State regulators approved a new framework Wednesday they say will make electric utilities more accountable.
The new framework establishes performance-based regulations for electric utilities. Regulators say those will better tie financial incentives for utilities to public outcomes like reliable electric service, not just to recouping capital investments in the grid.
“We should be evaluating the utilities based on their performance,” said Marissa Gillett, chair of the Public Utilities Regulatory Authority (PURA), which approved the change. “And moving toward a more customer-centric approach to regulation in general.”
The new framework establishes goals for reliable electric service, customer service and affordability. Regulators will work into mid-2024 to finalize how financial incentives and disincentives will be used “to drive progress toward the public outcomes,” according to PURA.
“The utilities in this state and across the world are used to being compensated simply for what they put into the ground,” Gillett said. “Now we’re saying what you put into the ground has to achieve the goals and objectives that we’ve outlined for you as a condition of being reimbursed for those expenditures.”
The framework passed Wednesday is built off the “Take Back Our Grid Act” of 2020. That Act was signed into law following Tropical Storm Isaias, which knocked out power to thousands of homes and businesses for days and happened right after an increase in electric rates.
“To be blunt about it, I thought Eversource’s response was pretty shoddy that day,” Gov. Ned Lamont said during a stop in Essex Wednesday.
Following Isaias, local leaders complained about Eversoure’s storm response, noting a lack of communication and preparation by the utility delayed power restoration in their towns. The outage came during the early months of the COVID-19 pandemic when many people were sheltering at home.
Utility regulators ultimately ended up imposing millions of dollars in penalties against both Eversource and United Illuminating for their storm response.
United Illuminating (UI) said in a statement Wednesday that it welcomes the shift to performance-based regulations.
“UI has been supportive of the effort to craft a regulatory structure that incentivizes optimal efficiency and performance while delivering excellent outcomes for customers,” said spokesperson Craig Gilvarg. “The framework finalized today advances those important goals.”
In a statement, utility Eversource said performance-based regulations have proven to be an “effective tool in our Massachusetts service area for increased transparency.” The utility also said it welcomes Connecticut’s shift to the metrics “in a manner that is equally effective.”
But it raised concerns about utility regulations in the state.
“Our concern is that the investor community has spoken loud and clear in recent months warning that the regulatory environment created by PURA in Connecticut is imbalanced, harming the interests of customers given the need for sustained, long-term investment in utility infrastructure,” said spokesperson Caroline Pretyman.
Lamont said the new PURA regulations will benefit customers by helping to ensure utilities respond within a reasonable period of time following severe weather events. He said the earnings and profits of utility companies will be tied to good performance. “Or there will be a price to pay.”
“That is what performance-based regulation is,” Lamont said. “Make sure performance is appropriately rewarded when it deserves to be rewarded – or otherwise, when it doesn’t.”
Note: Gregory B. Butler, who is an executive with Eversource Energy, is a member of Connecticut Public's Board of Trustees.
This story has been updated.
