Power To The People: Eversource Storm Costs — The $454 Million Question

By DONALD M. KREIS, Power to the People, InDepth NH

Everybody talks about the weather, but nobody does anything about it. Except, perhaps, Eversource.

Notably, what Eversource does is charge its New Hampshire customers a pile of money to deal with weather-related threats to its electric distribution service. Exhibit A is the $453,796,899 – that’s right folks, almost a half billion dollars – in extra money the state’s biggest electric utility wants to recover from customers throughout New Hampshire.

To put that staggeringly large sum in perspective, consider the distribution service rate case we, the state’s Department of Energy, and other parties just finished fighting before the Public Utilities Commission. Eversource is seeking an annual revenue increase of $103 million. A decision from the PUC is expected in late July.

The $453 million is extra – over and above the distribution rates at issue in the rate case – because, since 1999, the PUC has allowed Public Service Company of New Hampshire (which now does business as Eversource) to collect a special fund, known as the “Major Storm Cost Reserve,” to cover the cost of preparing for, and recovering from, really big weather events.

Eversource thinks it can get away with this because: What ratepayer advocate in his right mind would stand up in a public place – like the hearing room of the PUC – and argue that our big electric utility should not throw everything it has behind blunting the effects of huge storms on its 500,000 customers in the Granite State?

Well, actually, I would. And, to its great credit, so would the state’s Department of Energy. Let’s start with the Department.

Remember March 13, 2023? I don’t. You probably don’t either, unless you live in western New Hampshire.

According to the National Weather Service, a nor’easter blew into New England that day, dumping heavy wet snow and causing “numerous downed trees and power lines resulting in widespread power outages. . . .Some locations were without power for at least 1 or 2 days.”

Two feet of snow fell on parts of the Monadnock region. More than 70 municipalities postponed town meetings scheduled for the following day.

Eversource spent about $90 million gearing up for, and then recovering from, what is fondly known in PUC filings as “Storm 7.” The Department of Energy thinks about $30 million of that was mis-spent and should be eaten by Eversource rather than billed to customers.

Ninety million bucks can be a hard number to grasp in the abstract. But maybe this will help: The state’s Department of Business and Economic Affairs is spending roughly that sum to wire up 48,000 homes in New Hampshire with sorely needed broadband. The University of New Hampshire recently spent $89 million updating and expanding its 1960s-era Spaulding Hall to add new facilities for biochemistry, cell culture, medical laboratory science, anatomy and physiology, ecology, organismal biology, and neuroscience.

In the case of Storm 7, $90 million buys crews dispatched under mutual aid agreements from utilities as far away as Kentucky and various places in Canada. The Department’s claim that a third of this money was misspent is based on a comparison to a similar but less costly weather event that occurred a few weeks earlier.

Eversource does not appreciate this critique, deriding it as a form of Monday-morning quarterbacking. “Only one [Department] witness has experience with storm restoration,” said Eversource in its brief, “and that such experience was thirty-six years ago.”

Further, according to the utility, only one of the Department’s witnesses was actually in New Hampshire for Storm 7 and he made no attempt to travel during the bad weather. The Department is “improperly trying to substitute its own judgment in place of the reasonable judgment of the Company’s experienced personnel who were on the ground and making decisions in real-time,” grouses the utility.

Via the recently completed rate case, our office took a slightly different tack. Our expert, Charles Underhill, has more than 40 years’ experience as a manager with municipal utilities, which have to survive the same storms the investor-owned companies do.

Underhill proposed that Eversource scale back the amount of money it spends on “pre-staging” storm recovery crews and redirect the money toward more aggressive tree trimming. According to Underhill, Eversource should raise the threshold for spending money on “pre-staging” crews for storm recovery when bad weather is predicted.

Over a seven-year period, pre-staging has “proven to be accurate” – i.e., caused the utility to preemptively deploy resources that were actually needed – a mere 54 percent of the time, “which is akin to a toss of the coin,” Underhill told the regulators. Eversource’s response, at hearing, is that it has to do what all of the other utilities do or it will lose out in the competition for available crews.

Ultimately, what Eversource wants to do about the weather is securitize it.

In other words, it’s pretty clear the company will get to collect a significant portion of its $454 million in unrecovered storm costs – and if it happened all at once, monthly bills from Eversource would soar. So the company is willing to amortize those costs – i.e., spread them out – over a longer period, like 15 years.

But there’s a catch. Eversource doesn’t want the company to carry such a massive unrecovered cost on its books. Shareholders, and Wall Street, don’t like that sort of thing.

Instead, the utility wants the Legislature to authorize the PUC to entertain a plan to transform this obligation into securitized bonds. “Securitized” in this context means guaranteed under state law for cost recovery.

That idea will be familiar to those who remember how customers made PSNH whole for most of the so-called “stranded costs” the company incurred when it was forced to divest its interests in Seabrook Station, Merrimack Station, Schiller Station and other generation assets. That started in 2001 and wrapped up in 2018.

For good or ill, divestiture was a one-time thing. Is securitizing storm costs a good idea given that, in light of climate change, the bad weather and the massive storm recovery expenses are likely to recur?

The answer is maybe. Securitization is good for shareholders because it takes them off the hook, but it’s also good for customers because it means a much lower interest rate on what is, essentially, a massive loan to ratepayers.

What about the weather, though? It keeps on coming and I have a feeling nobody is going to do anything about it.

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.

This article first appeared on InDepthNH.org and is republished here under a Creative Commons license.