Utility Companies Fined, Customers Still on the Hook

By Scott Van Voorhis

Homes and businesses across Massachusetts remain on the hook for upwards of $160 million in extra electric bill charges from the massive fall 2011 outages, despite record fines recently levied by state regulators, the New England Center for Investigative Reporting has found.

National Grid, NStar and Western Massachusetts Electric will have to shell out nearly $25 million in fines for a less than stellar performance in getting the lights back on after Hurricane Irene and the freak October snowstorm last year.
The DPU’s decision comes in the wake of a pair of stories earlier this year by NECIR.

The Center’s findings included:
• Power companies plan to charge customers anywhere from $160 million to $190 million for work done restoring power after the two storms, despite allegations the utilities were unprepared for the storms and took too long to restore electricity to homes and businesses across the state.
• A quadrupling of major power outages in Massachusetts over the past five years, a trend that had previously gone unreported.
• Proportionately fewer linemen employed by the major power companies compared to several small, town and city-owned utilities in Massachusetts with much better track records of restoring power after storms.
• A failure by state regulators to review NStar’s storm performance during the process leading to the approval of NStar’s merger with Connecticut-based Northeast Utilities, creating New England’s largest power company.
“As the number of serious weather events has risen dramatically in Massachusetts, it’s crucial for ratepayers to have electric service that is both safe and reliable,” said Energy and Environmental Affairs Secretary Richard Sullivan in announcing the $24.8 million in fines against the three power companies.

Full cost to consumers probed
Hundreds of thousands of customers across Massachusetts lost power for as long as a week, not once but twice in the fall of 2011.

The state Department of Public Utilities slapped the largest fine, $18.7 million on National Grid, blasting it for “systematic failures,” with NStar and Western Massachusetts Electric escaping with smaller penalties.

The fines, some of the largest ever levied by state regulators, will be distributed back to the customers of the power companies, the DPU reported.
However, it may only put a small dent in $160 million to $190 million in storm costs customers may be asked to pay in future years through higher rates, an estimate NECIR first reported in February.

National Grid says its estimate of $100 million to $120 million in storm costs still stands, with plans to begin the process this year of seeking regulatory approval to charge customers, according to Deborah Drew, a company spokesperson.
NStar previously estimated its costs from the two storms at $48 million and Massachusetts Electric pegged potential charges at $23 million. Updated figures from the two companies were not immediately available.

In a story last February, NECIR found there had been eight major outages in Massachusetts from 2007 to 2012, compared to just two from 2001 to 2006.
The NECIR’s investigation also found that the state’s three largest electric utilities have a much smaller lineman-to-customer ratio than many town and city-owned utilities. These smaller, publicly-owned power companies reported restoring power anywhere from a few hours to a day or two after the fall 2011 storms.
While the major power companies employ, on average, 3 linemen per 10,000 residents, town and city-owned utilities have anywhere from four to six linemen for the same number of people, NECIR found.

Regulators’ scrutinized

In a second story that ran in May, NECIR examined state regulatory oversight of Massachusetts power companies. The story found the Massachusetts Department of Public Utilities did not examine NStar’s storm performance when it reviewed and gave a green light last spring to the company’s merger with Connecticut’s Northeast Utilities, creating a New England-wide electric behemoth.

Defending its decision, the DPU argued a better forum for those questions would be its official review of the performance of the state’s major power companies during the 2011 storms.

That report, just released along with the announcement of $24.8 million in fines, looks closely at the day-to-day management of the storms.

However, longer-term structural issues, such as whether the state’s big utilities have enough linemen on staff, are not the focus of the report. There is also only one mention of storm costs in general, with no dollar figure and a blanket statement that the DPU will review the power company requests for additional charges and decide what to approve or not approve.

The track record of small, town and city-owned power companies in restoring power quickly after the fall 2011 storms in communities ranging from in Concord to Taunton has been extensively reported on by both NECIR and other local media. However, that issue was also not addressed in the DPU report.

A spokeswoman for the DPU insisted there was insufficient evidence for the regulatory agency to examine the issue in its report.

“They (municipal power companies) are not regulated by the DPU and it is not clear whether and how much data is even collected on restoration activities by the municipal light companies,” wrote Mary-Leah Assad, a spokeswoman for the DPU, in an email. “Given the lack of data, it is even unclear whether or not municipal light companies’ restoration rates differ from those of the larger utilities.”
The DPU’s report reserves its harshest and most sweeping criticism for National Grid.

The company did not effectively communicate with local communities, left local police and fire officials to babysit downed wires for days at a time, and had an “inadequate response” to restoring power at nursing homes, sewage treatment plants and other “priority” facilities, the report said.

National Grid also did not bring in enough outside crews to help restore power, or, when they did, they were often too late, state officials contend. Along with paying fines, the company will now have to undergo a third-party audit to gauge its ability to respond to emergency situations.

By contrast, NStar and Western Massachusetts were hit with much smaller fines, $4 million and $2 million respectively.

NStar performed “reasonably well” during the storms, but did not respond fast enough to calls from public safety officials about downed lines, state regulators said.

Western Massachusetts Electric was found to have done a good job managing the October snowstorm, but was ordered to improve communication with customers on life-support machinery.

The DPU focused most of its criticism on poor communication by the power companies-- in particular National Grid and NStar-- with local officials and customers.

Still, state utility officials are also arguing that widespread outages may be inevitable at times.

“The DPU understands that there will be many thousands of outages in bad storms like Tropical Storm Irene and the October snowstorm. These will not be the last severe storms we see, and the public cannot expect that the utilities can prevent outages in events of this magnitude,” said DPU Chair Ann Berwick.

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