Operation Fuel Testimony Supporting RB 5203, AAC Utility Cost-Sharing Mechanisms

Testimony from Operation Fuel Policy & Public Affairs Director Gannon Long, March 2022.

Chairs Needleman & Arconti, Ranking members Formica & Ferraro, and honorable members of the
Energy & Technology Committee,
Thank you for considering Operation Fuel’s testimony today, in favor of RB 5203, AAC Utility
Cost-Sharing Mechanisms.

Operation Fuel provides utility and energy bill assistance to low- and moderate-income residents of CT who struggle to pay CT’s high and rising energy bills. We encourage anyone experiencing energy insecurity to check out our online application at www.operationfuel.org/gethelp. In just 3 months since December 6, 2021, we have served over 1768 households, providing almost a million dollars to families struggling with electric, gas, water, and other bills.

As this committee and Operation Fuel know well, energy affordability remains a serious challenge in CT. Since our founding in 1977, Operation Fuel has been on the front lines of energy affordability issues in CT. While we started out focusing on keeping families warm in winter, today our biggest expenses by far are CT’s exorbitant electricity bills. We refer the committee to reports on energy affordability, including our 2017 Energy Affordability in CT study from APPRISE, and the Green Bank’s 2020 follow up Mapping Household Energy & Transportation Burden in CT, which describe energy burden throughout the state. We are currently engaging VEIC to further examine the costs of basic needs in CT, including water, in the aftermath of the pandemic.

To better understand the complexities of our high electricity costs, Operation Fuel also monitors PURA dockets. As we read it, RB 5203 addresses several issues that have emerged in relevant dockets since last session. While we support all 7 sections of the bill, we highlight Sections 4 and 7, which we believe are particularly important as basic transparency for consumers. We all know that energy costs are too high in CT; this is an issue that affects everyone who uses electricity in CT. While that challenge is complicated, and this one bill won’t solve it overnight, RB 5203 provides concrete steps that the legislature can take immediately, to give ratepayers some relief. We hope the committee will seize this opportunity to lower energy costs for families.

Operation Fuel believes this bill and debate are important opportunities to educate consumers about the several, specific, costly charges on our bills. Many people don’t understand or benefit from them, but we are all required to pay every month. Very few customers or advocates participate in the PURA process, even though this is the most direct way to influence our utility rates. We believe the Authority needs greater flexibility to enact decisions that favor ratepayers over utility company shareholders. It is important that CT residents see the details of what we are paying for each month when our utilities bill us. RB 5203 highlights some of the frankly ludicrous costs that CT ratepayers pick up for these regulated monopoly companies.

Section 1 Regards decoupling (separating) Electric Distribution Company (EDC) sales from revenue. Revenue “decoupling” is a ratemaking tool first designed to incentivize energy efficiency. Decoupling is a means to provide a guaranteed “return on equity” or profit to the companies, even if they sell less power – which is a favorable goal for consumers and emissions reduction. During storms, customers don’t pay for electricity while power is out. However, these savings don’t change the companies’ guaranteed profits – the gap is then tacked on to the rates for the upcoming year. This is one reason that our rates continue climbing.

Operation Fuel is an advocate for and is involved in extensive energy efficiency work, including with the CT Green Bank’s battery storage program and the utilities’ Shared Clean Energy Facilities programs. However, our experience in energy affordability dockets demonstrates that the current system ofdetermining EDC profits deserves more scrutiny from regulators. In 2020, this committee and legislature passed a Performance-Based Regulation directive to PURA. As PURA takes on this docket to lay out performance goals, incentives, and penalties in collaboration with a broad group of stakeholders, we believe Section 1 gives them the appropriate authority in ratemaking. RB 5203 would give PURA, the state’s foremost experts on ratemaking analysis, broader authority to determine when and how to approve revenue decoupling.

Sections 2 & 3 Expanding PURA’s authority to examine interim rate decreases for EDCs when they over collect revenue; extends timeline to next rate case.

Currently, PURA approves rates in forward-looking rate cases, based on projected (not actual) cost data. When companies collect 1% or more over projected revenue, they are required to report it to PURA, who determines (with statutory limitations) the means of redistribution. These sections would lower the threshold for the companies to return revenue to .5% over collection, and would require that ratepayers get no less than 80% of the earnings – currently, law requires them to be split between shareholders and ratepayers. Think of that – in our state, the companies can require ratepayers to overpay through rates, then return half of what they pay in excess back to shareholders. Do you all think this is right? How do you explain to constituents struggling to pay their bills that they should overpay, and half that money then go to shareholders?

Section 3 addresses the deadlines for companies to return this money, at PURA’s direction.
Currently, this must be done within 12 months of the rate year ending; however, due to the timing of cases, the Authority often doesn’t detect overcollection until a few months after it’s begun. It makes sense that instead of a separate proceeding which makes the system more complicated and difficult to track, that this be instead considered in the next year’s rate case.

Section 4 Requires gas and electricity distribution companies to disclose how they spend advertising costs, which are borne by ratepayers.
This section is particularly important. Currently, LDCs and EDCs recover any advertising costs they incur from ratepayers through rate cases. Section 4 would require companies to disclose details about advertising, including costs, funding, purpose, media, timeline, etc. – how they are spending ratepayer funds to build their brands. While the utilities administer our energy efficiency programs, they are actually sponsored 100% by CT ratepayers, who are contributing $704 million over the next 3 years for energy efficiency investments. We believe it’s important for companies to disclose this information, and to clearly credit ratepayers when we are the ones footing the bill.

Section 5 Adds “macroeconomic conditions” to PURA’s considerations of rate analysis.
Section 5 is a reflection of the pandemic. CT’s Attorney General, who called for a utility shutoff moratorium, and PURA, who granted and enforces it, show us the value of comprehensive responses from the whole of state government in response to a crisis. Ratemaking doesn’t happen in a vacuum – it has real impact on people’s lives. Exorbitant utility costs can compound other financial hardships and stresses families face. It is absolutely appropriate that PURA cases consider these realities.

Section 6 Addresses “ESI” fund, developed through settlement in 2018.
“Electric System Improvements” (ESI) is a charge on the electric bill for vegetation management, which in most states is managed through the normal ratemaking structure, instead of through a separately charged fund derived through settlement agreement. This fund amounts to $300 million a year, and the funds are not reported in the same transparent structure as other rates. Chair Gillett detailed the problems with this structure in late 2021. We should not be funding this necessary work with a special fund that lacks public disclosure or reporting requirements. Please pass this bill to protect ratepayers from continuing to fund this charge.

Section 7 Would pass costs of companies’ lobbying, trade association memberships, and other related activities from ratepayers to shareholders.

The Kentucky Public Utilities Commission recently denied cost recovery to their utility for trade association memberships and lobbying costs. In CT, EDCs regularly recover costs of lobbying, trade association memberships, or related entities from ratepayers. This means that ratepayers pay higher fees on our electric bills so that companies can lobby in favor of shareholders’ financial interests, which are often not the same as ratepayers’ interests. Eversource is part of the Edison Electric Institute, a national trade group that is lobbying FERC to delay Virtual Net Metering – a means of expanding clean energy and lowering consumer costs. We do not believe this entity represents ratepayers’ interests. Company shareholders should be paying these costs as most businesses do to advocate for their interests. In December 2021, PURA fined Eversource $1.8 million for engaging in deceptive marketing practices to expand gas service to CT customers. Many of these materials were generated by a national trade group that sponsors gas expansion campaigns such as the one CT consumers were subjected to last summer. It is unconscionable that ratepayers are sponsoring membership for Eversource to access resources that are used to deceive CT utilities customers. Section 7 is important to bring transparency to this process, which will enable PURA to disallow these cost recoveries.

Operation Fuel is grateful to the committee for raising this bill, which addresses specific challenges regulators face when working to reduce electricity costs for CT residents. While no one bill from this committee or legislature will solve CT’s energy affordability crisis, we ask you to act on these specific recommendations right now, which will provide transparency and relief to overburdened CT ratepayers.

Thank you for your consideration, we urge support of RB 5203.