In an attempt to avoid “yo-yoing” in monthly electric bills, the Public Utilities Regulatory Authority said Wednesday that it will overhaul the process by which it approves certain utility rate adjustments every six months.
PURA said the current framework for those adjustments relies too heavily on forecasts of customer usage and wholesale energy prices. When those forecasts are wrong — like they were this year due to higher-than-expected residential consumption during the COVID-19 partial lockdown and teleworking — it contributes to unexpected “wild swings” in the amounts customers owe, as happened in July and August.
The adjustments happen twice per year, with reconciled rates taking effect on Jan. 1 and July 1. However, PURA is now changing those dates to May 1 and Sept. 1, which is considered a more “shoulder season” schedule in which monthly temperature changes (and therefore changes in bills) may not be as severe.
Seeking to rely less on forecasting, the regulator will also use actual revenues and approved expenses from the previous calendar year as a proxy for expected costs when determining rate adjustments.
PURA also determined that the existing process for rate adjustments compensates Eversource and UI at an “unjustifiably high rate”.
The agency is reducing those carrying charges, requiring Eversource and UI to instead use the “prime” interest rate, which is two to three times lower than the weighted average cost of capital of nearly 9%.
“In this decision, PURA has begun demystifying and unwinding decades of ratemaking policies that have evolved into a less customer-friendly, less transparent framework,” PURA Chairman Marissa P. Gillett said in a statement. “Moving forward, we are focused on making sure the risk borne almost exclusively right now by our ratepayers is shifted and shared equitably with utilities and their shareholders. PURA looks forward to working with stakeholders and our colleagues in the General Assembly on appropriately realigning risks across the regulated utility landscape.”
The increases in customer bills this summer were quickly followed by Tropical Storm Isaias, which knocked out power to roughly 1 million customers, mainly those in Eversource’s territory. PURA is conducting a parallel investigation into the storm response.