Essex — Nearly three years after a huge tropical storm paralyzed Connecticut and multi-day power outages enraged residents, the Public Utilities Regulatory Authority on Wednesday approved the next phase of oversight, unanimously starting a search for consultants to oversee the performance of electric providers including Eversource and United Illuminating Co.

Gov. Ned Lamont, authority members and leading lawmakers agreed that the often testy relationship between profit-making utilities and their customers is being disrupted further by the state's efforts to transform the regulatory landscape from one based on corporate investment, to a results-oriented state energy market.

"This is something that's long overdue," Lamont said during a 50-minute news conference. "You just don't get paid an automatic 9 percent when you do good work or bad work. You get paid for doing good work. In my world, you get paid a little extra for doing really good work and you get paid a lot less for not doing really good work." He admitted that anger in response to the 700,000 outages during the height of the summer of 2020 still lingers.

"To be blunt about it, I thought Eversource's response was pretty shoddy that day," Lamont said. "Broadly speaking, this is all in an environment where we're trying to bring down our carbon footprint and look out for the next generation here in Connecticut. Those are the broad goals that I define as performance and holding down rates in a way that makes this a lot more affordable."

"Our concern is on the part of the rate payers, not the shareholders," said state Sen. Norm Needleman, who is co-chairman of the legislative Energy & Technology Committee, during an afternoon news conference in Town Hall here, where he is also the first selectman.

While consumers are unlikely to see any difference until at least mid-2024, the action on Wednesday was essentially the next phase in a long-term effort to hold utilities more responsible, including pending legislation to foster more transparency in the energy market.

"We had an enormous amount of stakeholder engagement over the last 18 months," said Marissa Paslick Gillett, chairwoman of the panel, during a brief morning meeting in PURA's New Britain headquarters. "I'm optimistic that it's going to be a good thing," said Jack Betoski III, the veteran vice chairman of the authority.

The next phase of the oversight program will include consultants digging into utility operations with emphasis on future rate adjustments in a state that has one of the highest costs for electric customers in the nation. Gillett told reporters that the January price hikes were on the supply side of the issue, while Eversource and UI are merely providers now, the result of the state's 1998 restructuring of the energy market.

Gillett said that stakeholders including utilities, business, low-income residents, environmental advocates, and state officials have participated in workshops and provided research on the issues, including cost of service and outcome goals, culminating in Wednesday's authority vote.

"In short, there is an imperative for regulatory reform to better serve the public interest," she said, explaining that most regulators base rates on revenue requirements of utilities to earn a return on investment. "Historically, all across the nation and really across the world, monopoly utilities are governed by what is referred to as cost-of-service regulation," she said. "There's little to no consideration of what outcomes or value a customer is deriving from that service."

Gillett said Connecticut wants to shift the standard to compensating utilities on their progress toward goals, using both economic carrots and sticks.

"Today's decision represents a reset of the regulatory framework in Connecticut," Gillett said. "Looking forward, utility expenditures will be viewed through the lens of whether they further follow regulatory goals. Does it incentivize excellent operational performance? Does it drive toward achievement of public policies? Does it empower our customers and achieve customer satisfaction? And lastly but most importantly, does it provide reasonable, equitable and affordable rates?"

"I view this bill as more evolutionary than revolutionary," said state Rep. Jonathan Steinberg, D-Westport, co-chairman of the energy panel, stressing the need for long-term upgrades to the electric grid. "The fact of the matter is that we need an effective partner in the utilities themselves if we're going to achieve our goals going forward."

Pedro Azagra, CEO of Avangrid, UI's parent company, on Wednesday morning described the current rate case as one of cooperation with the state Department of Energy and Environmental Protection and Attorney General William Tong. He described the accountability landscape as current, with more legislation expected in the current session of the General Assembly.

"We just need to continue — I don't think we'll have results in a month, but I think once we have reinitiated or started many of those relationships, Azagra said. "I think after six, nine months, I'm very pleased that we have the right access to everybody. Second, I think we're very committed to Connecticut. We don't like to comment on rate cases, we don't like to comment on public commissions or commissioners."

He acknowledged that Lamont and state lawmakers are focusing on incentive-based performance. "We are happy to move in that direction as we have seen other places in the U.S. And I think in our case, we like to focus on presenting things with no mistakes — making sure that we don't make any mistakes to be blamed to us. We have offshore programs going on, we have many other matters that we are working with the administration, so we just need to continue working with them."

The "Take Back Our Grid Act" was approved during a special legislative session in October 2020, following the state's prolonged power outages from Tropical Storm Isaias during a sweltering week in early August that knocked out power for hundreds of thousands of state residents, many for multiple days. State lawmakers demanded more accountability, including fines and compensation for customers that could not be recoverable through rate hikes.

The legislation included an extension of time for PURA to research and decide rate cases; allowed the regulators to determine whether to link performance to executive compensation; raise the civil liabilities to $10,000 for utilities that fail to prepare or respond to emergencies; and establish minimum staffing levels for outage planning and restoration.

Another section of the law would give residential customers a $25 account credit for every day of an outage for those whose power failed for more than 96 consecutive hours after an emergency; and compensate customers with up to $250 for food and medication that expires or spoils due to a prolonged service outage.

Needleman recalled the disappointment he felt during the August 2020 storm, when Eversource's response was inadequate and delayed. He said that the cost of capital for the multi-billion-dollar corporations is not as important as the consumers.

"I think it's a lot of crap," Needleman said. "We're not materially impacting their bottom line. Look what just happened. Their profits went up from $1.2 billion to $1.4 (billion). I want them to be healthy. I want them to get the best possible value for the capital. But, again, the dynamic tension between shareholder and rate payers is what we're concerned about."

Lamont agreed. "Look, I don't think there's an increasing credit risk to lending money to Eversource or UI because of this," he said. "It's still a very solid credit risk."