Eversource ‘pauses’ electric vehicle program in dispute with CT

A dispute between regulators and electric companies over hundreds of millions of dollars the state is ordering them to spend on clean energy projects escalated Friday when Eversource said it is “pausing” it’s participation in an electric vehicle program — after the state threatened to fine it $10,000 a day for doing so.

The EV infrastructure program, to which Eversource has so far committed about $70 million, is a tiny piece of the state’s overall decarbonization plan. But it has become a flashpoint in a running dispute between the utilities, which are forced to pay for it, and Marissa Gillett, Gov. Ned Lamont’s chief regulator, who decides how much of their investment the utilities are permitted to recover though electric rates.

Each side accuses the other of failing to understand or even follow the law and regulatory precedents that determine how, when and how much of the money the state instructs the utilities to spend to build its clean energy programs can be passed on to electric customers through rates.

At risk are the state’s goals in its transition from carbon-based to all electric power. In addition to the EV charging program, the state wants to replace oil and gas burning furnaces and reduce residential electric consumption through installation of “smart meters,” something that by itself could cost more than $700 million.

Top executives of the state’s two electric utilities, Eversource and United Illuminating, argue in uncharacteristically blunt terms that Gillett, chair of the Public Utility Regulatory Authority, has denied them recovery of hundreds of millions of dollars they are spending on state programs and that the losses leave them unable to carry out those programs while continuing to meet their core obligation to deliver reliable electricity to customers.

What’s more, they said inconsistent and at times contradictory decisions by PURA has left them unable to plan future spending.

In May, Eversource CEO Joseph Nolan said he was reducing capital expenditures in Connecticut by $500 million over the next five years because of a  “negative” regulatory climate that prevents the company 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,” he said on a quarterly earnings call with utility analysts.

Gillett declined to discuss the matter. But her agency contends she inherited a system that was out of alignment with regulatory practice elsewhere in the country and that she, not the utilities, is following the law. PURA did not respond to questions about the EV program Friday.

An official familiar with the issue said the Eversource decision was delivered to the governor’s office, which has been trying to settle a dispute that could hold up Lamont’s call to transition to all electric vehicles.

The official said a meeting of all parties to the dispute has been scheduled by Lamont’s office for Sept. 14.

So far in the dispute, Wall Street has sided with the utilities, although such support is of questionable value since the utilities say it compounds their financial difficulties. After decisions by the Gillett-run PURA slashed utility earnings, analysts cut the stock and credit ratings of both Eversource and United Illuminating, making it more difficult or costly for the companies to raise capital.

Utilities raise capital through a combination of stock sales and debt. They invest the money in both the delivery of power and government-mandated  programs, like clean energy projects. With the approval of regulators, they expect to recover the money from customers over a period of years. During the review process, PURA decides how much the utilities can earn.

Both Eversource and United Illuminating report having had trouble borrowing money in recent months because of concern that PURA, since Gillett’s arrival, has contributed to an unpredictable regulatory climate in Connecticut, which undermines their credit worthiness and reliability to investors.

In March, S&P Global Ratings downgraded United Illuminating from stable to negative in “view of an increasingly challenging regulatory environment in Connecticut.” Two weeks ago, Moody’s Analytics lowered the credit rating of Eversource subsidiary Aquarion Water because of “a Connecticut regulatory environment that is less consistent and predictable as evidenced by the PURA’s decisions involving the state’s regulated utilities over the last few years…”

Said Steven Fleishman of Wolfe Research in New York, “It requires a lot of investment for these activities. And the regulatory construct is very important for the investors to support that investment. And I think that’s a problem in Connecticut right now.”

“They are watching an unstable and unpredictable regulatory environment where we aren’t necessarily going to get recovery of investment, so they may not want to lend money to us in order to make those investments,” Frank Reynolds, United Illuminating president and CEO said recently. “And if they are going to lend us money it probably is going to be at a higher rate, which is going to cost rate payers, or customers more.”

The disagreement over Connecticut’s EV program has simmered for months. Under the program, the utilities provide rebates to customers who install electric vehicle charging equipment.

Last summer, in a much anticipated decision, PURA denied United Illuminating’s proposal to recover what it had invested in the EV program, although, after some confusion, the regulatory agency said it would allow  the company to try again in the future.

In March, United Illuminating said it was withdrawing from the EV program because its resources had been “severely constrained” by PURA decisions on its ability to recover expenses and the rates it is allowed to charge.

“UI cannot continue with the EV Programs without a revenue stream to support the funding required to conduct those programs,” the company told PURA in a regulatory filing.

Not long after, Eversource said it would withdraw from the program for financial reasons. But both companies indicated they supported the program and would recommit if PURA allowed them to recover costs through an annual rate adjustment process and provided them with “a clear statement as to the standard that PURA will apply in reviewing and ruling on the recovery of deferred EV Program costs.”

The two sides failed to agree. The companies wanted to be able to recover their EV costs — including interest on the money they borrowed to pay for the program —  in September and PURA said the companies would have to wait another year for an opportunity to “seek” recovery.

On May 17, PURA told both companies they faced fines. UI resumed the program. On Friday, an Eversource spokesman confirmed that the company said it was “pausing” its involvement, meaning it would still accept rebate applications, but would not act on them.