Eversource Energy and United Illuminating face millions of dollars in lost profit for failing to properly prepare for, and respond to, Tropical Storm Isaias last August, state regulators said Wednesday.
The state Public Utilities Regulatory Authority issued a scathing final decision following an eight-month investigation. Regulators rebuked Eversource for numerous failures, with “inactions or deficiencies” creating a significant risk to public safety.
UI’s performance was “underwhelming in certain areas, but was still markedly better than that of Eversource,” PURA said.
“Make no mistake — the decision is a commentary on the deliberate decision by Eversource to manage the company as a corporation, rather than as a utility with a statutory public service obligation,” said Marissa Gillett, PURA’s chairwoman.
PURAs two other commissioners, John Betkoski III and Michael Caron, also strongly criticized the two utilities.
“It pains me that once again during my long tenure as a PURA commissioner, I am sitting in judgment of our electric utilities’ response to a tropical storm,” Betkoski said.
Caron said the utilities are “competent, well-run companies.” However, he said that over the decades Eversource has shown a “lack of preparedness, lack of communication, lack of coordination and lack of timely restoration.”
Eversource spokeswoman Caroline Pretyman said the utility stands by its response “as we know our thousands of employees showed skill and dedication in restoring power to customers as quickly as possible.”
“There are many areas for improvement that we are already addressing and we continue to work in good faith with our communities, customers and regulators to improve our performance,” she said.
UI spokesman Ed Crowder said the utility is “disappointed that the ruling does not fully reflect the facts” it presented during the review and imposes a penalty despite PURA’s finding that UI generally met the standards of acceptable performance.
Regulators said they’re prepared in a future proceeding to impose an indefinite reduction in the utilities’ return on equity, a measure of profitability. For Eversource, the annual lost net income that would result is about $25 million a year, using 2020 as a guide. For UI, it would be $1.3 million annually.
Regulators consider reductions in equity as incentives for utilities to improve their performance, Gillett said. By reducing the return on equity, regulators are “explicitly telling Eversource and UI that the utilities need to be managed differently in future storms,” she said in an email.
Reductions in the return on equity for UI would be .15% and 0.9% for Eversource, PURA said.
Eversource reported 2020 income of $327 million, with a return on equity of 9.03%. UI reported income of $101 million with a return on equity of 8.91%.
PURA imposed a .15% reduction in Eversource’s return on equity following storms in 2011 and 2012, Gillett said.
“Clearly that wasn’t enough or it was forgotten,” she said.
Regulators will separately consider penalties as part of a “notice of violation” to be issued next week for the utilities’ “subpar performance,” PURA said.
In another possible financial hit, the rebuke by regulators could undermine efforts by the utilities to bill customers for costs related to storm cleanup and preparation, Gillett said.
In their decision, regulators ordered the utilities to increase the number of line workers, damage assessors and liaisons to respond to emergencies. The agency also directed the companies to improve communications with large customers and those with medical hardships.
And PURA said the utilities must undergo management audits beginning this summer, focusing on emergency response procedures, communications, support from company executives and organizational changes that may be needed.
Michael Purcaro, Vernon’s director of emergency management, repeated his demand that Eversource reimburse towns and customers for damage resulting from the extended power outage. Vernon is seeking $84,000 from Eversource as compensation for labor, equipment and other services required to restore electricity.
As many as 1 million customers were without power for days following the storm, leading to widespread anger among ratepayers and elected officials.
In their 111-page draft decision issued March 19, regulators strongly criticized the storm response. PURA said Eversource Energy failed to meet “standards of acceptable performance” in its preparation for Isaias and its response.
PURA said the Berlin-based utility had “communications systems failures” and fell short in coordination and communications with the towns.
UI’s performance was at times “underwhelming,” but the utility that serves the Bridgeport and New Haven areas generally met the standards of “acceptable performance,” regulators said.
Stephen Singer can be reached at ssinger@courant.com.
