by Marc E. Fitch, Connecticut Inside Investigator
The following article was originally published on Inside Investigator
After five years of negotiations, the Public Utilities Regulatory Authority (PURA) today signed off on a plan for Eversource to install smart meters for its 1.3 million customers, a massive project that will take roughly five years and cost at least $855 million, but it is unknown if PURAs plan is acceptable for the company and, thus far, Eversource officials are keeping quiet as they review it.
Smart meters are necessary for the state to achieve its energy goals, according to PURA documents, and the meters allow ratepayers to monitor their energy usage down to the individual appliance, optimize their energy usage, and automatically alert the utility when there is an outage. They are seen as a way for both ratepayers and utility companies to save money, but the project to replace every meter in their territory is a big one.
Eversource is already underway installing smart meters in Massachusetts, but disagreements with PURA in Connecticut have stalled the start of the massive undertaking. Essentially, Eversource wanted to be assured they would be able to recover their costs from ratepayers through establishing a special “rate recovery mechanism,” meaning the costs of installing the smart meters would be added to the public benefits charge.
How that rate recovery mechanism would work is where PURA and Eversource had some disagreements and showed an overall lack of trust between Connecticut’s largest utility company and the small regulatory agency who oversees it. PURA and Eversource have butt heads in the recent past over PURA’s decision to put off Eversource’s requested rate increase in 2023 until 2024, which ultimately caused a massive spike in the public benefits charge to ratepayers, angering the public and setting off political finger-pointing at the Capitol.
In this case, PURA wanted to implement caps to Eversource’s costs and do a “prudence review” after completion of the project – meaning Eversource would incur all the costs of installation and then PURA would review the costs to determine what they could recover. The prospect left Eversource and its investors assuming a lot of risk in a regulatory environment they felt was hurting investment opportunities.
“The Company stated that holding a prudency review at the end of AMI deployment would be unacceptable because Eversource believes that the Authority is implementing prudency standards that are ‘shifting and moving and unclear,’ PURA’s proposed final decision said. “Nonetheless, the Company acknowledges and concedes that conducting one prudence review at the end of deployment, and not annually, is reasonable and happens in other jurisdictions where Eversource operates. But in Connecticut, the Company does not ‘trust’ PURA to follow its statutory obligation to review the Companies actions for prudence.”
“Eversource is in a position where it now cannot fund this program on the optimal deployment schedule without solid regulatory footing for investment recovery due to negative investor sentiment,” wrote Eversource Assistant General Counsel Vincent P. Pace in their July 24 filing. “Given the current regulatory climate in Connecticut, the Company cannot attract capital funding for this program without a cost tracking mechanism established to operate outside of base distribution rates, so that timely and adequate cost recovery is demonstrated to investors and credit-rating agencies.”
Eversource sought annual prudence reviews and rate adjustments through a special mechanism for the cost of installing the meters, essentially spreading the costs for ratepayers over time through the public benefits charge. According to Eversource’s documents, the peek charge would be roughly $7.31 per month for the average residential ratepayer.
According to Stephen Capozzi of PURA, the decision reached by the authority is based largely on what Eversource was seeking, “with the addition of certain protections to ensure ratepayers are protected from paying more than is warranted,” and that the rate recovery mechanism – called the AMI Tariff – is “extraordinary” and based on “special circumstances.”
“The cost recovery mechanism… permits Eversource to recover incremental AMI operations and maintenance expenses and capital costs contemporaneously with the company incurring those costs,” Capozzi said. “Establishing cost recovery in this way provides regulatory certainty to the company to undertake the deployment but it also reduces the risk the company faces when it does business under traditional ratemaking principles. So, to balance this shifting of risk, the Authority has established certain limitations on cost recovery to ensure protections are in place for ratepayers.”
Those protections include an overall cap on the costs that can be recovered, limiting the time frames when Eversource can recover those costs, prohibiting the company from collecting interest on undercharges, and limiting the recovery period to the five-year project timeline, among other limitations.
In their July 24 docket filing, the Office of the Consumer Counsel said it supported establishing a special rate recovery mechanism for smart meter deployment in the state, writing that it “will give Eversource enough certainty to move forward with AMI deployment, while also ensuring Eversource deploys AMI in a manner that benefits ratepayers.”
Whether Eversource will take up the project considering these limitations is unknown at this time. PURA has largely been supportive of the idea of installing smart meters in the past, but there was also some concern that PURA had relied heavily on Utilidata, a technology company that could potentially benefit from the project, for developing its AMI framework – concerns that PURA dismissed.
The summertime spike in electricity rates driven by the public benefits charge continues to have a political ripple effect in Connecticut where residents pay some of the highest electric rates in the continental United States. Gov. Ned Lamont held off on committing to an offshore wind deal with Massachusetts and Rhode Island over concern about electric rates, and Republicans in the General Assembly have continued to hammer the point that the cost of energy is too high.
PURA’s proceedings have come under increasing scrutiny by the public and lawmakers, with some, like the utility companies, arguing they use a heavy and inconsistent regulatory hand, while others argue they’re not doing enough to protect ratepayers.
PURA’s final decision indicated that Eversource would have to come back with a final AMI deployment plan. The commissioners voted unanimously in favor of the decision.
This article first appeared on Connecticut Inside Investigator and is republished here under a Creative Commons license.
