Face the Facts: Breaking down increasing electric costs

Frustrated electric customers are saying, Enough is enough. Two increases in two months led to a petition with more than 60,000 signatures on it, calling on lawmakers to do something about the electric rates.

There are Facebook groups that are now planning a protest at the State Capitol in September. So how did we get here?

We've heard from state lawmakers right here on Face the Facts. Now it's Eversource's turn.

NBC Connecticut's Mike Hydeck spoke with President of Electric Operations for Eversource Steve Sullivan about it.

Mike Hydeck: Alright, so I'd like to kind of break this down into two parts. You and I were talking as we led to the interview here. When Connecticut customers continually hear that we have among the highest rates in the country, and that's not new, they know it. It's been that way for a long time. It's upsetting to them. So I wanted to break it into two parts. We could start with the public benefits portion, and then we could go into the rates. As far as the public benefits portion, for some customers, not all, it seemed to have gone pretty high for some. Can you help me explain where that money goes to them?

Steve Sullivan: Sure, I mean public benefits, they're for a variety of items, and they all really come from state policies. So one will be renewable energy purchases, incentives for solar, incentives for battery chargers. And there is a smaller piece in regards to financial aid. And I know that gets a lot of play lately, but that's actually the smallest component. The largest component was really a power purchase agreement with Millstone. And I could talk about that, if you would like.

Mike Hydeck: Right, and the power purchase agreement with Millstone, correct me if I'm wrong. So gas prices were really high, which can can move your turbines to create electricity, not your turbines, the turbines to create electricity, and then, so we made an agreement with Millstone, because then it was a cheaper way to buy power. That's all shifted. Is that correct?

Steve Sullivan: Yeah, well, I think you have to step back and really look at, you know what was behind that Millstone purchase, which was the largest piece of the public benefits portion. And really, by state policy, the state was saying, "hey, these two very large nuclear plants, Millstone in Connecticut and Seabrook in New Hampshire, there is a public interest in keeping them running up and operating."

Mike Hydeck: Because it keeps jobs and that kind of thing.

Steve Sullivan: Well, really, and it's also base load that enables, partially, the transition to clean energy. So arguably a very good policy from the state, but then you have to look at how is that policy then implemented. So essentially, from what the regulators had us do was buy that power from Millstone and then immediately sell it into the marketplace. And it is a marketplace because the supply side, these supply companies, they're deregulated. So we were buying the power, selling it in the marketplace. Now, 50% of the time we were buying the power from Millstone at this rate, but the supply market was at that rate, and it created a huge savings, and the regulators flowed those costs through to our customer, as was appropriate and as we supported 100%. But the other 50% of the time, the Millstone costs were here. The market costs were there. It created a huge cost, and the regulator chose not to flow those costs onto the customer. They kicked the can down the road several times, building up interest costs, and they essentially just created a huge bow wave. So essentially, they used us as a credit card, ran up a huge bill, hit their rate limit, and now they're paying it down.

Mike Hydeck: So there's an agreement with state regulators to pay off that originally, I think, and correct me if I'm wrong, over 22 months. Eversource says, "Look, we need to pay this off way quicker, like a year." Is that right? Do I have that right?

Steve Sullivan: Yeah. Well, again, first you have to, the folks that are advocating, hey, why don't we just make it 22 months, were the same folks that kicked the can down the road for four years and created this huge bow wave of costs. So if you just extend it any further, you're just continuing to kick the can down the road, and you create interest costs, so you're just pancaking those overall costs. But again, if you step back, the overall state policy, good sound policy, but then flawed regulatory implementation led to a bad outcome for our customers.

Mike Hydeck: So let's talk rates now, because I want to get some of this in before we run out of time. Power use at home, state regulators, that's what I want to talk about. State regulators recently approved a 39 cent per kilowatt increase added to the rate. So that's what you use, and now you pay for what you use. Where does that increase go? Why was the increase requested and where does it go?

Steve Sullivan: So again, the only two increases recently have really been through the public benefits portion. The one we just talked about. The second one is for electric vehicles. Relatively small amount on your bill, about $3 on average for a customer. And again, very similar situation. The state has a policy goal of being carbon neutral by 2040. To do that, you absolutely have to electrify the transportation sector, so the state wanted to incentivize battery chargers. Now I've heard quite a bit in social media and even the media that folks think that means Eversource is installing battery chargers and you're going to be forced to plug into a logo with the Eversource logo on the charger. Nothing could be further from the truth. These are homeowners and businesses that are installing their own battery chargers. Our role is merely to process those applications and pay out a cash rebate. But again, a second, how that was then implemented by the regulator was to push those costs down the road.

Mike Hydeck: Right, so you outlay the money first you, get paid back, but it's going to be paid back way more slowly than Eversource wanted.

Steve Sullivan: Well until now, they haven't. So essentially took out a second credit card, rang up a big bill, and now they have to pay this bill off as well.

Mike Hydeck: So this is complex. It's hard to unwind for billpayers. One of the things I think, messaging might help, as far as the anger. Can the bills become more transparent than they are now? Like I said, if I know that $5 of my bill is going to go towards the electric charger program, $3 is going to go towards, you know, grid enhancement, things like that. Will we see that on the bill? Is that something you think that customers would like, and do you think it would stop some of the anxiety we have right now?

Steve Sullivan: Great question. And you're actually saying, "hey, take it to the next level." Because if you actually look at your bill now, we've tried to provide transparency by breaking it down into those four components, and if you just work your way through the components, it's local delivery, transmission, public benefits and supply. It is important to note that the Eversource piece is only the local delivery and the transmission piece. And if you look at that, it's less than half of your bill. And those rates have been very stable. If you track them over time, they've essentially tracked the rate of inflation. Now the supply piece, biggest piece, most volatile piece, that is not Eversource. Those are large generating companies. You know, Millstone is owned by Dominion, a very large Virginia Company, twice the size of Eversource. Seabrook, owned by NextEra, a very large Florida company, five times the size of Eversource. Now their names are not on the bill, because, by regulation, we are required to consolidate that bill so the customers get one. They get that bill in our name. But behind the scenes, 50% of those dollars are going to those generating companies. 10% are going to for those public benefits programs. Approximately 40% is actually going to Eversource and that's the piece that we use for all the poles, the wires, the manholes and the people that design, build and operate that system.