s request praised PURA’s decision to reject Eversource’s request for retrospective interests payments, which they said would have set a bad precedent for future cases.
“This is an important victory for Connecticut ratepayers. PURA has rejected Eversource’s attempt to make Connecticut families pay millions of dollars in interest payments on unvetted and unapproved costs,” Attorney General William Tong said in a statement. “We will continue to scrutinize every dollar Eversource requests from ratepayers, including in its upcoming rate case, to ensure ratepayers do not have to pay a penny more than they absolutely have to.”
The Office of Consumer Counsel, which represents utility customers in cases before PURA, had advocated for more than $171 million in additional cuts from Eversource’s request based on what it determined to be improper expenditures.
“While today’s decision does not include our full list of disallowances and could have held Eversource to account in areas where OCC does not believe the company met its burden of proof, the decision appropriately denied Eversource retrospective carrying charges and adopted several of the adjustments identified through OCC’s prudency review related to storm eligibility, vendor oversight and management, excessive food, lodging, and transit spending, and duplicative cost recovery,” Consumer Counsel Claire Coleman said in a statement. “Overall, the ratepayer savings reflected in the final decision would not have been possible without OCC’s extensive investigation, legal analysis, and advocacy.”
During their public comments on Wednesday, several members of PURA’s board also lamented about the time that had passed since many of the storms in question occurred.
Wiehl, the chairman, noted that he and four other members of the board who were appointed by Gov. Ned Lamont last year inherited the case from the previous PURA regime under former chair Marissa Gillett. Gillett resigned in October, following a series of bitter disputes with Eversource and the state’s other major utility company, United Illuminating.
Everett Smith, one of the new members on the board, also called for reforms that will allow for a more streamlined recovery of catastrophic storm costs, which he said would would be fairer for both the utilities and their customers.
“Storm costs recovery needs a fresh approach to ensure that this situation does not happen again,” Smith said.
