Attorney general says CL&P would overcharge customers for storm recovery

In a brief filed today, Attorney General George Jepsen asked the state Public Utilities Regulatory Authority (PURA) to disallow at least $90 million in storm-related costs Connecticut Light & Power (CL&P) is seeking to recover from ratepayers. The attorney general asserts that certain claimed costs are improper or unjustified and that PURA should impose a substantial penalty for the company’s broadly deficient and inadequate response to Tropical Storm Irene and the October 2011 nor’easter.

CL&P is seeking approval from PURA to charge its ratepayers approximately $414 million for the costs the company claims are associated with major storm damage incurred in 2011 and 2012 — including the two 2011 events and Storm Sandy in 2012.

CL&P issued the following response: "We disagree with the attorney general's assertions. These were unprecedented storms that caused historic damage which was costly to repair. It's also important to remember that storm recovery costs have already been reduced for our customers by $40 million as a direct benefit of our merger agreement."

“Utility companies are, by law, allowed to recover reasonable expenses for major storm response,” Mr. Jepsen. “However, I believe CL&P’s petition to PURA includes a number of expenses that should not be recovered from ratepayers. Further, I believe the evidence presented in these proceedings shows that, in a number of instances, CL&P did not take adequate steps to protect its ratepayers. CL&P should treat its ratepayers as a last, rather than a first, resort for its storm-related costs.”

In his brief, the Attorney General argued that PURA should also disallow 30% to 50% of the otherwise legitimately incurred costs from Tropical Storm Irene and the October nor’easter due to the company’s failures during those two storms. CL&P identified $111.2 million in costs associated with Tropical Storm Irene and $175.1 million related to the October nor’easter. This would equal a disallowance of $85 to $140 million.

Mr. Jepsen said CL&P incorrectly accounted for $16.34 million in accumulated deferred income taxes that should be applied to offset the utility company’s storm costs and, as a result, failed to provide ratepayers with the full benefit of tax deductions it used to reduce its storm costs.

According to the brief, CL&P failed to hold AT&T responsible for its rightful share of storm-related tree work per an agreement between the two companies and that ratepayers should not be responsible for the 30% — or $9.2 million — of storm-related tree work that CL&P should have collected from AT&T.

The attorney general alleges that CL&P mismanaged an affiliate storm reserve fund — an insurance arrangement between Northeast Utilities’ three affiliated electric utilities — by choosing not to file a claim on behalf of CL&P ratepayers and that the company should return $5 million to ratepayers for that mismanagement.

He also argues the company failed to evaluate whether damage sustained during the two massive 2011 storms could have been covered by an insurance policy held for its substations and any infrastructure within 1,000 feet of those structures. For that failure to take minimal steps to protect its ratepayer interests, CL&P should compensate ratepayers no less than $5 million.

The company is also seeking recovery of nearly $11 million in recovery costs associated with two separate thunderstorms in June 2011. Mr. Jepsen said in his brief the company is precluded by the merger settlement agreement from seeking recovery for the thunderstorms and, even if it was not precluded, the June 8, 2011, thunderstorm did not rise to the level of a “major storm.”

PURA is expected to issue a draft decision in this proceeding in late December.

Assistant Attorneys General John Wright and Michael Wertheimer, with Associate Attorney General Joseph Rubin, are assisting Mr. Jepsen with this matter.

To view the brief click here: