AG Healey Calls for DPU Investigation into Allowed Profits for Bay State Utilities

by | Dec 27, 2016

In a letter sent on December 19 to the Massachusetts Department of Public Utilities, Bay State Attorney General Maura Healey called for an investigation into why the allowed profits for utility companies “are going up and are higher than the allowed utility profits in neighboring states.”

AG Healey urged the DPU to shine more light on–and improve the process used to determine–utility companies’ allowed profits. She described the DPU’s final decision-making process for a power company’s allowed shareholder profits – known as its rate of return on common equity (ROE) – as “less transparent than other public utility commissions,” noting that, “The DPU does not provide a road map or the specifics for how it arrives at a final allowed ROE number, and the final result often appears inconsistent with the DPU’s other findings.  Small changes in a company’s ROE can either cost or save customers millions of dollars.”

“Massachusetts customers should not be paying millions more towards utility profits than customers in neighboring states,” said AG Healey. “As the ratepayer advocate for the state, we must ensure best practices and a transparent process that is understandable to the public.”

Healey’s letter follows a decision on December 14 by the Connecticut Public Regulatory Authority (Docket No. 16-06-04) to limit the allowed ROE to 9.10 percent for United Illuminating.

In October, the DPU allowed a much higher 9.9 percent ROE as part of National Grid’s recent $101 million rate hike (Docket No. D.P.U. 16-BSF-D3 ), which, Healey said, is the highest ROE for an electric or gas utility company in Massachusetts since 2009. 

Indeed, the AG claims, “If National Grid’s ROE [had been] limited to 9.10, the rate allowed in Connecticut, its customers would save approximately $12 million per year.

In her letter, AG Healey asks the DPU to explore a range of options for increasing transparency for the public, recommending that the DPU review its current practices, the practices of other states’ public utility commissions, and opportunities for improvement.    

Adding to the urgency, she said is the fact that Eversource Electric recently announced that NSTAR Electric and Western Massachusetts Electric will be asking the DPU to approve rate increases in January 2017.

Her action follows a June letter signed jointly by her  and a colleague in Rhode Island. Attorneys General from Massachusetts and Rhode Island sent a joint letter to ISO-New England and New England electric transmission owners on June 30, urging the companies to “improve the transparency of calculations and inputs” so that all stakeholders can more easily review, question and challenge proposed transmission rates.

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