AG Healey Calls on the DPU to Investigate Increase in Allowed Profits for Utilities in Massachusetts
Seeks More Transparency in the Department of Public Utilities’ Decision-Making Process; A Decrease in Shareholder Profits Would Save Customers Millions
BOSTON – Attorney General Maura Healey this week called on the Department of Public Utilities (DPU) to launch an investigation to explain why the allowed profits for Massachusetts utility companies are going up and are higher than the allowed utility profits in neighboring states. In a letter sent to the DPU Monday, AG Healey urged the DPU to shine more light on--and improve the process used to determine--utility companies’ allowed profits.
In her letter, AG Healey describes the DPU’s final decision-making process for a company’s allowed shareholder profits – known as its rate of return on common equity (ROE) – as less transparent than other public utility commissions. 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. Our office is calling on the DPU to conduct a comprehensive and public review of utilities’ allowed profits and to bring more clarity and openness to the rate-setting process.”
AG Healey’s letter follows a decision last week by the Connecticut Public Regulatory Authority to limit the allowed ROE to 9.10 percent for the United Illuminating Company. In October, the DPU allowed a much higher 9.9 percent ROE as part of National Grid’s recent $101 million rate hike, which is the highest ROE for an electric or gas utility company in Massachusetts since 2009. If National Grid’s ROE was limited to 9.10, the rate allowed in Connecticut, its customers would save approximately $12 million per year. In the most recent Massachusetts rate cases for Unitil and Eversource Gas, the DPU allowed each company a 9.8 percent ROE, similarly costing customers millions of dollars.
The DPU sets a utility company’s ROE as one element of a company’s costs in a rate case. In making its ROE decision, the DPU considers evidence presented by the AG’s Office and company expert witnesses.
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.
Eversource Electric recently announced that NSTAR Electric and Western Massachusetts Electric Company will be asking the DPU to approve rate increases in January 2017.
AG Healey’s Energy and Telecommunications Division works to ensure Massachusetts businesses and residents have access to reliable, safe and affordable energy. This matter was handled by Division Chief Rebecca Tepper, with the assistance of all of AG Healey’s Energy and Telecommunications Division.