Eversource Proposes Rate Increases to Recover 2020 Costs


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Eversource has offered state regulators three options for rate increases to its residential electric customers next summer: a $12 a month increase to the average customer, smaller increases over several years, or the possibility of borrowing about $200 million, if lawmakers approve, to spread out costs and rate increases over a number of years.

In filings on Monday, Eversource asked state utility regulators at PURA to increase rates this May so that the company can recover costs from 2020 – largely citing costs from a deal that requires utilities to buy power from the Millstone Nuclear Power Station at above-market rates, and nearly half-a-billion dollars in costs passed on from the regional grid operator for its transmission projects.

Three options: How much would each cost?

Eversource offered three methods to recover its costs from 2020. The first would cause residential customer bills starting May 1 to increase about $12.55 a month – 8.2 percent – for an “average” customer using 700 kilowatt-hours of electricity.

The other option, which Eversource told PURA it prefers, is meant to avoid the kind of steep bill increases that caused regulators to pull back its regular rate increase last July. It would increase the average bill by $1.06 a month starting May 1, then increase another $5.01 a month starting Oct. 1, when the “winter” rate adjustment takes effect.

The phased-in approach would lessen the impact to customer bills in 2021, but would spread those costs out over 2022 and 2023, potentially setting the stage for steeper rate hikes in those years.

Eversource also suggested a third option that it told PURA could allow it to avoid that October increase entirely: borrowing about $200 million through selling securities. That would spread the costs over a longer period, reducing the immediate impact to ratepayers, the company said.

Soon after Tropical Storm Isaias, Eversource made a similar proposal to recover its costs from the storm, which lawmakers rejected, the CT Mirror reported. Like that proposal, this securitization plan would require changes from the legislature.

Doug Horton, the company’s vice president of distribution rates, told CT Examiner that the securitization option is not a true proposal like the other two options, but an idea Eversource is pursuing.

The $200 million in under-recovered costs would not be enough to securitize alone, so the legislature would need to change statutes to allow the company to securitize other costs as well.

Horton said that, if the legislature expanded what costs Eversource could securitize, it would be an option to limit the impacts to customer bills because it could spread the payment of large costs out over a longer period of time.

State Sen. Norm Needleman, D-Essex, co-chair of the Energy and Technology Committee, said he and other lawmakers were looking at Eversource’s proposal, and looking to see if there are any options for lessening the rate impact other than securitization.

Allowing the company to securitize those costs would be a significant step, Needleman said. In Connecticut, it’s only been used to recover costs when a power plant has been turned off before the end of its full life cycle, he said. 

“I understand they are pitching this particular idea, but I need a lot more data before I actually have an opinion on it,” he said. “I will say, whatever allowable costs there are – both for the storm damage and for the unexpected uncollectible payments as a result of the pandemic – is a substantial amount of money, and it cannot be added back into the rate base in one shot, that’s for sure.”

Eversource seemed to agree that the costs couldn’t be added in one shot, telling PURA it is proposing the phased-in option, rather than the all-at-once option.

“We are concerned about the impact this level of increase will have on our customers in light of the unprecedented economic challenges that our customers continue to face in the midst of the pandemic,” Eversource officials wrote to PURA. “Moreover, the Company is concerned that this rate increase will take effect at the same time as customer’s usage naturally starts to increase with the oncoming summer weather.”

Why would Eversource be allowed to raise rates?

Eversource and United Illuminating – which has not yet submitted its proposal – have their rates adjusted twice a year so they can recover costs from federal or state policies, or actions of the regional grid operator, ISO-New England.

In filings with PURA, Eversource cited costs from a deal the state made with the Millstone nuclear plant and costs of transmission upgrades done by ISO-New England as key drivers of the costs it’s looking to recover in 2021.

After the companies file their plans, PURA reviews the costs and determines what the companies can actually pass on to ratepayers. PURA is scheduled to rule on the Eversource rates around April 28.

“There are legitimate costs, but what [Eversource has] submitted and what PURA agrees to as appropriate are not necessarily the same number,” Needleman said.

Aren’t these rate increases in July and December?

Not anymore.

PURA last December made changes to how those adjustments are calculated, which including having the rate increases take effect on May 1 and Oct. 1, rather than July 1 and Dec. 1. 

July and December are typically months where customers use more power, either to fend off the summer heat or winter chill. Making those changes in more temperate months is meant to lessen the shock of seeing a huge bill increase from month to month when a rate increase kicks in.

The combination of a rate increase, summer weather and people using more power than usual at home because of the pandemic are all factors Eversource pointed to when it came under fire for massive spikes in customer bills last July. 

Backlash against those bills caused state regulators at PURA to pull back those rate increases, which Eversource attributed to the costs of an agreement the state made to buy power from the Millstone Nuclear Power Station under pressure from the plant’s owner, Dominion Energy, which said it would shut the plant down without more revenue.

What costs are they trying to recover?

Under the state contract, Eversource buys power from Millstone at a set price, then sells it on the market, where prices are volatile. A mild winter last year was followed by an economic shutdown, all of which caused energy prices to decline, leaving Eversource with lower revenues than expected.

The net cost of the Millstone agreement to Eversource was $188.5 million in 2020. The power purchase agreement allows Eversource to recover those costs, and other costs from state mandates, through customer rates.

Those charges account for more than half of the proposed rate increase under the all-at-once plan, and about 42 percent of the proposed October increase under the phased-in plan. Under the phased-in plan, transmission costs are the largest driver of increased rates.

Those transmission costs – which Eversource said it under-recovered by $62.3 million – are mostly a combination of regional and in-state upgrades to the transmission system. From regional transmission projects on ISO-New England’s grid, about $420.8 million was passed to Eversource – about 80 percent of its total net transmission costs.

If added to bills all at once, those two categories alone would increase the average residential customer bill by about $12 a month, not including additional categories with decreases or smaller increases – which would come out to a total increase of about $12.55 a month. 

Eversource also proposed reducing the distribution portion of residential customer rates because it has completed the recovery of its costs from the 2011 and 2012 storms, including Hurricane Sandy.

This story had been updated to include comments by Doug Horton on securitization