Pay more for electricity and/or complain less?
A while ago, I wrote a letter to the editors of the Hartford Courant. My opinion was that Eversource was being unfairly pilloried for raising its rates in July, and then for failing to prevent power outages from storm Isaias in August – since it would have cost more money for them to be better prepared for the hurricane. I have since done some more thinking and research, and I realize that the situation is more complicated than I initially thought. Spoiler alert: I will end this piece with some questions still unresolved.
Eversource is a “regulated monopoly.” At some point even the most dedicated free market enthusiasts realized that A) it would be inefficient and dangerous to have multiple sets of electric transmission wires snaking around, and B) if not regulated, a single electricity provider might indeed charge very high rates. So, like most electricity providers, Eversource falls under the scrutiny of a government agency, in our case the Public Utilities Regulatory Authority (PURA). Eversource is allowed to be (mostly) a monopoly, but its rates are limited by PURA.
So, when a hurricane strikes and trees fall on electric wires and transformers, who is responsible? Who should be responsible? What I’m reading and hearing in the last several weeks pretty much says Eversource should have foreseen how bad Tropical Storm Isaias would be, and should have gotten more crews out there faster to repair the lines quicker. But of course, the devil is in the details. Could Eversource, relying of course on various weather predictions, actually have foreseen which trees and utility poles would collapse, and have crews ready and waiting two blocks away to fix them? Well, no, that’s not realistic.
They could, however, have put more crews on standby before the storm hit, and could have imported manpower and trucks and equipment from some state that was very unlikely to have any natural disasters of their own in mid-August. That, of course would have cost extra money. Who would pay? Keep in mind that ratepayers are already incensed about July’s rate increases . . .
Craig Hallstrom of Eversource pointed out in the CT Mirror that ultimately, ratepayers bear the cost of hiring crews to stand by, as well as keeping them on the payroll for as long as it takes to restore power. Hallstrom said Eversource could err on the side of overstaffing, saving itself from criticism. “No one would ever be able to accuse me of not being ready – but that’s not financially responsible to anybody,” he said.
Several have written that Eversource needs to “strengthen the grid” – meaning trim trees, replace old rotten poles, bury lines underground. But they don’t suggest how to pay for it. The math is that, ultimately, rate payers pay for it, so PURA would have to allow Eversource to raise their rates.
It has been pointed out often that Connecticut has the highest electricity rates in the country, except for Hawaii and Alaska. This is mainly because most of our power plants run on natural gas, which we don’t have locally. We have to pipe it in, which is expensive, especially in winter when everybody else wants it. We don’t have all that much sunshine, or wind, or hydropower. Coal would be cheaper, but we really don’t want to burn any more coal, do we?
It has been argued that Eversource isn’t using its vast resources responsibly. Surely the $20 million annual salary paid to CEO Jim Judge is excessive? Well, maybe it is, but Eversource operates a couple of decimal points beyond that. According to its recent annual report, Eversource has gross revenues of $8.5 billion, of which they invest $2.9 billion in “property, plant, and equipment” – the stuff we wish they’d improve. So trimming the CEO’s salary wouldn’t make much of a difference in the resources available for tree trimming, standby crews, and the like.
Although there are plenty of question yet to be answered, it seems to me that the math is clear: in order to do a better job preparing for and coping with adverse events like storms, Eversource will need to charge us more for electricity. Oh well. (Full disclosure: I don’t own shares in Eversource.)
Sandy Becker lives in Middletown.
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