Eversource Says Storm Isaias Criticism 'Not Accurate'
This story was updated at 4:01 p.m.
Eversource Energy gave skeptical lawmakers a forceful rebuttal Thursday of the widespread complaints that the electric utility failed to prepare for Tropical Storm Isaias – then bungled the restoration of power in Connecticut’s worst blackout in nearly a decade.
While conceding the storm was more damaging than predicted and its communication system failed at times, Eversource cast its overall performance in near-heroic terms, getting the lights back on four days faster than after the worst of the three disastrous storms in 2011 and 2012.
“Eversource prepared for and conducted an emergency response to Storm Isaias that was coordinated, organized and effective in restoring power to customers on an expeditious timeline,” the company said in a 15-page letter to the legislature’s Energy and Technology Committee. “This was the largest mobilization ever achieved for Connecticut customers and we were prepared for it.”
Released in advance of an appearance by the company’s top executives before the committee, the letter is an effort to reframe a narrative that has portrayed Eversource as inept and its leadership tone deaf.
“Although we surely could have done many things better, the perception that we were not prepared is just not accurate,” the company said. “We are looking forward to doing everything we can to bring the facts forward for consideration.”
It was signed by Jim Judge, the chairman and chief executive of Eversource, and the other two senior executives, Craig Hallstrom and Penni McLean Conner, who joined Judge as the first witnesses in an informational hearing that opened 10:30 a.m.
The letter makes no mention of Judge’s low profile during the blackout or his failure to stand with Gov. Ned Lamont and address the press and public outside Eversource offices after a private briefing on Aug. 5, the first full day of a blackout that, for some customers, lingered for more than a week.
Judge’s silence was widely derided as a classic failure in crisis communications.
The letter essentially is a first draft of a longer and more-detailed response that Eversource will file on Sept. 8 to PURA, the Public Utilities Regulatory Authority, which oversees the monopoly and regulates a portion of its rates.
Judge apologized for the inconveniences and hardships suffered by customers, but he did not waver in his assertion that Eversource investments with ratepayer funds after the 2011 and 2012 storms have produced a more reliable system, and that its restoration performance this month was reasonable in face of the widespread destruction.
The company’s position was at odds with the comments from lawmakers, who relayed complaints from constituents and local officials. Rep. David Arconti, D-Danbury, a co-chair, said he has never seen mayors and first selectmen react with such pure outrage.
Rep. Stephen Meskers, D-Greenwich, said Eversource and the lawmakers seemed to be describing wholly different events.
“You have to do better,” Sen. Norm Needleman, D-Essex, a co-chair, told Judge, before the CEO signed off. “I think you need to look at your company culture.”
Eversource was put on the defensive on Aug. 5 by PURA’s top regulator, Marissa P. Gillett, and Katie Dykes, the commissioner of energy and environmental protection. They announced a PURA investigation of the storm response and criticized Eversource for anticipating a much smaller impact from Isaias than did United Illuminating, the other electric utility that serves the state.
Gillett and Dykes were part of a contingent of state officials who accompanied Lamont to Eversource for a private briefing by Judge and Hallstrom, the president of regional electrical operations, among others.
Also on the agenda Thursday were United Illuminating’s leadership team, plus Gillett, Dykes and two municipal officials, Mayor Mark Boughton of Danbury and First Selectman Matthew Knickerbocker of Bethel. But the Eversource contingent was questioned until 4 p.m. about the storm and a mid-year rate adjustment that PURA recently suspended. The rate increase was the subject of a PURA hearing Monday.
Due to COVID-19, the hearing was conducted via videoconferencing. It was broadcast on cable and streamed online by CT-N, the public’s only window into legislative hearings during the pandemic.
The Eversource letter showed signs of being prepared in haste. It misspelled the names of a state lawmaker, a top Eversource official, the title of a regulator and, in one place, the name of the storm responsible for its troubles, Isaias.
An outage atop a pandemic
Isaias seems to be an inflection point for Eversource and its relationship with regulators and ratepayers in Connecticut.
Eversource is a multi-state, publicly traded Fortune 500 company that provides electricity to 149 of Connecticut’s 169 cities and towns, as well as large swaths of Massachusetts and New Hampshire. It also is a provider of natural gas and water.
Its troubled 2020 followed a stellar 2019. In letter to shareholders, Judge described 2019 as its best year judged by reliability of service and financial performance. The stock price had soared from $65.04 to $85.07, a gain of 31% over 12 months. And the reliability of the company’s electric distribution system was in the industry’s top 10%.
Judge was rewarded with a $3 million bonus that swelled his compensation for the year to $19.8 million.
Rep. Bill Buckbee, R-New Milford, alluded to Judge’s pay when he said Eversource might have afforded more than the $80 million it spends on tree trimming and vegetation clearing “if somebody made $5 million less salary.”
“I know how well I’m paid. I also know that the compensation is very much in line with CEOs of similar-sized utilities,” said Judge, who joined the company as an entry-level employee in 1977 after graduating from Babson College and has been the CEO for five years.
Judge noted that his 2020 package is certain to be smaller.
While the governor has questioned the 9¼% return on equity allowed by PURA for Eversource as too generous, Judge said Eversource is allowed higher returns in Massachusetts and New Hampshire — and the return is not guaranteed.
“We’re not making a lot of money in Connecticut,” he said.
Lamont has urged Eversource to reimburse customers for food spoiled during the blackout, as does Con Edison in New York. But Judge said such policies are the exception, not the norm, unless required in rate tariffs.
Judge quoted national publications and groups, repeatedly saying Eversource is an industry leader in reliability, overall performance and flexibility in dealing with customers in arrears.
To that, Needleman replied that not all metrics accurately portray a company. He asked: Are those the right metrics? Can you do better?
Eversource is the product of the 2012 merger of Northeast Utilities in Hartford and NSTAR in Boston, two companies that had absorbed some of the first electric utilities, including Hartford Electric Company and Boston Edison.
Eversource has dual headquarters in Boston and Hartford, but its center of gravity is in Boston, where Judge grew up and is based. As became clear during the hearing whenever Judge or Hallstrom referred to “smart” technology, the company literally speaks with a Boston accent.
More seriously, the company has faced a steady drumbeat of questions about whether Connecticut ratepayers have been shortchanged by post-merger efficiencies.
The letter released Thursday does not break out its available line crews by state; instead referring to the resources available to Connecticut from all its subsidiaries. Hallstrom acknowledged that the number of Connecticut-based crews shrunk after the merger, but said they are more efficient.
Eversource says it quickly contracted to bring 120 crews from Canada to supplement the 923 line crews “on hand and available to Connecticut” from Eversource’s units in Connecticut, Massachusetts and New Hampshire.
Eversource asked lawmakers to take a broad view of what happened when Isaias hit on Aug. 4, arriving with stronger winds than originally forecast, toppling trees weakened by years of drought from 2015 to 2017 and outraging consumers stressed by the COVID pandemic.
The company said the “pandemic has exponentially elevated the tension and frustration of our customers,” as well as boosting power consumption during a hot summer when most white-collar employees were working at home.
“We fully appreciate that the unexpected loss of power during COVID-19, along with the social and economic disruptions many customers are experiencing, is simply overwhelming for customers,” Eversource said.
But it defended its original assessment. Connecticut and its utilities use a multi-level storm rating that is the inverse of hurricane categories, with a Level 1 signifying the highest level of expected damages.
On July 31, Eversource notified PURA it had declared a Level 4 event for the Isaias, with the expectation of 125,000 to 380,00 customer outages and up to 10,000 damage locations. UI declared a more serious Level 3.
Eversource said the National Weather Service had predicted the day before the storm that sustained winds would be between 25 and 40 miles per hour, with gusts up to 55 or 60. It upgraded its expectations late Monday and early Tuesday, and Eversource said it reacted accordingly.
While the wind still blew, Eversource upgraded the storm to a Level 3 event, one that anticipated up to 650,000 outages and up to 25,000 damage locations.
About 1 million customers lost power at various times during and after the storm, but the peak outage — the greatest number blacked out at one time — was 632,632. There were 21,669 damage locations, with damage to 2,506 poles, 1,438 transformers and more than 500 miles of wire.
The storm hit Tuesday, Aug. 4.; 90% of the customers had power restored by the end of Saturday, Aug. 8, and 99% by the end of Tuesday, Aug. 11. The last outages, however, took nine days, compared to 10 days for Tropical Storm Irene and 11 for Tropical Storm Sandy nearly a decade ago. The longest was the 13 days it took to restore every outage after a freak snowstorm in October 2011.
Buckbee said his constituents have a different view, but he hopes Eversource learns and reacts constructively. He told Judge, “I don’t want you to be the most hated company in Connecticut.”