My Turn: Utility regulators and the public trust

For the Monitor
Thursday, February 01, 2018

Call me quixotic, but when utility regulators entertain infrastructure projects why can’t we presume they would consider only scrupulous applicants and, at the hint of a petitioner’s unfair business practice, halt the proceedings to investigate?

In November the Department of Energy granted Northern Pass Transmission LLC a presidential permit. It did so only one day before Hagens, Berman, Sobol and Shapiro, LLP, a large consumer-rights, class-action law firm, filed a federal lawsuit claiming Eversource – NPT’s parent – was party to causing $3.6 billion in excessive electricity costs for New England customers. With the suit’s discovery looming, the department rescued Eversource’s private project with perversely timed consent.

The recent suit charged both Eversource and Avangrid, a Connecticut company, with manipulating the natural gas market in a years-long scheme to drive electricity costs higher. As important, the allegations were a matter of public record weeks before the department’s decision to permit the project. In my view, without a formal Federal Energy Regulatory Commission investigation of these charges, the grant counts as the DOE’s base disregard for the public trust.

The permit now awaits the New Hampshire Site Evaluation Committee order on the project.

The DOE’s bent for our incumbent utility isn’t new. Seven years ago it chose Normandeau Associates for expertise on the project’s environmental impacts, the same consultant Eversource used. In a 2011 letter to then Secretary of Energy Steven Chu, Sen. Jeanne Shaheen wrote, “I am deeply troubled that the Department of Energy selected a firm to perform what should be an objective assessment while it is also doing work for the project applicant.”

Another matter pending the SEC decision with a similar backdrop is the New Hampshire Public Utility Commission order granting NPT LLC public utility status.

In December 2015, two months after the PUC opened NPT’s petition to do business as a public utility, FERC concluded an investigation into New England’s participating transmission owner’s tariff. Of the owners, Eversource is the largest. The federal regulators found the tariff’s formula rates for regional and local network service appeared “unjust, unreasonable and unduly discriminatory or preferential or otherwise unlawful.”

According to the Hartford Business Journal, the problem began in 2005 with a federal law providing for a return on equity of 11 percent or more on grid-reliability projects. With the promise of generous equity returns and other enriched incentive payments, New England transmission owners made substantial new investments. But coupled with large, persistent construction cost overruns – absent FERC prudence reviews – the regional network service rate skyrocketed.

The costs compounded for a decade.

By October 2016, when the PUC granted NPT public utility status, New England market transmission rates were running a freakish 81 percent higher than the next highest in the country, the Pennsylvania PJM market.

That same month, then PUC Commissioner Robert Scott addressed the problem at an Energy Summit in Concord revealing that since 2005 transmission costs to PSNH residential customers had increased an astounding 347 percent. He told attendees that in June 2008, the New England Conference of Public Utility Commissioners compiled data showing that from 2004 into 2008 transmission construction cost overruns ranged from 30 percent to 408 percent of estimated costs. He next cited a later survey of grid-reliability projects from 2007 through 2012 that showed more than two-thirds exceeded planned estimated costs on average by 29 percent and that after eight years FERC had not resolved the problem.

The PUC knew about the overruns by 2008 at the latest. Still, the commission granted NPT public utility status by allowing it to rely on Eversource to meet the “public good” standard – that it had the technical managerial and financial expertise as well as general fitness as an applicant. But given Eversource’s role in the cost overruns and corrupt transmission rates, how could the PUC find it competent or ethical enough to qualify?

Modern utility regulators consider each case on their vast dockets as a discrete matter and “the orderly and prompt conduct of the proceedings” has become an end in and of itself. As a consequence they most always favor the power and privilege of the very monopolies they were instituted to shield us from making a mockery of what is right and just.

What about the public trust?

(Terry Cronin lives in Hopkinton.)