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    Friday, June 21, 2024

    Eversource to slash grid work by $500M in dispute over state’s ‘negative’ regulatory climate

    Eversource issued a dire warning to Connecticut Thursday, telling investors it is cutting its investment in clean energy and reliability projects by hundreds of millions of dollars because of a “negative” regulatory climate that prevents it from recovering money it invests in the state.

    “You can have my assurance that we will not spend dollars until such time as we have a constructive regulatory environment that allows us to get fair treatment in the recovery of our dollars that we have spent on behalf of the customers in Connecticut to bring better service,” Eversource CEO Joe Nolan said at quarterly earnings call with utility analysts.

    The immediate cuts in capital expenditures, $100 million a year over five years, will affect not only system reliability, but clean energy programs, such as electric vehicle infrastructure and smart metering improvements designed to reduce power use. Analysts said overall commercial development could suffer as well by slowing business growth geared to an emerging all-electric economy.

    The unusually blunt complaint by Eversource shows its frustration at being unable, after three years of talks, to reach what it considers a collaborative regulatory understanding with Marissa Gillett, Gov. Ned Lamont’s appointee to lead the state Public Utility Regulatory Authority.

    Gillett has been promoting what she calls performance based regulation. Eversource and downstate electric utility United Illuminating complain that under Gillett’s leadership, the utilities have had difficulty obtaining timely rate adjustments that would enable them to recover hundreds of millions of dollars they invest in infrastructure.

    Eversource delivers electricity in Connecticut, Massachusetts and New Hampshire. Utility analysts have said uncertainty over the regulatory climate in Connecticut has acted as a drag, lowering Eversource investment and credit ratings and making it more costly from the utility to raise capital.

    Until PURA’s regulatory decisions “come back into alignment with the law and state policy,”  Eversource CFO John Moreira said the utility will redirect capital investment once planned for Connecticut.

    “I do want to emphasize that we are confirming our five-year capital expenditure forecast of $23.1 (billion) across all business units,” Moreira said. “Substantial, consistently emerging infrastructure needs across our system provide ample opportunity for capital deployment in lieu of using those valuable resources in Connecticut.”

    Lamont did not respond directly to the Eversource executives. A spokeswoman said the administration is awaiting details of the utility’s capital spending cuts, but is confident Eversource will uphold its legal commitment to maintain reliability of the electric grid.

    “The administration believes the best way for Eversource to have a fair review of their recovery costs is by coming in for a ratemaking case,” spokeswoman Julia Bergman said. “The governor has been clear in his support of Connecticut’s shift toward performance-based regulation and his support for Marissa Gillett as chair of Connecticut’s Public Utilities Regulatory Authority.”

    Lamont reappointed Gillett on Thursday.

    Officials at PURA did not immediately respond to inquiries.

    Eversource has had an increasingly rocky relationship with Gillett.

    Nolan reaffirmed the utility’s decision to sell its Aquarion Water subsidiary, a decision made after PURA not only rejected a rate hike request to cover the costs of improvements to water delivery systems, but reduced rates overall.

    Two weeks ago, it announced that, after committing more than $50 million to electric vehicle charging infrastructure, it was discontinuing spending on the program “until such time that PURA establishes a secure, timely and adequate funding mechanism to provide the revenue necessary to support these programs.”

    In response to a pointed question from an analyst, Nolan said he is aware that Lamont has considered expanding the number of PURA regulators from three to five, or replacing those now serving, moves that could weaken Gillett’s influence

    “I am really not quite sure what the current plan is around that,” he said. “As you know, we have grave concerns about the environment there. You know that. I think everyone knows that.”

    The Eversource experience over recent years in Connecticut is in contrast to what it has encountered in New Hampshire and Massachusetts, which Nolan said is at the forefront of  decarbonization efforts.

    “It is going to take that type of collaboration as we look to electrify our system and move away from carbon fuel,” Nolan said. “If we don’t collaborate it is going to make it very difficult. It is a disappointment to me and it is a priority for me as we try to focus on Connecticut and see if we can’t get aligned and get on the same page so that we can move the agenda.”

    He pointed specifically to Eversource’s financial contribution to the $400 million State Pier renovation that has made New London a prime supply port for Northeast offshore wind projects.

    “That clean energy port down there should put them on the map for clean energy,” Nolan said. “But it has been a real challenge. I want all of our investors to know that this is something that I take very seriously and it is something that I will continue to work on seven days a week until such time as we can get some constructive change.”

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