Another Oopsie: this time it’s Liberty Utilities

Power to the People is a column by Donald M. Kreis, Consumer Advocate of New Hampshire. Kreis and his team of four represent the interests of residential utility customers before the NH Public Utilities Commission and elsewhere.

By DONALD M. KREIS, Power to the People

In the last installment of “Power to the People,” I explained how Eversource was trying to force its New Hampshire customers to foot the bill for a $ 1.6 million mistake the company made in connection with the government revolving portfolio standard. But, in fairness to Eversource, it’s not the only utility deploying such tactics.

In fact, Liberty Utilities is asking the Public Utilities Commission (PUC) to force customers to cover a $ 4 million error made by its natural gas subsidiary in 2019 and 2020. What if you thought the stupidity of Eversource was a messy mess, wait you get a load of that.

At the end of 2018, as part of the settlement of a natural gas tariff case at the PUC, Liberty adopted a technique known as “revenue decoupling”. Who deserves the credit or the blame for income decoupling? I do.

By that I mean: After I took office in 2016, the Office of the Consumer Advocate (OCA) began pressuring all of the state’s electricity and natural gas utilities to shut down. “Decoupled”. Income decoupling breaks the link between the amount of electricity or natural gas sold by a utility and the amount of income it receives.

Why do that? Because a utility that no longer makes money by selling more of its product has lost the so-called “flow incentive” and can become a strong supporter of energy efficiency and other measures calculated to help us. to use less energy. It’s good for the customers.

A public service subject to revenue decoupling regularly adjusts its tariffs to compensate for fluctuations in sales. Was it cold last month, so natural gas customers needed a lot of heat? Then there was a windfall of income and the following month the rates fell accordingly.

Decoupling is a complicated mechanism, the details of which are set out in the tariff published by the utility. What is a rate? Basically all the terms and conditions that form the contract approved by the PUC between a utility and its customers.

If you look at Liberty’s natural gas tariff, you’ll see that its decoupling mechanism takes up over four pages of dense, single-spaced verbiage. (Search by word or just go to “Original Page 35”.) The resulting rate fluctuations occur through the Local Distribution Adjustment Clause (LDAC) charge on monthly bills.

Utilities are responsible for the adequacy of their tariffs, but when it comes to decoupling Liberty has issues. In particular, it turns out that Liberty did not sufficiently take into account that some residential customers get a discount because they qualify for low income assistance. (A similar program is available for eligible electric customers.)

Because we love decoupling, we helped Liberty solve this problem. Two smart people on my team, Al-Azad Iqbal and Christa Shute, spent hours on revised tariff wording to be included in the settlement agreement we signed earlier this year to resolve the latest gas tariff case. natural Liberty.

(Alas, Iqbal now works for PUC and Christa is the executive director of NEK Broadband in Vermont. I guess others have noticed their ability to work on complex regulatory issues like decoupling.)

The new and improved tariff came into effect on August 1. So what about the $ 4 million Liberty would have collected from customers in 2019 and 2020, through the decoupling mechanism, if only the tariff had correctly taken into account the revenue effects of the low rebate? returned?

The answer is in the New Hampshire Constitution: never mind. It’s right there in part 1, section 32 – the clause on how “retrospective laws are very damaging, oppressive and unfair”.

In other words, because a public service tariff has the force and effect of law, a public service cannot go back in time and collect money that it could have collected before if only it had obtained money. the PUC the approval of the correct tariff language. Imagine buying a box of breakfast cereal from your local supermarket for $ 4 only to be charged another dollar a few weeks later because the grocer charged you the wrong price.

The principle that applies to the $ 4 box of cereal applies to the $ 4 million Liberty wants to collect from its natural gas customers, regardless of whether Liberty’s prices are approved by a regulator.

How do you know a utility is in desperation mode? One sure sign is when they stop relying solely on their in-house lawyer and bring in the mercenaries from a law firm in Boston. This is exactly what happened here.

With the help of these big city lawyers, Liberty applied a very clever argument to support his quest for that $ 4 million. This is not retroactive pricing, they claim, it is a “reconciliation mechanism”.

Boston attorneys unearthed a Massachusetts case in which that state’s utilities regulator said a fuel adjustment mechanism (in which tariffs go up or down to account for fluctuations in the wholesale prices of commodities). base) “falls outside the retroactive pricing structure”.

What does a Massachusetts case tell us about how to interpret the language of the New Hampshire Constitution? Exactly nothing.

What does a mechanism for adjusting tariffs when fuel prices change – a process defined in tariffs – tell us about the situation when the tariff itself is wrong? Also nothing.

A silver lining is that the controversy offers proof that the creation of a State Department of Energy on July 1, mainly by reassigning former PUC employees, was a great idea.

Before July 1, lawyer Mary Schwarzer worked for the PUC, she should have kept silent because the statutory charge of her agency is to act as arbiter between the interests of the clients of the public services and the interests of the shareholders of the public services . Now that she is in the ministry, she and her colleagues are free to say what is right publicly.

“[A]When it comes to black letter law, Liberty is not entitled to the “take back” it seeks, ”Schwarzer wrote in an argument recently filed with the PUC. She rightly points out that besides the tariff argument, there is the small problem of the PUC which twice examined the tariff adjustments linked to decoupling (those made in 2019 and 2020) and considered them prudent, without the shadow of an objection on the part of Liberty.

We have asked the PUC to send the problem immediately. The Energy Ministry has adopted a different strategy, suggesting that the Commission take “more time to consider the arguments” outside of an impending tariff hike procedure linked to the surge in wholesale natural gas prices.

Either way, Liberty messed up and customers shouldn’t be paying for the mistake. So enjoy your corn flakes; you have already paid them.

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