Power to the People is a column by Donald M. 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.
By DONALD M. KREIS, Power to the People
Let’s get the bad news out of the way first. Eversource is coming for your money – lots of it.
The state’s biggest electric utility – it serves 70 percent of the state, with almost 540,000 thousand customers – filed a distribution service rate case at the Public Utilities Commission (PUC) on June 11, five years after the last such filing. At the same time, Eversource issued a news release talking about a 17 percent rate increase.
Seventeen percent is a whopping big rate hike, but even that number is misleading. The rate case
covers only the distribution charge on your electric bill; you also pay transmission charges, a system
benefits charge (to pay for the NHSaves energy efficiency programs and assistance for low-income
electric customers), various miscellaneous charges, and an energy charge that pays for the actual
electrons flowing out of your sockets.
All of those lines on your bill are on a perpetually upward trajectory, as the result of inflation if nothing else. Yes, energy charges have moderated since the huge price spike of 2022 that was attributable in large part to disruptions in the global market for natural gas caused by the war in Ukraine. But if you remove that blip from the chart it’s still the case that energy charges steadily increase over time.
So, from a ratepayer perspective, we can and should focus on exactly what Eversource is trying to do here: increase its revenue from distribution charges by a colossally big 42 percent. That’s not a typo. Forty-two percent!
If you were inclined to make excuses for Eversource, you could point out that it’s been five years since the company filed its last rate case. Forty-two percent after five years works out to a little more than 8 percent a year – still outpacing inflation but not quite as outrageous.
Do not succumb to this temptation. The outcome of the last rate case included three so-called “step adjustments,” the most recent going into effect less than two years ago. Step adjustments are automatic rate increases, the purpose of which is to allow the utility to avoid the hassle and bother of filing lots of rate cases (which are expensive to pursue, with the bill going to ratepayers).
In other words, the most charitable assessment of the proposed increase in distribution revenues is that it reflects a need to hike distribution rates by 21 percent a year.
Now that we’ve gotten the bad news out of the way, let’s move on to . . . more bad news.
Some might call it petulant, others prudent, but Eversource declares in its rate case that it will not be investing in AMI meters for at least another five years. AMI stands for “advanced metering infrastructure.”
A decade ago, Eversource deployed so-called AMR meters throughout its service territory. AMR stands for “advanced meter reading;” AMR meters are basically old-fashioned meters that can be read remotely, so the cost and bother of human beings working as meter readers became unnecessary.
AMI meters do much more than that – they can record usage as it varies over time, in increments as low as 5 minutes. That’s the sort of thing that allows for time-varying rates and other innovative programs that save customers money.
Cynics might say that Eversource deliberately invested in AMR meters a decade ago to avoid deploying AMI meters as long as possible, given that meters typically have a useful life of as long as 25 years. At the Office of the Consumer Advocate, we folded on making such an argument in the 2019 rate case in exchange for Eversource agreeing to study the feasibility of AMI meters.
Why would a utility like Eversource resist the deployment of AMI meters? Because the kinds of services AMI meters facilitate are the sort of things that increase customer autonomy and undermine the utility’s hegemony. In fact, the current monopoly electric utilities enjoy on meters should probably go the way of the cassette tape, the typewriter, and the incandescent lightbulb.
But even as Eversource resists the deployment of state-of-the art electric meters in New Hampshire, there is one major sense in which the newly filed rate case is decidedly and helpfully forward-looking.
The heart of Eversource’s rate case is its proposal for PBR – performance-based ratemaking.
Under a PBR plan, the Public Utilities Commission would set new distribution service rates and they would vary, up or down, depending on how well Eversource does in achieving certain customer service benchmarks. The proposed metrics involve reliability (i.e., the frequency and duration of outages), customer satisfaction, interconnection of solar panels for net metering, performance of customer work requests (things like line extensions and service upgrades), and active demand response (i.e., programs that reward customers for curtailing consumption at peak times).
A poorly designed PBR mechanism is basically a scheme for transferring free money from customers to shareholders. What would a well-designed PBR mechanism accomplish?
Well, three Eversource witnesses – outgoing New Hampshire president Doug Foley, incoming New Hampshire president Robert Coates, and Vice President for Distribution Rates and Regulatory Requirements Doug Horton — said it quite well in the joint written testimony they filed with the rate case.
“A PBR plan is the optimal ratemaking mechanism to promote long-term cost control, [and] mitigate bill impacts for customers and avoid the need for multiple, sequential base distribution rate proceedings,” they testify. “PBR mechanisms in other jurisdictions have proven to be an innovative rate design that is effective in promoting rigorous cost control, while enabling capital investments and serving the interests of customers along the way.”
That’s not to say the proposed Eversource PBR plan is worthy of swift and uncritical approval. The proposal is a monster mash-up of scary sounding concepts like “revenue cap formula,” “K-bar mechanism,” “stretch factor,” “earnings sharing mechanism,” and “exogenous events provision.”
To say that the devil is in these details is, perhaps, to give the anti-hero from John Milton’s Paradise Lost too much credit as a financial analyst and maximizer of shareholder wealth. We and our team of (to invoke Milton again) angels have a lot of reading and analyzing to do.
Nevertheless, Eversource deserves a lot of credit for making a detailed and serious proposal for performance-based ratemaking. I think PBR is a lot like democracy – not terribly attractive until you consider all of the alternatives. We’ve tried the alternatives – including the step increases referenced above — and they all enrich shareholders without doing much for customers.
So, by statute, now we have a year to get this thing done. The Eversource rate case filing itself weighs in at 19,745 pages; just getting something that big into our electronic filing system practically melted down our computer resources.
Should you want to follow along nevertheless, the case will unfold on the PUC web site and the hearings will be open to the public. New Hampshire law requires Eversource’s rates to be “just and reasonable,” but ultimately it is up to the PUC to decide.