2 days Ago
On August 31, the Hartford Courant printed an op-ed entitled “ Lawmakers: Setting the record straight on CT electric bills .” This piece included information that originated from the dissent of the chairperson of the Public Utilities Regulatory Authority , or PURA, the state agency charged with setting rates for utilities in the state. The dissent was a response to a motion brought to PURA by various parties seeking to have PURA declare “changed conditions” to reduce high customer bills in July by a few dollars by moving certain costs to next year and adding millions of dollars to the tab for customers in interest charges.
A critical fact lost in this concept of “changed conditions” is that hot weather caused customers to use more electricity in July to cool inside spaces and customer bills reflected that higher usage. July’s hot weather is gone, and electric bills are naturally reducing. Pushing dollars forward to next year to mollify frustration over high summer bills this year only perpetuates the problems for customers, because summer is coming again in 2025.
In the same edition, the Courant ran a story reading “ Summer heat smashed records. A CT city study seeks out neighborhoods suffering the most ,” telling readers that, “the summer’s soaring temperatures in Connecticut shattered records going back 75 years..
..” In this context, the decision of the majority of PURA’s commissioners to resist pushing dollars off to next year was not only wise – it was the responsible decision for customers.
Had the alternative been chosen, there’s no gamble that July’s hot summer weather will come around again next year when customers would still be paying off today’s costs, making the “relief” they would have been sold anything but. Pancaking costs for customers is not good policy, and merely pushes off obligations for a higher cost to another year. There are three key points that the authors of the op-ed got wrong in relying on that dissenting opinion.
First, bills were high in July because usage was high, not because of any rate change. Most of your electric bill – and all utility bills – is dependent on how much electricity you use, and in July, as is the case every July (but in particular this year as it was one of the hottest Julys on record), most of us used quite a bit more electricity. Our review of actual customer bills issued in July shows that the average residential customer increased their electric usage by 45% from June to July, or from 655 kilowatt hours (kWh) to 949 kWh.
This higher usage caused approximately 89% of the bill impact that the average residential customer experienced in July compared to June. Translated into dollars, this means that the typical residential customer saw a bill increase of approximately $92 in July, as compared to the customer’s June bill, with only $10 (or 11%) of that impact resulting from PURA’s change in rates. Under these circumstances, “amortizing” certain costs over 22 months would not eliminate or even materially reduce the overall increase customers experienced.
In this example, the $92 bill impact was an increase of about 48% for the customer in July over June (i.e., increasing from $191 to $283).
Even with a 22-month “amortization” of the costs of power purchase agreements, the customer’s bill would have increased by 44% in July due to usage (i.e., from $191 to $275), while almost $9 million would be added to customer bills over that 22-month amortization period for carrying costs.
The lawmakers’ letter states that amortization would have reduced rates by 8 cents per kWh, which, if accurate, would represent a large reduction in rates, and therefore bill savings for customers. However, the fact is that amortization would not have resulted in an 8-cent reduction, or anything close to it. Amortization would have resulted in less than a penny reduction in the cost per kWh, and would have added millions of dollars on customer bills in interest payments.
Second, Eversource did not propose rates in 2023 that would have “significantly worsened” the situation for customers this year, had PURA taken Eversource’s “recommendation” on rates as stated in the piece. PURA is the decision-maker on setting rates from start to finish, determining the rules for setting those rates and deciding the rates that go into effect. Under PURA’s rules, Eversource was required to submit rates in accordance with the method established by PURA, which Eversource did.
From the outset, Eversource informed PURA that implementing the rate of -1.578 cents/kWh on May 1, 2023, as derived from PURA’s rate formula, would cause an under-recovery of $441 million – which in utility ratemaking parlance is simply a piling up of costs that customers will need to pay in the future, resulting in large rate increases and added interest costs. Eversource explained that an increase in the rate of three cents/kWh would be required to mitigate the exposure – a recommendation that PURA rejected in favor of setting the rate at 0.
00 cents/kWh on July 1, 2023 (which, at the time, was an increase to then current rates, but not sufficient to recover expectations of then current costs); and then later setting the rate at 0.289 cents/kWh on September 1, 2023, rather than the rate of 1.325 cents/kWh that Eversource stated would be needed on September 1, 2023, to mitigate customer exposure to a significant under-recovery.
Thus, the proposition that Eversource proposed a rate that would create a larger under-collection in 2023 is flatly untrue. Third, the op-ed repeats the dissenting opinion’s complaint that Eversource failed to make strong enough recommendations to PURA in 2023 and this is the reason that PURA set rates too low to recover 2023 costs, causing a pancaking of costs for recovery in 2024. In fact, throughout the 2023 Rate Adjustment Mechanism (RAM) docket, Eversource repeatedly advised PURA of the growing costs – and made several recommendations regarding treatment for those costs – that PURA consistently rejected.
Ultimately, PURA reached its own conclusions on the rate levels approved for the 2023 docket, and in doing so, gambled that ongoing power purchase agreement costs would not continue to increase in the marketplace through the end of the year, thereby setting rates lower than necessary to recover the costs that Eversource was reporting to PURA. The agency’s actions to set a lower rate than needed to recover 2023 costs significantly contributed to the $265 million under-recovery that carried over to 2024. We know that understanding the reason for the bill increase does not help customers bear the higher costs, particularly those who are experiencing financial difficulty.
We want to help customers by providing the most stable and affordable rates possible, along with programs and assistance that help those who cannot pay. The authors of the op-ed went as far as to accuse Eversource of purposefully contributing to “obfuscation and subterfuge,” with claims that this somehow helps the company. While we strongly and staunchly disagree with that accusation and have been calling for constructive dialogue on these issues for months, we do agree with the notion that our customers deserve and benefit from bill transparency and factual communication on these complex matters.
Collaborative efforts between the Lamont administration, legislators, PURA and the electric companies to find the right balance between educating customers on the impacts of their usage, providing pathways for customer assistance and achieving rate stability, while maintaining the financial integrity of the electric utilities is the best way to serve the interests of all electric customers. We strongly support such an approach. Doug Horton is Eversource vice president of Distribution Rates & Regulatory Requirements.
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