NEW HAVEN, Conn. (WTNH) — Customers were livid when electricity bills hit mailboxes across the state in July and August. Many registered substantial increases in the cost of lighting and cooling their homes. Anger over dramatically higher bills quickly ignited a blame game between policymakers, utility companies, and regulators.
But what actually drove up costs this summer? News 8 sat down with the governor, a top Republican lawmaker, executives at Eversource, the state attorney general, and the chairman of the state's utility regulator to examine how a mixture of public policy and a particularly hot summer ignited a political firestorm.
Every person News 8 spoke with agreed on one point: high temperatures led to a spike in electricity usage.
"The biggest increase in costs was the hottest weather we've had and air conditioning on," Gov. Ned Lamont (D-Conn.) said.
A senior Eversource executive concurred.
"Most of what customers felt in July and August was an increase in usage. It happens every summer," Steve Sullivan, Eversource's president of Connecticut electric operations, said.
State Sen. Ryan Fazio (R-Greenwich), the top Republican senator on the legislature's Energy and Technology Committee, echoed Eversource and the governor on the issue of usage.
"It was very hot in the summer, so usage went up," Fazio said.
However, the three men also agreed that another factor drove up rates over the summer: the public benefits charge.
The public benefits charge is one of four categories visible on a ratepayer's bill. The other three categories are:
- Supply, which represents the cost of generating electricity.
- Transmission, which represents the costs of the expansive regional system of high-voltage wires that bring electricity from power plants to local communities.
- Local delivery, which represents the cost of bringing electricity from substations to customers' homes and businesses.
Eversource, the state's largest utility, is in the transmission and local delivery business. It does not generate power and does not determine the public benefits portion of the bill.
More than 60 different charges fund dozens of government-mandated programs in the public benefits portion of the bill.
This summer, several of those programs attracted significant attention. One was responsible for the lion's share of the increase in the public benefits portion of the bill: the costs associated with the state's 2017 deal to purchase electricity from Millstone Nuclear Power Plant in Waterford.
State legislators conceived the deal to ensure the long-term viability of the Millstone plant, which supports nearly 4,000 jobs, and hedge against the sometimes volatile natural gas market.
Simply put, the Millstone deal set a fixed rate for purchasing nuclear power. At times, ratepayers benefit from the difference between that fixed rate and the price of natural gas. Other times, ratepayers are on the opposite end of the nuclear hedge.
"When gas is very cheap, we pay a price for that," Lamont explained. "When gas is expensive, when Putin invades a country, we get a credit."
"When natural gas prices are lower than the Millstone rate, we lose and it's not a good deal in those moments," state Attorney General William Tong said.
Tong voted against the Millstone deal when he was in the state legislature. As state attorney general, he frequently locks horns with utilities.
This summer, ratepayers felt the effects of cheap natural gas prices falling below the fixed Millstone rate. A report from the Connecticut Office of the Consumer Counsel, an independent state agency that advocates for utility customers, stated that the year-to-year increase in the cost of the Millstone contract was just under $300 million.
According to Marrissa Gillett, the chairman of PURA, the combination of hot summer weather and the increases in the public benefits portion of the bill formed a "perfect storm."
Another significant cost embedded inside the public benefits portion of the bill was the state's pandemic-era shutoff moratorium. At the onset of the COVID-19 pandemic, state leaders instructed utilities not to turn off power for those experiencing financial hardship. Over four years, the cost of those unpaid bills built up and is now being shouldered by all ratepayers.
Lamont defended the decision to halt shut-offs while conceding to critics that the moratorium lasted too long.
"During the worst of COVID, when people were not working – having a hard time paying their bills – the idea that you were gonna shut off their power, I think, was not the right decision," Lamont said. "So, we did extend the moratorium, and now we're paying that off. Do I think the moratorium went on a little bit too long? I do. But it'll be over, that moratorium payment, within five or six months."
The higher-than-expected bills that landed in ratepayers' mailboxes this summer triggered a public debate, led by Republicans, over the future of the public benefits charge.
Fazio, the GOP's de facto point man on energy issues, railed against the dozens of other programs funded by the public benefits charge. Those programs include a slew of renewable energy subsidies and efforts to boost energy efficiency and weatherize the power grid.
Fazio argues that green energy programs, including funding for electric vehicle charging stations, should be removed from ratepayer bills and instead funded through the state's normal budgeting process. Asking ratepayers to pay for the programs on their monthly bills, Fazio and other Republicans argue, is a backdoor tax to fund Democratic environmental priorities.
"If you look at Connecticut's electricity rates in particular, we have the third highest in the country after Hawaii, which is an island, and after California, which has lost its mind," Fazio said. "My thesis is that Connecticut state policies are inflating the cost of electricity here to the point that we're higher than our neighbors, higher than all but two other states in the country."
Lamont and many of his Democratic allies don't fully buy Fazio's argument that removing some or all programs from the public benefits charge would meaningfully impact bills.
Asked about Fazio's proposal to remove the cost of electric vehicle charging stations from the public benefits charge, Lamont said, "Let's talk about that in the general session [of the legislature], but it's not really enough to make a big difference."
Lamont has maintained that many of the proposals put forth by Fazio and the Republicans following the shock of this summer's bills are largely cosmetic. The real challenge, Lamont argues, is that Connecticut's demand for electricity is outpacing its supply of affordable energy.
"We have a long-term problem," Lamont said. "Our long-term problem is that demand is picking up, and supply is not so much."
Lamont said a large part of Connecticut's problem is its unique position at or near the end of the energy supply chain.
"Well, it's easier in the other states!" Lamont exclaimed. "If you're in Oklahoma, you've got a hundred acres, you can put up a bunch of windmills. If you're in Texas, you put a straw in the ground and up comes natural gas. We're sort of at the end of the supply chain."
Connecticut currently gets a large portion of its energy from natural gas. Expanding the supply of natural gas, however, is a daunting challenge.
"At this point in time, it's actually a very tough issue," Sullivan said. "It would be extremely difficult to get a new gas supply line into our area. If we did that, that would really lower our natural gas prices."
Political opposition to new natural gas infrastructure effectively halted plans for a new gas-fired plant in Killingly. Lamont remains largely focused on collaborating with regional governments to increase renewable energy capacity online.
The governor highlighted Connecicut's collaboration with Rhode Island on an offshore wind project scheduled to come on line next year.
"That will be helpful," Lamont said.
Lamont also said he was engaged in talks with the governor of Maine to bring in more solar and hydroelectric power.
Republicans like Fazio are quick to point out that renewable sources are typically more expensive than natural gas. Solar and wind power are also intermittent sources of electricity.
"We need to look at expanding the existing supply chain and pipeline to bring more affordable, reliable sources of energy inputs like natural gas," Fazio said.
One area where Fazio and Lamont seem to agree is on the promise of nuclear power. Both men still support the 2017 Millstone deal and are optimistic that Connecticut can lead in further investments in nuclear power.
"I think most serious people about energy think it was a good decision," Fazio said.
"I think the Millstone deal was the right thing for Connecticut," Lamont said. "It gives us always-on, carbon-free power. If we did not have that, we'd have much more spiking of electricity prices because we'd have a bigger shortage."
Lamont added that he believes capacity at Millstone could be expanded further, and that lingering public concerns about safety are largely based on fears no longer relevant given advances in nuclear power.
"I think they're doing it much more safely than they did it 50 years ago," Lamont said. "We've had Millstone for fifty years in this state with no mishaps – really managed well. The locals like it, and I think there's room for capacity there."
"We need strong regulatory infrastructure in order to protect the public safety, and that's been there a long time," Fazio said. "I mean, the fatality rate society-wide among different sources of energy, nuclear is by far one of the safest over 50 or 60 years."
Of course, these proposals to expand Connecticut's energy supply take time. In the near term, the fight to lower rates is largely the purview of the various entities tasked with regulating and scrutinizing the utilities. Unlike the debates over the future state's energy supply, the debate over utility regulations yields few points of agreement between the principal participants.
Numerous entities regulate utility giants like Eversource at the state and federal levels. PURA, the state's principal utility regulator, has jurisdiction over the costs associated with local distribution.
"PURA's role in that is to take in all of the evidence and then essentially make factual and legal determinations and ultimately decide what the rates are that the utility can charge pursuant to the law," Gillett, the PURA chairman, said.
Whenever utilities request a rate hike, PURA hears arguments from various interested parties, including the Office of the Consumer Counsel and the state attorney general.
"We're in there basically under the hood, and we're looking at every cost they ask for," Tong said. "Does that seem right to us based on our experience? Is it well documented? Is it justified?"
While PURA portrays itself as a quasi-judicial entity carefully adjudicating rate cases, Eversource says the regulator has clearly picked a side.
"Every sign that we get from our regulator is 'drive investment down, lower your costs of that delivery piece of the bill,'" Sullivan said.
In Eversource's telling, rate cases that result in greatly reduced rate hikes often impede the utility's ability to make investments in the future reliability of the grid. The choice to not make significant investments now, the company argues, could eventually come home to roost for ratepayers.
"You have to constantly be making consistent investments in order to keep that system as strong and as reliable as it can be," Sullivan said. "If you cap that investment or have an intention to drive that investment down, then it's very difficult to stay on that trajectory of improving our reliability."
The perceived hostility of Connecticut's regulatory environment has led Eversource to include a "regulatory risk premium" charge in a recent rate hike request for subsidiary company Yankee Gas.
"Given the financial uncertainty created by the regulatory atmosphere in Connecticut and subsequent credit downgrades that ratings agencies like Moody's have given to utilities in Connecticut, a regulatory risk premium is necessary to help attract investors so that we can access the low-cost capital needed to maintain safe, reliable service which keeps costs stable for customers," an Eversource spokesperson wrote.
The state attorney general offered a sharp counterpoint.
"Let me translate that for you: They don't like that we're holding them accountable," Tong said. "They don't like that the regulatory system is working, and now they're asking us to pay a premium because we're holding their feet to the fire? Give me a break."