Eversource has taken to the courts to challenge penalties imposed by state regulators for what they say were failures in the company’s response to Tropical Storm Isaias last August. The legal challenge is the first that PURA Chair Marissa Gillett has seen since she took over the authority in 2018. It’s a step the company said it hasn’t taken since 2009.
In a 185-page complaint filed in New Britain Superior Court on Thursday, Eversource asked the court to review whether the Public Utility Regulatory Authority overstepped its authority and failed to provide due process before cutting the company’s guaranteed return on equity for its response to the storm.
In the filing, Eversource argues that the cut amounts to an “indefinite financial penalty” of about $31 million a year. The company also complained that the cut only appeared — without any warning to the company — in the regulator’s final decision.
Eversource also noted that PURA did not request discovery, evidence or briefing from any party involved in the investigation before deciding whether those penalties were “warranted or legally authorized,” or to determine a reasonable level of penalties. In its filing, the company wrote that it had understood that penalties would be decided in a separate, later proceeding.
Eversource also claimed, in a footnote in the filing, that the announcement of the penalty had caused its market capitalization to decline “precipitously” due to investor reactions. By hurting its ability to attract investment, the company warned it will need to ask its customers to pay more to finance its distribution system.
Eversource spokeswoman Tricia Modifica explained in a statement to CT Examiner, that Eversource is down by between 900 and 1000 basis points from the beginning of the year compared to its “peer utilities” across the U.S. That is about $8.00 a share, which when multiplied by the 340 million outstanding shares equates to a loss in market cap of about $2.7 billion, according to the company.
Eversource said regulatory uncertainty in Connecticut is behind the drop.
“The open-endedness of the ROE reduction in the Final Decision is among the key issues; however, even the stark difference between PURA’s draft and final decisions has exacerbated the sense of uncertainty and unpredictability of PURA,” Modifica told CT Examiner in an email.
Eversource noted in the filing that this was the first time PURA had used it’s authority under a 2012 law passed in response to two damaging 2011 storms – Hurricane Irene and an October Nor’easter. Given that new authority, Eversource asked the court to set aside any deference, and instead subject PURA’s application of the law to review by the court.
In its complaint, Eversource also claimed that state regulators had tried to “chill” the company’s right to appeal, when they wrote in the decision that the company’s resources would be better spent trying to “rectify the deficiencies found in this investigation.”
In a statement, the company said it had restored power to the more than one million customers who lost power safely and faster than in previous storms.
“Our appeal addresses critical legal aspects of PURA’s decision and the serious implications the decision will have on future storm response efforts,” she said.
In its own statement, PURA said it would prefer to avoid litigation on the issue, but that Eversource is entitled to appeal. PURA said it was confident the public litigation would continue to highlight the company’s deficiencies in responding to Isaias.
“The Authority would rather that Eversource prioritize its responsibilities as a public service company and use its resources on operating a reliable and resilient distribution system and improving its emergency response instead of expending resources on further litigation,” PURA said. “Regardless, the Authority will rigorously defend the final decision issued in the storm performance review docket.”
This story has been updated to include additional comments from Eversource