In the News: Formica Calls for Clear Accounting from Eversource

March 3, 2021

Eversource returns to Connecticut regulators seeking higher rates, but this time it’s offering a choice

As featured in the Hartford Courant

By: Stephen Singer

Eversource Energy was back before Connecticut regulators Monday with a new plan to raise electricity rates, this time relying on a novel approach to soften the blow in a pandemic by offering a choice among two proposals.

The utility is offering two options to the Public Utilities Regulatory Authority: raising customer bills to bring in $346 million all at once, or with two increases on May 1 and Oct. 1 yielding $244 million by relying on power price forecasts and extending the period to recoup costs.

One potential obstacle is that PURA has urged utilities to not use forecasts to set costs because the pandemic has undermined the credibility of figuring out future trends.

In what Eversource calls option 1, customers who use 700 kilowatt hours of electricity a month would pay $12.55 more, an 8.2% increase, bringing a monthly bill to $166. Option 2 would cost consumers using the same amount of electricity $6.06 more a month, up 4% to $159 phased in on May 1 and Oct. 1.

“We hope PURA will see value in the second option,” said Doug Horton, the utility’s vice president of distribution rates. “It’s very difficult to experience the rate increase of option 1.”

The requested increase will likely add to longstanding frustration among businesses and consumers about Connecticut’s high price of electricity. Excluding Alaska and Hawaii, Connecticut was No. 1 in the U.S. in the cost of electricity, at about 18.7 cents a kilowatt hour in 2019, according to data released in November by the U.S. Department of Energy. The U.S. average was 10.5 cents.

Every six months PURA reviews requests by Eversource and United Illuminating for new rates to account for costs and revenue that do not meet estimated targets. Regulators in June OK’d a rate increase for Eversource and United Illuminating, but ordered a rollback after significant price spikes provoked outrage among consumers and elected officials. Dozens of customers protested at Eversource’s headquarters in Berlin.

Eversource said the timing is “especially challenging” because customers can’t easily pay higher electricity costs in an economic downturn caused by the coronavirus pandemic. The utility warned against postponing the increase again after its initial July 1 start was canceled by PURA.

It’s now set to take effect May 1 and a delay will result in “compounding the amount that will need to be collected from customers,” Eversource said.

Sen. Paul Formica, the top Republican on the legislature’s energy and technology committee, called on PURA to reject rate increase requests “unless and until there is a clear accounting for every additional dime that this utility has spent.”

The utilities have a “poor recent track record” of not investing ratepayers’ money to modernize their systems, maintain adequate staffing or develop effective communications, the East Lyme lawmaker said.

In the complicated business of setting rates, numerous charges are taken into account. One was related to separating revenue from sales, another was a set of transmission charges and a third covered costs approved by the Federal Energy Regulatory Commission to avoid congestion on the transmission system.

Several heat waves last summer and customers working from home also led to a spike in electricity use and its cost.

In addition, a contract required by state law directs Eversource and United Illuminating to buy power from the Millstone Power Station. Eversource is factoring in the most recent forecast of the cost of Millstone’s power that will help bring down customer bills by $102 million in the second option. Using last year as a proxy to set rates this year would result in an overstatement as compared with the most recent forecasts, Horton said.

However, that method challenges PURA to disregard its decision in December changing how it periodically adjusts electricity rates. Regulators said utilities should use as a guide to set rates recent expenses and revenue, not forecasts that fell short in the pandemic that caught everyone by surprise.

Regulators investigated what they called “unexpectedly high electric bills” and said they will rely on utilities’ recent revenue and expenses rather than forecasts that have been “dramatically off-base.”

Stephen Singer can be reached at [email protected]