State regulators on Wednesday issued a final decision highly critical of how utility Eversource responded to Tropical Storm Isaias. The decision will reduce Eversource’s allowable profits from state ratepayers and could also pave the way for monetary fines announced as early as next week.
Isaias hit Connecticut last August and cut power to hundreds of thousands of customers with some restorations taking more than a week.
The three-member Public Utilities Regulatory Authority issued a final decision detailing how the state’s two major electric utilities, Eversource and United Illuminating, responded to the storm.
It concluded Eversource failed.
“Eversource, especially, in major storms continually refuses to make the efforts to truly communicate with stakeholders about what the hell is going on,” said PURA Commissioner Michael Caron. “When regulators are getting virtually all of their information from the evening newscasts, it illustrates a culture of arrogance and a dismissive attitude.”
In a detailed report, regulators cited communication breakdowns with customers and towns and a failure by Eversource to prepare for and clean up after the storm.
United Illuminating was also cited for some aspects of its storm response, but regulators concluded that while UI’s storm response “was underwhelming in certain areas … [it] was still markedly better than that of Eversource.”
Here Are Some Changes The Decision Makes
One of the biggest changes to come from PURA’s decision is a reduction in how much profit Eversource and United Illuminating can now claim from Connecticut customers.
It’s something regulators call a “return on equity,” which is basically the amount of allowable profits, over and above their costs, a utility can take from state ratepayers.
Eversource will see a downward adjustment of 0.9%, and United Illuminating will see a downward adjustment of 0.15%. Both would have to be implemented in a future rate case.
While PURA declined to speculate on what that adjustment would equate to in actual dollars, Andrew Minikowski, a staff attorney with the state Office of Consumer Counsel, said the allowable profit reduction could result in a “significant” financial hit for Eversource.
“By decreasing the return on equity, it essentially makes the company less profitable while that reduction is in effect,” Minikowski said. “On the one hand [it’s] a penalty for past poor performance, but also an incentive going forward to not perform as poorly again.”
PURA Chair Marissa Gillett said that Wednesday’s decision also could eventually reduce how much in storm-related costs Eversource can get back. Eversource said it incurred about $230 million in costs because of Isaias. The utility would have to formally apply to PURA to recoup that money from customers, which has not yet happened.
“Today’s findings will be taken into account and could result in some or all of costs being disallowed in a future proceeding,” Gillett said.
As a result of Wednesday’s report, both utilities will also undergo a management audit at no cost to customers and will be ordered to improve their emergency response plans.
Gillett said improving those plans means both United Illuminating and Eversource must “increase the number of line workers, damage assessors, liaisons and other emergency response and restoration resources for responding to emergency events.”
In a written statement, Eversource said it stands by its response to the storm.
“We know our thousands of employees showed skill and dedication in restoring power to customers as quickly as possible,” said company spokesperson Tricia Taskey Modifica in an email.
“There are many areas for improvement that we are already addressing,” she said. “We continue to work in good faith with our communities, customers and regulators to improve our performance.”
Wednesday’s decision was also critical, albeit significantly less so, of United Illuminating and its response to Isaias.
“The decision finds UI failed to meet acceptable performance standards in coordinating certain emergency response actions in its service territory, most notably, with respect to the city of Bridgeport,” said Gillett, noting UI failed to meet certain public safety obligations in responding to high-priority calls.
In an emailed statement, UI spokesperson Ed Crowder said “we are disappointed that the ruling does not fully reflect the facts we presented during the proceeding, and that it imposes a penalty despite PURA’s finding that UI ‘generally met the standards of acceptable performance and conducted itself prudently and efficiently.’”
“As we consider our next steps, we will continue to use what we learned during Isaias, and from PURA’s investigation, to serve our valued customers, and to improve our readiness for and response to future extreme weather events,” Crowder said.
Gillett said the return on equity reduction is not viewed as a penalty but rather as an “incentive” for the companies to do better.
Still, she noted regulators have reopened a proceeding that will spell out specific areas of perceived storm failures, which could carry monetary fines that would not be recoverable from customers.
“Civil penalties are absolutely under consideration,” Gillett said. “That notice of violation will be coming out sometime next week.”
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