PUC Staff to Eversource: Time for a Haircut

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D. Maurice Kreis, NH Consumer Advocate

Power to the People is a column by D. Maurice Kreis, New Hampshire’s Consumer Advocate. Kreis and his staff of four represent the interests of residential utility customers before the NH Public Utilities Commission and elsewhere. It is co-published by Manchester Ink Link and InDepthNH.org and distributed as a public service to news outlets across the state.

D. MAURICE KREIS, Power to the People

Looking for the mother lode of unreported news?  Check out the written testimony filed by the staff of the Public Utilities Commission last month in the pending Eversource electric rate case.

A rate case is the PUC’s chance to look at every aspect of the costs a utility recovers from customers.  Eversource wants to increase its annual revenues in New Hampshire by almost $70 million.  That amounts to a rate hike of nearly 20 percent.

In the December 21, 2019 edition of this column, I wrote about what our witnesses at the Office of the Consumer Advocate have to say about all of this on behalf of Eversource’s residential customers.

Among other things, we want the PUC to disallow for rate recovery the utility’s recent $42 million investment in new meters.  We accuse Eversource of deliberately failing to deploy state-of-the-art meters so as to thwart grid evolution the utility considers a threat to its hegemony.

Frankly, though, to some degree it’s a man-bites-dog story.  We fight for ratepayers, so of course you’d expect us to go after the state’s biggest electric utility with a degree of ferocity comparable to that of the Normandy Beach landing in 1944.

On the other hand, the PUC and its staff are by statute supposed to be neutral arbiters between the interests of utility shareholders (who love rate increases) and utility customers (who want lower bills).  So, when the staff of the PUC proposes to give that proposed rate increase a haircut, by lopping off 65 percent of it – well, that seems like news to me.

That’s especially true when the PUC staff’s written testimony is so full of quotable quotes.

For example, the assistant director of the PUC’s electric division, Richard Chagnon, testifies that “Eversource seems to have put much effort into devising a rate proposal which allows them to operate at little risk.”  That’s because Eversource doesn’t simply want a drastic rate increase; it’s also asking the PUC to approve a pile of future automatic rate increases that won’t be subject to rate-case scrutiny for prudence and usefulness.

When will they ever learn?

Chagnon’s testimony reminds me of what a then-relatively-obscure jurist named David Souter had to say about Eversource in 1988.  The company was already in Seabrook-induced bankruptcy when it had the audacity to go before the New Hampshire Supreme Court to argue its investors were entitled to a 19 percent annual return on investment.

Souter, then an associate justice on the court, accused Eversource of seeking “plenary indemnification” for its shareholders, or “nothing less than a shifting of the entire risk from the investors to the ratepayers.”

In its latest quest for plenary indemnification, Eversource is seeking to impose on its customers the consequences of its lackluster process for planning and overseeing its major construction projects.  At least that’s the way I read the testimony of another PUC staff witness, former banker Jay Dudley.

“The cost estimates contained in the capital budgets were consistently inaccurate, especially for large complex projects,” Dudley complained, and Eversource’s “capital planning and budgeting process itself appears to be ad hoc with project managers devoting significant time compensating for inaccurate estimates and poor designs.

“Eversource management appears to provide only cursory oversight and monitoring as projects progress to completion,” Dudley added.

We want to throw $42 million in meters out of rate base (about which the PUC staff seems sympathetic, by the way).  By comparison, Dudley’s testimony seeks to eliminate an even bigger amount – a whopping $63 million – from rate base (i.e., investments that the company recovers from customers with interest).

Dudley’s testimony zeroes in on a sample of four Eversource capital projects from 2017 and 2018 to explain why ratepayers should not have to pay for such poorly planned and executed investments.  Three involve substations in Webster, Bow, and Berlin.  The fourth concerns the replacement of 223 defectively manufactured reclosers (basically, big circuit breakers located on utility poles).

Collectively, these four projects were originally budgeted by Eversource at $12.4 million and ended up costing $34.3 million.  Those are cost overruns worthy of the Pentagon!

The Webster substation project is particularly egregious because of its proximity to the never-built Northern Pass transmission project and the fact that the original $7 million budget ultimately soared to more than $19 million.

Unfortunately, the public version of Dudley’s analysis of this project consists of seven pages of totally blacked out prose.  Same with his discussion of the Bow project; it’s totally censored.

Check it out yourself.  These pages look like something J. Edgar Hoover would have provided in response to a request by Pete Seeger for his FBI file.

I’ve seen the unredacted version of Dudley’s analysis, which makes for delicious reading.  But I am not allowed to share it with you; by statute, the Office of the Consumer Advocate must follow the PUC’s lead when it comes to redactions.  And the PUC’s rules allow utilities simply to designate information as confidential while cases are awaiting final hearing.

In a better world, some media organization would already have filed a request for full access to Dudley’s testimony under the state’s Right-to-Know Law, RSA 91-A.  In my respectful opinion, the processes and standards currently employed by the PUC allow utilities to exploit the RSA 91-A disclosure exception for confidential business information in a manner the Legislature did not intend.

But, alas, when it comes to reporting about energy the state’s working journalists find it more convenient to focus on he-said-she-said coverage of dueling partisan press releases about the never-ending fight over net metering.  I’m all for coverage of net metering but, gosh, there’s real money at stake in this rate case and if the past is any indication there won’t be another one involving Eversource for a decade.

Apologies to the PUC staff for offering only a few highlights of its detailed and robust analysis, from a total of eight witnesses, of the Eversource rate increase request.  Apologies to the other parties to the rate case – Clean Energy New Hampshire, the AARP, Wal-Mart (a major commercial customer of Eversource), The Way Home (which advocates for low-income customers), and the Department of Environmental Services – that also submitted testimony.

Collectively, this body of work from six parties (including the OCA) and the PUC staff is a devastating critique of Eversource’s latest quest for plenary indemnification.  Ultimately, the three PUC commissioners will decide.  Hearings are scheduled for mid-April.

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