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Regulators May Cut Utility Profit For “Inadequate” Storm Response

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.(Mauricio Lima/AFP/Getty Images)

.(Mauricio Lima/AFP/Getty Images)

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(Click here to read the full report.)

By STEPHEN SINGER, AP Business Writer

HARTFORD, Conn. (AP) _ Connecticut regulators harshly criticized the state’s biggest utility on Wednesday for its “deficient and inadequate” handling of two massive storms last year and held out the possibility of cutting its allowed profit as punishment for extensive outages affecting hundreds of thousands of customers.

The Public Utilities Regulatory Authority issued its final decision in a months-long review of how Connecticut Light & Power prepared for and responded to Tropical Storm Irene in late August and a freak October snowstorm.
Regulators said CL&P failed to get adequate help before the October storm and that its response was deficient.

“The Connecticut Light and Power Company’s performance in the aftermath of the 2011 storms was deficient and inadequate in the areas of outage and service restoration preparation,” regulators said in their 119-page decision.
CL&P’s failures were sufficient to “warrant regulatory sanction,” the agency said.

The Berlin-based utility said it has taken steps to improve emergency response procedures. It appointed a new head of emergency preparedness, is revising its emergency plan and procedures to cover significantly larger storms and has increased spending on tree-trimming to protect wires from downed trees and branches.

The utility has previously said several consultants found that its performance was consistent with industry norms. It also said it is aware of opportunities for improvement and has made changes and will continue to do so.

Regulators did not say how much it may reduce CL&P’s profit. They said a reduction in the next ratemaking proceeding would serve as penalty and spur incentives for improvement.

CL&P has no rate requests pending and has not submitted request for recovery of storm-related costs, which regulators also said they may reduce. The utility has estimated that costs may total as much as $290 million for the two storms.

Costs typically are assessed to ratepayers, not shareholders.

The final decision orders CL&P to develop a plan to establish a “heightened state of readiness” in preparation for future storms and to take steps to address issues such as tree trimming, communications and getting help during and after storms from other utilities.

Regulators did not specify potential sanctions against other public service companies such as United Illuminating, Connecticut’s second-largest utility. But they said they will consider UI’s storm performance when reviewing future requests for the recovery of costs.

Spokesman Michael West said that if and when UI submits a rate request to regulators, it would not be for storm costs but after assessing business operations and determining that higher rates are needed.

Regulators said telephone, cable TV, gas, and water companies and Internet providers were less affected by the storms than the electric industry and “for the most part” maintained adequate service. But it said the companies must do a better job communicating with customers.

Reviews commissioned by Gov. Dannel P. Malloy and Attorney General George Jepsen also found fault with how CL&P responded. Jepsen demanded that up to half the costs CL&P would seek to be shifted to ratepayers be rejected.

The Connecticut legislature, following an examination by a commission appointed by Malloy, established minimum performance standards for emergency preparation and response for electric and gas companies.

(Copyright 2012 by The Associated Press.  All Rights Reserved.)

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