Connecticut residents are sharing outrage over their electricity bills this month, loudly and often, all over social media and on talk radio, blaming those who could not pay their electricity bills during the Covid-19 pandemic.
Specifically, they are angry about the Public Benefits portion of their electricity bills, despite it being less than a quarter of the total. This is the issue people are complaining about loudest – they don’t feel that they should have to pay for others’ unpaid electricity bills.
Disregarding the other 75%-80% of the bill – and the state’s steadily increasing, unabated consumption of electricity – it is worth noting that the Public Benefits portion of the bills did not have to be quite so high. CTNewsJunkie already reported on this in April, as did CT Public.
In April, two of the three commissioners at the Public Utilities Regulatory Authority – Vice Chair John Betkoski III (D) and Michael Caron (R) – outvoted PURA Chair Marissa Gillett (D) to force all of Eversource’s customers to repay the utility an additional $800 million over only 10 months.
The $800 million is the result of an annual accounting called the Rate Adjustment Mechanism, or RAM, which the utilities use to request rate changes based on the cost of mandated public programs. The Public Benefit portion of peoples’ electricity bills is based on the RAM and includes both the cost of paying back Eversource for all the electric bills that went unpaid during the state’s Covid-era moratorium on shutoffs (23%), as well the cost of keeping the Millstone nuclear power plant running (77%).
The Millstone piece dates back to a 2017 deal led by Republicans in the House and Senate to preserve the nuclear power plant, which included a requirement to buy power from Millstone each year at a rate nearly five times of about 2.5 times the cost of electricity generated by natural gas-fired plants. Millstone provides about 40% of Connecticut’s electricity with zero greenhouse gas emissions and is the largest power plant in New England. In 2017, Dominion, the owner of the plant, was considering shutting it down early because it could not compete with the price of natural gas.
The moratorium on shutoffs was enacted because hundreds of thousands of people were out of work during the pandemic. Applications for things like unemployment benefits and other pandemic-related government support were online. Heat and water require electricity, as do refrigerators and freezers that keep food from spoiling. Air conditioning is needed during dangerous heat waves. The state-ordered economic shutdown was wrecking havoc on the economy as public health officials tried to stop the spread of Covid-19 – well before the first vaccine arrived – and the state’s utilities were ordered to keep the lights on with a promise of repayment later.
That moratorium lasted nearly four years, ending May 2, 2024. NBC Connecticut reported late Wednesday that Gov. Ned Lamont said waiting nearly four years to end the moratorium on electricity shutoffs may have been a mistake.
“You could make a case we should’ve done that sooner,” Lamont reportedly said.
An Eversource official was also reported saying this week that without the moratorium the utility could have continued its regular policy of setting up payment plans with customers who could not pay, directing them to other resources for help.
Of course, with all things pandemic-related, hindsight is 20/20 after it’s over.
Gillett, in her written dissent in April, argued that 10 months was far too short a time for ratepayers to cover such a large sum and suggested that it should have been amortized over two or three years to reduce the shock.
“This decision could have struck a fair balance by allowing the recovery of this substantial liability over a period of 2-3 years, rather than just 10 months. This would provide timely recovery for the utilities and reduce the rate shock for ratepayers,” Gillett wrote. “Instead, customers will bear the brunt of this extraordinary volatility and anomalous conditions over the course of an unreasonably short period of time given the magnitude of costs at stake.”
Gillett also said that Eversource argued that the use of a two- or three-year amortization to recover costs would violate its right to a “timely” recovery, and rather than making a persuasive argument or citing precedent, she said the company made a “thinly veiled threat that the combination of its cashflow issues (largely resulting from substantial losses from its unregulated wind energy business) and purported regulatory uncertainty would prevent it from supporting similar state policy initiatives in the future if the Company did not recover its money immediately.”
Gillett said the decision “does not strike the required reasonable balance, leaving ratepayers with a substantial rate increase that could have been smoothed out over a longer period.”
Using simple math, $800 million over 10 months would make ratepayers responsible for paying 10% – or $80 million – of the total each month. Over 36 months, the monthly payment drops to $22.22 million, or 2.78% of the total each month.
Commissioners Betkoski and Caron were appointed by Gov. Dannel P. Malloy and pre-date Gillett’s appointment as chair of the authority. Before her arrival, the agency had a reputation for rubber-stamping rate hike requests from the state’s two largest electric utilities, drawing the ire of the governor as well as legislators on both sides of the aisle and ratepayers across the state. Some current legislators, including Energy Committee Co-Chair Sen. Norm Needleman, D-Essex, say they ran for the General Assembly at least partly based on the need to do something about soaring electricity costs.
Since her arrival at PURA, Gillett has changed the culture at the agency to better protect ratepayers from never-ending rate hikes by refusing to approve those that pay for things like executive bonuses, luxury seats at sports arenas, legal fees associated with acquisitions, or any other costs unrelated to the mission of providing electricity to ratepayers. She has been described as a “disruptor” in what is now seen by many in the financial industry as the “investor-owned utility” sector, rather than the “Public Utility” sector.
With her help, the legislature approved legislation to require utilities to use performance-based ratemaking, rather than cost-based, drawing more animosity from the state’s two largest investor-owned utilities – Eversource and United Illuminating. The authority is still working toward implementing that change.
Utility officials have reportedly expressed concerns over what all this change looks like from Wall Street’s perspective. They need access to large sums of money to maintain their operations and to pay for improvements to keep up with the ever increasing demand for electricity. They argue that when PURA denies a rate hike request, the financial sector sees that as a reduction in the utility’s ability to access needed capital.
But in her dissenting opinion in April, Gillett reminded her colleagues that in addition to protecting the public interest and her duty to monitor the financial condition of the utilities, PURA is charged with monitoring only the financial condition of the regulated public service company – not its unregulated parent company.
“In carrying out this duty, it is incumbent on PURA, particularly in instances such as this one where our oversight role is more narrowly tailored, that we leverage all of the tools at our disposal to mitigate and smooth rate shock for all of our ratepayers,” she wrote. “Today’s decision fails to do so.”
In July, Betkoski announced plans to retire at the end of the year. Lamont has nominated David Arconti, Jr., as an interim commissioner to replace Betkoski. Arconti, a former House Democrat, is credited with ushering through the legislature the bill to switch ratemaking from cost-based to performance-based before he left office for the private sector. Most recently he served for 11 months as vice president of state government relations for United Illuminating. His arrival at PURA is timely for Gillett in that he would appear to be a more dependable second vote on the three-member board.
Gillett, Gov. Ned Lamont, and Democrats in the General Assembly this week have been on the receiving end of election-year criticism from Republicans who say the Democrats have mismanaged the state’s energy policies. Press releases have gone out this week blaming Democrats for the rate hike – despite the Democrat-appointed chair’s lone vote against it. One Republican legislator called for a special session.
Republican leadership has scheduled a news conference at 11:45 a.m. today (Thursday, Aug. 8) in Room 1C at the Legislative Office Building to discuss proposals related to electric rates in Connecticut. During the legislative session that ended in May, Republicans proposed major changes to the state’s energy policies with an eye toward only signing agreements that are affordable for consumers.
They suggested that Connecticut’s current policy direction was to embark on a game of chicken with the state’s utilities. One proposal among several was to limit the price at which the state can sign electricity purchasing agreements to no more than 200% of the current lowest available rate.
However, the current price of electricity generated by plants that use natural gas is so low that, presumably, a rate cap that low would preclude most of the new renewable energy sources that are just arriving, such as offshore wind. A cap at 200% of the lowest current price also would have precluded the state from signing the agreement to save Millstone from being shut down by Dominion.
Sen. Ryan Fazio, a Republican and ranking member on the Energy Committee, said at the time that they want renewables to succeed. However, he said he doesn’t believe giving them a free pass to continue charging above-market prices helps them in the long run because a competitive market will make them work faster toward affordability.
After publication early Thursday, some missing context was pointed out to us that should have been included in the original version of this analysis. The vote in April was the second time PURA had the opportunity to raise rates to start paying down the debt. The first vote came in May 2023. On background we were told that PURA voted 3-0 not to raise rates at that time, leaving ratepayers on the hook for the debt into 2024.
Eversource warned the state in writing and in testimony (pages 30 and 62) that failing to begin paying back the debt in 2023 was a mistake that would lead to a big rate shock for customers in 2024.
At the moment, the cost of electricity in the state is among the highest in the nation. The two charts below are from FindEnergy.com.
