Here is an element of New Hampshire’s regulation of public utilities that is so bad for ratepayers, but so firmly embedded in established practice, that nobody even notices it anymore.
Roughly every three years — sometimes more frequently, sometimes less, depending on circumstances — every utility in the state files a rate case. This is how these investor-owned companies increase their prices — by obtaining the approval of the Public Utilities Commission.
By statute, the PUC has a year to wrap up a rate case. Believe it or not, that’s reasonable.
Rate cases are complicated beasts with lots of parties. My office (which represents the interests of residential utility customers) almost always among them. Many issues require detailed analysis — everything from depreciation and return on equity (which, collectively, assure that utility shareholders get made whole) to personnel costs, to slicing up the revenue pie so that every customer group pays its fair share.
Utilities hate waiting around for a year before their rates go up. So, way back in 1941, they persuaded the Legislature to authorize PUC approval of what are known as “temporary” rates. The temporary rate statute allows the PUC to approve part of the requested rate increase — sometimes a big part of it — almost immediately.
The standard for approval of such temporary rates is much more lenient than the statutory “just and reasonable” benchmark that applies to the permanent rates that arrive at the end of the rate case rainbow. Indeed, at the Office of the Consumer Advocate we generally just shrug if a utility’s temporary rate request is about half of the permanent rate increase the company seeks.
Unitil is the latest New Hampshire utility to file a rate case. Having just wrapped up the electric distribution rate case it filed last year, the Hampton-based company is now seeking to increase gas distribution rates for residential customers by more than 14%.
Of course, Unitil is also seeking a temporary rate increase of 8.1% for residential customers. Unitil wants the temporary rates to go into effect on June 1. The PUC has scheduled a hearing for May 12.
All of this is bad news for customers for three distinct reasons.
First, in what other economic realm does government work like this? If you graduate from law school and sit for the bar exam, the state doesn’t immediately issue you a temporary law license while you await the exam results. Municipalities can’t impose temporary hikes in property taxes while everyone awaits the results of town meeting. There’s no such thing as a temporary increase in the price of a first class postage stamp.
Second, the temporary rate statute contains a reconciliation provision. If the PUC approves temporary rates — indeed, even if the regulators adopt a temporary rate that is equal to current rates — the permanent rates approved at the end of the rate case are applied retroactively, as if they went into effect when the temporary rates did.
The utility doesn’t send you a new bill for the old service. Rather, the company simply calculates the difference between the permanent rates and the temporary rates and tacks on a rate surcharge to recover the extra money, usually over the course of a year.
Any constitutional scholars in the audience might find themselves wondering: Doesn’t that violate Part 1, Article 23 of the New Hampshire Constitution? “Retrospective laws are highly injurious, oppressive, and unjust,” says Article 23, and it’s well established that among the “laws” covered by this language are utility rates when approved by the PUC.
So why hasn’t the New Hampshire Supreme Court declared the temporary rate statute to be unconstitutional? Perhaps because nobody has ever asked it to.
The last reason temporary rates are bad for ratepayers is the way utilities manipulate this mechanism for propaganda purposes. For example, when Eversource won its rate case last summer (since getting 98% of the rate increase you seek counts as a victory in my book) the company put out a news release suggesting the effect on bills would be modest — less than five bucks a month for a typical residential customer.
What statements like that fail to mention is that the increase to which the utility is fessing up is simply the difference between temporary rates (made effective a year earlier) and permanent rates. Eversource was hoping you didn’t remember that rates were much lower before the temporary rate increase.
How much lower? The monthly fixed customer charge — effectively, the price of admission to being a customer went from less than $14 at the beginning of the rate case to almost $20 at the end.
Meanwhile, Eversource’s volumetric rate (paid per kilowatt-hour consumed) when up by more than 17% via the temporary rate increase imposed on August 1, 2024. By imposing the rate increase piecemeal, Eversource could effectively hide the magnitude of its victory over ratepayers last August — a victory that was, don’t forget, retroactive to the previous summer.
We at the Office of the Consumer Advocate, along with the state’s Department of Energy, are awaiting word from the New Hampshire Supreme Court that it has accepted our appeals of the Eversource rate case decision. Meanwhile, new rate cases are in the pipeline — and with them, new requests for temporary rate increases. The temporary rate statute is anti-ratepayer and the Legislature should repeal it.
Attorney Donald M. Kreis is the state’s Consumer Advocate, representing the interests of residential utility customers.