🔒Eversource cuts earnings guidance, vows legal fight after FERC slashes transmission returns

A federal regulator has slashed the return that New England electric transmission owners can earn on their infrastructure investments, a long-awaited ruling that consumer advocates say could deliver roughly $900 million in refunds to ratepayers. Connecticut’s largest power utility, Eversource Energy, is already moving to fight the decision in court. The Federal Energy Regulatory Commission issued an order on March 19, setting a base return on equity of 9.57% for New England transmission owners, down from the 11.14% they had been allowed to collect. FERC made the lower rate retroactive to 2014 — and to a separate window stretching from October 2011 through December 2012 — concluding that the transmission owners had been collecting a return that was “unjust and unreasonable.” The agency also set a maximum ROE for transmission incentives at 12.09%. The case traces back to 2011, when the Massachusetts Attorney General’s Office filed a complaint challenging transmission owners’ returns, arguing that the costs being passed on to ratepayers were excessive. The coalition behind the complaint grew over the years to include ratepayer advocates from every New England state, and the proceeding stretched more than a decade before FERC acted. Claire Coleman, Connecticut’s consumer counsel and a member of the Consumer Advocates of New England, called the ruling a ratepayer victory. “This important decision reducing the profit rate utilities earn for building transmission lines is a victory for New England’s ratepayers,” Coleman said. “FERC’s action — stemming from years of litigation and collective consumer advocacy — will help reduce annual energy costs for ratepayers in Connecticut and across the region.” Beyond the refunds, the group estimated the ROE reduction would produce more than $100 million in annual savings going forward for the roughly 7.2 million retail electricity customers across the ISO-New England service territory. Eversource Energy, whose Connecticut Light and Power subsidiary is among the affected transmission owners, pushed back sharply. In a securities filing, the company called the decision “arbitrary” and said it was inconsistent with the Federal Power Act’s statutory limitations. The company said it is seeking to pause the order and request a rehearing, while also considering a Section 205 filing, a federal process used to propose new rates. Eversource argued that FERC relied on outdated, decade-old data to set the ROE despite transmission owners being entitled to returns based on current economic conditions, and warned that the ruling would erode investor confidence and raise the cost of capital needed for infrastructure improvements. The financial consequences for Eversource are significant. The company said the ROE change is expected to reduce its after-tax earnings by roughly $70 million in 2026 and has lowered its non-GAAP earnings guidance for the year to a range of $4.57 to $4.72 per share. In the filing, Eversource also noted a roughly $15 million negative earnings impact from the expected closure of its $2.35 billion sale of Aquarion Water Co., which the state’s Public Utilities Regulatory Authority approved in March. The company said it continues to expect cumulative long-term earnings per share growth of 5% to 7% through 2030. Wall Street analysts at Jefferies, who maintain an “underperform” rating on Eversource shares, believe its stock could fall to $57. The firm warned that Eversource may need to raise roughly $1.5 billion in new equity, creating what it estimated as roughly 25 cents per share in net dilution. On Wednesday morning, Eversource shares were trading at $69.13, down 0.22% from Tuesday. FERC has yet to finalize the mechanics and timeline for distributing the refunds. Consumer Advocates of New England said it intends to push regulators to move quickly.