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September 9, 2020

Utilities: Mandating outage fixes within three days would drive up electric rates

Photo | Eversource An Eversource crew works to repair damage from Tropical Storm Isaias.

Connecticut’s largest electric utilities warned Tuesday that forcing them to pay refunds to customers after prolonged outages would dramatically drive up rates for all households.

Eversource and United Illuminating also warned the legislature’s Energy and Technology Committee that to restore most major outages within 72 hours would require significant staffing increases — another recipe for higher consumer costs.

“It’s going to have devastating cost impacts on customers going forward,” James J. Judge, chairman, president and CEO of Eversource Energy, testified via teleconference Tuesday. “The consequences are very daunting.”

And if utilities were forced to reverse most major outages within 72 hours — or face more financial penalties — it would have to add thousands of staffers, also at ratepayers’ expense.

Tuesday’s committee hearing was to review a bill drafted in response to Tropical Storm Isaias — the August 4 event that caused nearly 1 million power outages in Connecticut — and the major utilities’ handling of the recovery.

The measure freezes electric rates while directing the state’s Public Utility Regulatory Agency to craft new “performance-based regulations” and rates by September 2022.

PURA’s rates would reflect not only energy sold and grid investments made, but also service safety, reliability, customer satisfaction, and resiliency against storms and other grid damage.

Eversource, which delivers electricity to nearly 1.3 million customers in 149 cities and towns, endorsed the concept of a performance-based system, as did United Illuminating, which serves about 340,000 customers in the greater New Haven and Bridgeport areas.

But the companies balked at proposals that would mandate they reimburse customers for up to $500 in spoiled medicines, and as much as another $500 in lost food, in cases of most outages that exceed 72 hours.

They also would owe a base rebate of $125 per customer per day for each day in excess of 72 hours. This would be waived, though, for huge events involving more than 870,000 total outages. These fines would not apply retroactively to the recovery from the Aug. 4 storm.

Utilities also could face civil penalties equal to 10% of their annual revenue for failure to meet performance standards. The current limit is 2.5%.

“To the the best of our knowledge, these proposed penalties are the most onerous piece of draft legislation we have seen proposed anywhere in the U.S.,” Eversource officials wrote in a statement to the committee.

Tony Marone, senior vice president of United Illuminating, called the penalties in this bill “enormously punitive and unfair.”

“These secondary costs would be passed on to customers,” UI officials added in their written testimony. And if the legislature wants to mandate reimbursements for spoiled medicines and food related to prolonged outages, then utilities should be able to recoup these payments, UI officials wrote, by building that cost into their rates.

But legislators said the proposed bill would force utilities to eat those costs, and for a good reason.

“This bill will really make a difference in the way people receive their power,” said Sen. Julie Kushner, D-Danbury, who said many in her district were without power for the full nine days.

Kushner added that the prolonged outages — and the hefty food and medicine losses her constituents faced — was even more painful given that it came on the heels of a major rate increase granted Eversource earlier this year. (PURA has since suspended that increase.)

“People who could ill afford these losses were suffering greatly,” she said.

Rep. Anne Hughes, D-Easton, said the early August storm exposed “the epic failure of the power monopoly” to prepare and respond to an emergency, or to concede its mistakes afterward.

Eversource and United Illuminating officials have said there could have been better communications between the utilities and state and municipal officials during the crisis. But they also said the companies fulfilled the basic requirements of the state’s regulations governing storm response.

“I felt like it was kind of a callous disregard for the suffering and fallout of thousands of ratepayers,” Hughes said.

The proposed measure also would order PURA to analyze utilities’ past storm responses, establish minimum staffing levels for utility maintenance efforts, and report back to the legislature next January.

But Eversource officials said storm timing and damage is extremely hard to predict. More importantly, the response involves a delicate balancing act that varies from storm to storm.

Craig Hallstrom, president of regional electric operations in Connecticut for Eversource, said that to guarantee restoration of all outages from Tropical Storm Isaias, “we would be hiring upwards of 5,000 crews while that storm was still spinning around the Caribbean,” days before it arrived in Connecticut. 

And that would be just the beginning.

Mobilizing larger crews means securing more hotel and other lodging space, adding managers and dispatchers, expanding other coordination staff and training programs, Hallstrom said.

And while the extra crews would be temporary hires, the added support personnel would be permanent staff, who would still have to be paid even after the crisis was over.

“Those costs would continue on after the storm.” Hallstrom said. 

Eversource put more than 2,550 electric restoration crews and nearly 800 tree crews in the field in early August to address damage at nearly 21,700 locations.

But Judge said if the utility had to resolve future storm with similar damage — within 72 hours — it would spend what it must to meet that mandate. But the ratepayers may not like it.

We will do everything in our power, we will hire hundreds of employees to meet that standard … because the standard is clearly punitive,” he said. “This is something that will dramatically increase customers rates in my mind.”

“Nobody wants to put a utility out of business. That’s not our job,” said Sen. Norm Needleman, D-Essex, co-chair of the Energy and Technology Committee.

But state officials, who enacted a series of utility reforms in 2012 after a couple of storms the prior year caused prolonged outages, have grown frustrated.

I don’t think they [utilities] have changed that much in 10 years.” Needleman said.

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