By KATHARINE WEBSTER, InDepthNH.org
The state’s Public Utilities Commission (PUC) affirmed a large increase in Eversource electric bills for residential customers but threw out automatic yearly increases of $2 a month going forward, in a mixed decision handed down on New Year’s Eve.
Last July, the three-person commission granted Eversource a one-time increase in its fixed, monthly “poles and wires” charge from under $14 a month to $19.81. It also granted an automatic increase of $2 a month every year to the fixed rate, regardless of how much or how little electricity each customer uses.
The AARP, the state Department of Energy and the state Office of the Consumer Advocate, which represents consumer interests before the PUC, asked the commission to reconsider several aspects of its July decision.
Meanwhile, Gov. Kelly Ayotte declined to reappoint then-PUC Chairman Daniel Goldner, who stepped down from holdover status on Sept. 15.
Last week’s order, responding to those requests for reconsideration, was handed down by the remaining two commissioners, who agreed that the automatic yearly increases in the fixed rate were neither fair nor supported by any evidence, but said the one-time increase to $19.81 was fair and in the public interest.
Christina FitzPatrick, state director of the AARP, said Tuesday that the increase to $19.81 per month “has a dramatic impact on customers who are on a fixed income and may be living alone,” as well as on residential customers generally, many of whom are also struggling with higher costs for groceries, housing and other essentials.
She also remains concerned that residential customers are bearing a greater share of the overall rate increase than business customers. But she lauded the decision to do away with the automatic increases in the fixed residential rate.
“We were really gratified to see that, and that they were going to take a harder look going forward at performance-based ratemaking,” she said.
In July, under Goldner, the commission had approved EverSource’s proposal for “performance-based ratemaking,” an alternative to traditional rate setting.
In traditional, “cost of service” ratemaking, utilities spend money and then seek to recover their reasonable and “prudent” costs plus a rate of return on investment. In performance-based ratemaking, regulators set goals and incentivize utilities to reach them by providing financial rewards when they do and assessing penalties when they don’t.
For example, performance-based ratemaking can be used to promote greater grid reliability and to meet clean energy goals, said Sam Evans-Brown, executive director of Clean Energy New Hampshire.
Clean Energy New Hampshire strongly supports performance-based ratemaking – as long as the incentives are properly designed and apply equally to all electric utilities – because under the traditional cost recovery system, rates will just keep going up, Evans-Brown said.
That’s because the approved return on investment only applies to capital spending on hardware, not to investments in software, operations, maintenance and services, such as increasing the rate at which utilities connect private solar and battery arrays to the grid, he said.
“The cost of service model just incentivizes building poles and wires,” he said. “So for instance, if there’s a solution that can produce the same service with less capital, the utilities are disincentivized to pursue it because they don’t get a return on investment. … We want performance-based ratemaking with clearly established goals that will bring prices down.”
But that was not what Eversource was proposing, Evans-Brown and others argued.
Instead, the utility’s plan, which was approved in July and then put on hold during the appeal, would have allowed the state’s largest electric utility to spend $250 million on capital improvements each year with little or no oversight – and with no penalty for “imprudent” spending, the state Department of Energy (DOE) said.
“The Commission’s annual spending threshold of $250 million improperly substitutes a spending cap for prudency review and lacks an appropriate claw-back mechanism,” the DOE’s experts said.
The Office of the Consumer Advocate argued, in addition, that “the Company’s capital planning history shows aggressive and sometimes poorly managed investments.”
In the Dec. 31 order, Interim PUC Chairman Mark Dell’Orfano agreed with the objectors, saying that the previously approved order did not “establish a valid alternative regulation plan that conforms to the requirements of (state law) and, accordingly, cannot result in just and reasonable rates.”
Dell’Orfano said that Eversource’s proposal wasn’t even performance-based ratemaking, since it “does not include any meaningful incentive-based rate components.” He called it “merely a flawed variant of a traditional rate plan.”
However, PUC Commissioner Pradip Chattopadhyay said it conformed to state law on alternative utility regulation and had enough reliability incentives to contain costs.
The two commissioners, unable to agree, decided to consider this year whether the commission could and should transition to performance-based ratemaking.
“The Commission will launch a 2026 investigative docket to examine its incentive-based, alternative regulatory authority, including issues related to the design and implementation of multi-year rate plans and alternative frameworks for electric distribution utilities that focus on customer affordability and reasonable utility investment to establish just and reasonable rates, using incentives and standards other than those based on cost of service, rate base, and rate of return,” the order said.
The outcome could depend on whom Gov. Ayotte appoints to replace Goldner.
Eversource spokesman William Hinkle responded Tuesday afternoon, by email, that “The PUC’s recent order is a fair one that provides necessary clarity on a handful of outstanding items from their original order last year and importantly remains focused on customer impacts.
“We are appreciative of the thorough review that has been applied through this docket, and we will continue to work with all stakeholders to keep costs as low as possible for customers while maintaining safe, reliable service,” the statement said.
The Dec. 31 order also kept Eversource’s rate of return on investment at 9.5 percent, the rate supported by the Department of Energy. The utility had asked for a 10.3 percent return, while the consumer advocate sought an 8.13 percent return.
The order also removed a $2.5 million cap on Eversource’s “New Start” program, which forgives past due bills for customers in financial straits if they successfully pay a fixed monthly amount for 12 months in a row. In the previous order, the commission said any spending over that amount would have to be absorbed by Eversource’s investors. Instead, the new order says Eversource must spend at least $2.5 million on the program.