Eversource CEO under scrutiny
Does outage response nullify Judge’s accomplishments?
Amid demands in August for Eversource accountability after prolonged electric outages and bill hikes in Connecticut, another was audible time and time again: “Where’s the CEO?”
With that question answered Thursday with Jim Judge’s appearance to field questions from Connecticut legislators, the question now becomes, “What’s he done for us?”
Ratepayers and communities do not pick utility CEOs — but through the regulators and lawmakers who oversee monopoly businesses, they have a major say on four priorities that matter in their lives: reliability, affordability, safety and a utility’s impact on the environment.
Are electricity, water and natural gas at their fingertips, whenever customers want them? How much is it costing them? Does the utility deliver those commodities safely? And are its practices having any long-term effects on the air, water and soil?
The General Assembly took up the first two questions Thursday, with both Judge and Avangrid executive Tony Marone appearing before the Energy and Technology Committee.
But the story of Judge’s tenure leading Eversource is incomplete without considering the second two questions as well. Earlier this year Eversource acquired a Massachusetts utility responsible for one of the worst accidents in New
England history and the company looks to make a major return to the power generation business via wind farms off the region’s coast.
Add up the four elements, and it boils down to trust — a commodity Eversource saw drained in the summer of 2020, as customers received shocking billing statements followed by hot days and dark nights as the air conditioning and lights went dead in Tropical Storm Isaias.
Judge did not grant an interview in response to a request filed with Eversource’s media office, but addressed the issue of Eversource’s image during a Thursday hearing in which he fielded questions for more than five hours from legislators.
“I’m sorry that they had to go through the ordeal that they went through,” Judge said. “Our people dealt with a devastating storm as best as they could.”
Quinnipiac University Prof. Hilary Fussell Sisco, in an interview, said companies make the routine mistake in keeping the CEO out of sight in a crisis and the immediate aftermath, particularly when many of those executives got to where they are for their smarts, communication skills and force of personality.
“The CEO’s the leader of the organization so that’s the face of the organization,” Sisco said. “The problem for Eversource particularly was that ... they had this problem six weeks ago before the storm, about the bills. It will be interesting to see how that plays into it, because a lot of people in crisis [communications] say, ‘the first crisis is bad but the second crisis is worse’ — because people remember the first, and it compounds.”
‘Embarrassing and inept’
In his own comments to legislators Thursday, Danbury Mayor Mark Boughton criticized the company’s response to Isaias, noting that he thought its service was on the decline.
“They have said ... that they were coordinated, they were organized and they were effective in dealing with the loss of power that followed the storm,” Boughton said. “They were actually uncoordinated, disorganized and ineffective — and on top of that, I would add embarrassing and inept . ... There has been a steady decline in Eversource
services, responsiveness (and) staffing.”
As an investor-owned company, Eversource’s board of trustees rates Judge’s performance first and foremost for “enhancing the longterm value” of the company for its 33,500 shareholders, as enunciated in the board’s guidelines posted online, while also monitoring whether decisions fulfill Eversource’s customer, community and public service obligations.
Against that first criterion, Judge has done his job well. Since Eversource promoted Judge to CEO in May 2016, the company’s stock is up by half, trading at $86 this week. That was twice the gain over the same stretch of the Dow Jones Utility Index that includes Con Edison, with Eversource’s profits topping $1 billion for the first time in 2018.
Judge has been richly compensated in return, with Eversource calculating his compensation at $19.8 million last year including the value of future pension benefits; and $37 million over the preceding three years.
But customers in Connecticut, Massachusetts and New Hampshire are now taking a fresh look at what they are getting from their utility companies in the context of the $4 billion in profits Eversource has racked up during Judge’s time at the helm.
Absent storms with the statewide punch of Isaias or Sandy in 2012, Eversource has improved on one measure it uses to assess reliability — the interval between
power outages for customers averaged across its operations in three states. In 2019, that interval approached 22 months, a company record that improved on its performance the year before by more than four months, and putting it in the top 10 percent of utilities nationally.
Eversource also set a new best by reducing restoration times to just under an hour as averaged out across all outages, also putting it in the top decile nationally.
But for many Connecticut customers, the company’s Isaias response made a mockery of those stats, with Eversource needing eight days to restore power fully. While that was three days less than Sandy, a number of customers and municipal leaders have complained that utility crews were not spotted in some neighborhoods for several days.
“I can’t even begin to tell you the number of times that I ... found Eversource crews and outsidecontractor crews sitting idly in parking lots waiting for instructions — for hours,” said Bethel First Selectman Matt Knickerbocker. “If we had been assigned one ‘make-safe’ crew for one day, all of those neighborhoods would have been opened — and I find that reprehensible.”
Rising costs
Customers were already apoplectic over their July and August bills, which rocketed up largely due to the thermometer touching 90 degrees or more for stretches of the summer, prompting families to turn up air conditioning while stuck at home during the pandemic.
When it comes to rates, Eversource routinely notes that it cannot charge more than allowed by PURA and regulators in Massachusetts and New Hampshire; and that it cannot profit from customers using more electricity, under rate “decoupling” rules adopted in Connecticut.
But it is Eversource’s name that appears on bills under its “standard offer” service — and both executives and regulators acknowledged this week that the company’s bills do not sufficiently itemize and highlight all components of customer bills.
In approving rates charged by Eversource and Avangrid , the Connecticut Public Utilities Regulatory Commission also factors in additional charges mandated by the Federal Energy Regulatory Commission and ISO New England, the Springfield, Mass., nonprofit that oversees the region’s electric markets and capacity. And rates include additional amounts redistributed by the Connecticut Department of Energy and Environmental Protection as incentives to underwrite the cost of renewable electricity generated by solar panels or energy efficiency programs.
The bottom line is maddening to many in Connecticut. Households paid 21.2 cents for each kilowatt hour of electricity they used in 2018 on average, as calculated by the Energy Information Administration, up just 1.24 percent from 2015 prior to Judge’s elevation to CEO.
That compared to an average U.S. increase of 1.74 percent, and prices went up more in Rhode Island and Massachusetts. But New York and New Jersey recorded declines in the price of electricity
over that period. Connecticut homeowners’ average bill of $153 a month trailed only Hawaii in 2018.
And prices have gone up sharply since. With home-bound pandemic electric use, a summer heat wave and new rates kicking in for power purchased from the Millstone nuclear plant in Waterford, many homeowners are now seeing bills double or triple what they have paid in the past.
Water, gas, wind
Judge has added a few new wrinkles to the job since taking it over from his mentor Tom May, including the company’s 2017 acquisition of Bridgeport-based Aquarion. The move made Eversource the first electric utility in the nation to branch into the water business since widespread industry deregulation. Judge failed subsequently in an attempt to build on Aquarion with the addition of Connecticut Water Service, but continues to buy up smaller municipal water systems.
Another deal with Judge’s fingerprints is Eversource’s $1.1 billion purchase of Columbia Gas, which landed national headlines two years ago after leaks set off a succession of neighborhood explosions in towns north of Boston. Eversource was among the utilities dispatching crews under an emergency “mutual aid” agreement to safeguard against additional damage, running Columbia’s Massachusetts natural gas plant temporarily and then agreeing to take it over permanently.
The company continues to deal with aging infrastructure across the three states in which it does business, to include corrosion in its
natural gas and water pipelines. Eversource has earmarked nearly $410 million for pressing fixes in its natural gas and Aquarion businesses, in addition to another $570 million to replace electrical systems nearing the end of the line.
Even as it maintains that aging plant, Eversource now wants to build wind farms off the coast of southern New England, with Avangrid aiming to do the same with its Park City Wind project Connecticut regulators approved last year.
While Avangrid has ample experience with wind farms in the United States and Europe, Eversource’s Revolution Wind project would mark its first major foray in electricity generation since predecessor company Northeast Utilities was forced to sell off power plants two decades ago as part of industry deregulation, including Millstone.
Judge noted Thursday the choices before Connecticut all cost money, whether soldiering ahead with renewable energy and efficiency or shoring up the existing grid against threats like Isaias. The question becomes whether the company’s shareholders will be asked to pick up a bigger piece of that cost, rather than ratepayers.
“I understand that your perception is that you are succeeding — I also understand the public perception that you are not,” state Sen. Norm Needleman, chair of the legislature’s Energy & Technology Committee, told Judge Thursday.