For Immediate Release - June 20, 2013

AG Urges DPU to Reject $20 Million Cost Increase by Western Massachusetts Electric Company for Storm Response Costs

Cost Request Includes Funding for Promotional T-Shirts and Employee Bonuses

BOSTON – Arguing that a majority of the storm recovery costs sought by the Western Massachusetts Electric Company (WMECO), including employee bonuses and promotional t-shirts, should not be passed on to ratepayers,  Attorney General Martha Coakley is urging the Department of Public Utilities (DPU) to reject WMECO’s $20 million cost increase request.

According to a brief filed late Tuesday by the AG’s Office to the Department of Public Utilities (DPU), WMECO is requesting a $20 million cost increase to recover costs related to previous storms including Tropical Storm Irene. In its request, WMECo included funding for promotional t-shirts and videos as well as bonuses for employees who handled storm response issues. The AG’s Office argued that both issues are discretionary budget items and should not be included in any potential rate increase.

In its brief, the AG’s Office recommended to the DPU reduce WMECO’s request from $20 million to approximately $4.2 million.

“The majority of costs that WMECO is seeking to recover are unjustified, and should not be passed on to ratepayers,” AG Coakley said. “It was particularly concerning to discover that they were trying to recover costs for promotional materials touting the storm response of a company that has already been fined $2 million for prior poor performance. As ratepayer advocate for the Commonwealth, we will fight to keep unjustified and excessive costs and rates from impacting the wallets of Massachusetts residents.”          

The utility also included operational costs related to regular storms, often stringing together multiple small events to surpass the $300,000 threshold required to file for an increase. In its brief, the AG’s Office argued that the bulk of the $20 million is a result of smaller, individual weather events that WMECo grouped together in order to characterize them as large, extraordinary storms. 

According to DPU regulations, in order for utilities to recover storm response costs, they must be:

  • Incremental;
  • Prudently incurred or have occurred under unavoidable circumstances;
  • Reasonable;
  • Storm related; and
  • Attributable to the utility company.

In its request, WMECo also cited its work to regularly prune trees and shrubs to prevent branches from falling on power lines and other utility equipment during major storms. According to WMECo, it is unable to pass on any of the costs to Verizon, even though the telecommunications company also benefited from the utility’s vegetation management. The AG’s Office argued Verizon was contractually obligated to pay half the costs to WMECo for vegetation management and that WMECo failed to pursue those costs from the company.

The brief additionally argues that ratepayers should not be charged for the company’s previous lack of vegetation management. Although WMECo claims to have increased its effort in recent years that does not address the fact that it was significantly inadequate before 2011.

The AG’s Office also argued against WMECo’s use of an “adder” to calculate the additional costs of installing new equipment during storms to restore power. According to the brief, the utility has repeatedly failed to provide how it calculates the upward adjustment in cost to account for the higher costs associated with installing equipment during weather events.

In December 2012, the DPU issued more than $2 million in fines against WMECo for its poor response to the October 2011 snow storm that cause massive power outages for thousands of Massachusetts residents. AG Coakley initially recommended that the company be penalized $4 million.

AAG’s John J. Geary, Joseph W. Rogers and Paul Stakutis of the AG’s Energy and Telecommunications Division are handling the recommendations to the DPU.

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