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Mass. regulators reduce Eversource's rate request by $54M

Massachusetts utility regulators have reduced Eversource Energy's request rate hike of approximately $90.8 million by nearly 60% to $37 million.

The Massachusetts Department of Public Utilities, or DPU, on Nov. 30 issued the final order on rate requests by NSTAR Electric Co. and Western Massachusetts Electric Co., or WMECo, which together do business as Eversource.

The DPU order culminates a 10-month investigation into the requested rate hike. It cut NSTAR Electric’s base revenue request by approximately $43.8 million and its requested rate increase of nearly $56.1 million by 78% to a smaller increase of roughly $12.2 million. NSTAR's rate increase is premised upon a 10% return on equity (53.34% of capital) and a 7.33% return on a rate base valued at approximately $2.73 billion for a test year that ended June 30, 2016.

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The order also reduced WMECo’s base revenue request by $10.6 million and its requested $34.7 million rate increase by approximately 30% to around $24.8 million. WMECo's rate increase is premised upon a 10% return on equity (54.51% capital) and a 7.26% return on a rate base valued at appropriately $436.4 million for a test year ended June 30, 2016.

DPU Chair Angela O’Connor said the significant reduction of the rate increases will minimize financial impacts on customers while ensuring safe and reliable electric service.

"Additionally, today’s decision requires Eversource to pursue important investments in advanced technologies in an effort to strengthen the state’s clean energy economy and reduce greenhouse gas emissions," said O'Connor.

The new rates are effective Jan. 1, 2018, and are the first changes to NSTAR's and WMECo's electric base distribution rates since 2005 and 2010, respectively. The DPU order prevents Eversource from filing another rate case until 2022 to provide rate certainty for consumers.

The DPU also approved $45 million in investments to speed up the development of infrastructure for electric vehicles and authorized up to $15 million to build a 5-MW energy storage facility in Cape Cod. The facility will prevent the need of additional wires, including a new cable from the mainland to Martha's Vineyard, by increasing distribution reliability and facilitating the development of cleaner, distributed energy resources.

In addition, the DPU approved a performance-based ratemaking mechanism, which seeks to fund the replacement of essential aging infrastructure while avoiding constantly increasing rate case expenses and changing rate redesigns that would result in uncertainty for ratepayers. The regulators also approved the recovery of capital investments for electric infrastructure for Seafood Way and Electric Avenue in the City of Boston and for a New Bedford service station.

The order is the first step in a two-phase rate case that will be followed by a rate design order slated to be issued Dec. 31. According to the DPU, the case's rate design is on a separate track in order to further consolidate rates in Eastern and Western Massachusetts service territories.

The outcome of the rate design proceeding will specify estimated bill impacts on individual ratepayer classes. As a result, the DPU directed Eversource to revise its bill impact analysis and file it with the state agency within five business days.

DPU order draws criticism and disappointment

Eversource is still reviewing the DPU decision but spokesman Michael Durand said in a statement that the utility is "disappointed with the deep cuts" the DPU made to the rate request. "We feel we provided sufficient and detailed documentation to support the total increase we requested," he said.

Durand said Eversource is nevertheless pleased that the DPU agreed with their plan to start implementing measures to support the building of "the electric grid of the future, including electric vehicle charging station infrastructure and an energy storage pilot program, that will assist the commonwealth in meeting its greenhouse gas emission reduction targets."

The approved rates were also criticized by Massachusetts Attorney General Maura Healey, who wanted significantly lower rates. In a statement, she derided the order for allowing additional rate increases of 3.5% annually over four years after the first year's $37 million-hike, "for a total increase of over $220 million over a five-year period."

"At a time when businesses and residents are already struggling with high energy costs, the DPU’s order chooses unjustified corporate profits over Eversource’s 1.4 million customers," continued Healey. "The Department has allowed Eversource to raise rates by hundreds of millions of dollars, instead of imposing the decrease that customers deserve."