Op-Ed: Connecticut’s Absurdly High-Priced, Unregulated Utilities – A White Paper

Editor’s Note: This op-ed was submitted by Joseph F. Camean, P.E. of Old Lyme and reflects his opinion.

Connecticut’s purportedly regulated electric utilities have been making news of late, with articles claiming Connecticut’s electricity bills are the highest in the continental U.S. and that as electric prices are set to skyrocket, there aren’t any immediate solutions. There have also been suggestions that Eversource needs a new CEO.

Contrary to the position that there aren’t any immediate solutions, I submit that there actually is one. And it is the competent regulation of our state-sanctioned monopolies and/or conversion to municipally governed regional utility cooperatives.  

As one who has witnessed the conduct of Connecticut Utility Regulation for almost 40 years, the political appointment mechanics for selecting and installing commissioners has resulted in an outcome of no one having pertinent expertise serving as a commissioner.  It’s a non sequitur to have lay persons holding sway over multi-billion dollar, 100-year impact decisions for which ratepayer-taxpayers get saddled with unreasonable costs and unreliable services.  Some examples:

• The aberration as to how our monopoly utility operating companies and physical assets have been allowed to be cashiered to out-of-state and out-of-country ownership, along with unrestrained use of out-of-state service providers for administration, construction, and operations.  How illogical for a state-granted-monopoly to facilitate ratepayer monies sailing out of our state’s borders rather than recirculating these funds within our domestic economy.

• In the 1980’s Connecticut had a municipal waste, i.e., garbage crisis.  The Environmental Protection Agency (EPA) made it near impossible to continue with landfilling, so the default became capitalizing public and private waste incineration “Resource Recovery” plants, producing some electricity. 
  
  Connecticut’s towns shuddered at the capital costs that had to be borne, the legislature in a dilemma of what to do?  Easy—facilitate long term contracts for the purchase of electricity from the proposed plants at 300 percent of fair market value, disguising and socializing the garbage problem into everyone’s electric bills. 
  
  Sadly, had utility regulators piped up and made this ruse transparent to the public, the upward spiral of our electric rates would not have begun its initial upward acceleration, and a more responsible solution to waste disposal could have been motivated, i.e., recyclables and compostable wastes being source-separated, might have started decades ago.

• The 1980s also found Eversource’s predecessor allowed to grossly mismanage the construction of the Millstone III nuclear plant, resulting in the capital cost of the then three-unit Millstone nuclear complex to exceed $4 billion (in 1980’s dollars); this cost burden then saddled upon the ratepayers.  More egregious was the evolution to follow, whereby our original four nuclear generation plants were so negligently mis-operated that federal regulators had to order a stand-down to protect the public. 
  
  Shutting down a majority of our state’s electric generation capacity nearly bankrupted Northeast Utilities, and its managerial failings scandalously made the cover of Time magazine.  Further failure to regulate, extended into allowing Northeast to unnecessarily retire two of the four nuclear plants, followed by auctioning off the two remaining active units to an out-of-state owner. 
  
  In a profound illustration of failed governance, the regulators acquiesced to the utility valuation of Millstone, in year 2000 dollars at $235 million, when in fact the plant brought the highest cash bid ($1.3 billion) of any divested nuclear plant in the USA. End-game was Connecticut ratepayers paid over $4 billion for what was sold for $1.3 billion. 
  
  Adjusting to today’s dollars, with a replacement value of the four plants at $32 billion, all of which could have been life-extended to operate until 2045 and cheaply provide 70 percent of Connecticut’s electricity, all carbon-free, is an unconscionable forfeiture of ratepayer’s money. 
  How’s that for a lasting regulatory impact!

• Following the model of electric ratepayers being hoodwinked to pay for municipal waste disposal, Fuel Cells are one more facet of Connecticut’s electric price road to hell paved with good intentions.  Fuel Cells are machines that were made practical during the 1960s space race to provide electricity for spacecraft, using rocket fuel, i.e., pure hydrogen and oxygen. These machines were developed by the fuel cell division of a now-departed Connecticut company called United Technologies Corporation (UTC).
  
  Fueled on pure hydrogen, these aerospace Fuel Cells make electricity very cleanly, exhausting only water vapor and heat. As a utility power generator, it sounds too good to be true.  In fact, fuel cells cost six times the price of conventional electric generators, and hydrogen fuel costs six times the price of fossil fuels.  Nevertheless, UTC promoted fuel cells as a source of Connecticut jobs and sought state support, with the hydrogen fuel being extracted from natural gas, ignoring that this extraction dumps carbon dioxide into the atmosphere – no differently than conventional natural gas-fueled power plants. 

So should a power generator that costs six times more, with carbon emissions hardly better than conventional generators, be generously subsidized with ratepayer money?  Don’t think for one minute the lobbying power of UTC would be daunted by such minor issues – they succeeded in getting our regulators to allow the fuel cells to be subsidized under the aegis of Renewable Energy Credits (REC’s). 

Recall the stock market derivatives manipulations?  Not the same, but REC’s were a mechanism whereby the production of renewable electricity would mint a power generation bitcoin of sorts, which our regulators obligated the utilities to buy.  Essentially treating natural gas-fueled fuel cell power as different yet equal to renewable energy. 

Despite all the ratepayer subsidy, UTC still could not profitably deploy their fuel cell product, ultimately paying ClearEdge Power, an almost bankrupt company, $48 million to take it off their hands and subsequently UTC wrote off $227 million.  ClearEdge then bankrupted and the former UTC fuel cell product was acquired from bankruptcy by Doosan of South Korea, who continues to troll for Connecticut projects. 

The Connecticut subsidies also support Fuel Cell Energy, another Connecticut fuel cell company that consistently loses money and marginally survives on subsidies.  Inexplicably, in 2021, our utility regulators allowed natural gas-fueled fuel cell projects to be outright classified as renewable energy, like power made from hydroelectric, wind, and solar power. 

Only in Connecticut is electricity produced from natural gas classified as premium-priced renewable energy.  This poorly crafted legislation backfired in opening the door to out-of-state fuel cell companies such as California company Bloom Energy—a remote but similar player living on government grant welfare, struggling to financially break even. 

Connecticut taxpayers have generously helped Bloom’s solvency by multiple subsidized projects throughout our state, a most recent example is the $80 million fuel cell project at a redevelopment of the former Stanley Works in New Britain.  So much for the intent of creating Connecticut jobs as we now give ratepayer money to fuel cell products from companies our Secretary of State deems foreign corporations.

• Putting aside the abovementioned special failings, we must also look at general mismanagement of our electric system’s basics: the siting of generating plants and electric transmission to deliver this power to our towns and cities.  For the most part, Connecticut has delegated this responsibility to the regional power grid, an entity called Independent System Operator New England (ISO-NE).  Although it is prudent to participate in a larger grid, in the recent past illustrated by the stand-alone Texas power grid collapsing, our regulators nevertheless have a fiduciary obligation to ratepayers to look out for what’s best for Connecticut. 
  
  For example, Connecticut’s greatest electric load is concentrated in the western downstate part of our state, whilst the lowest electric load is in the central and eastern upstate areas.  Shortly after the regulators coerced our utilities to divest their generating assets, two large private power projects were built in Killingly and Middletown, far away from the electric “load pocket” of southwestern Connecticut.  The plant sites were easy marks for private developers that acquired cheap land having access to ISO-NE transmission wires and interstate pipeline natural gas (more about this later). 
  
  However, placing power generators far away from the “load pockets” resulted in the need for long distance transmission to move the power.  Not a problem, Eversource’s predecessor ran a 70-mile power transmission line from Middletown to Norwalk at a cost of $1 billion – Oh. Thank you ratepayers.  By the way, recall that natural gas fuel; it enters our state from our western border with New York; there were considerable costs to expand this infrastructure to supply the power plants as were built way to the east.  Not to worry, those costs have quietly been baked into your electric bills too.

• Looking down a bit closer to home, after the bulk electric power gets moved long distances around our state at very high voltages, ultimately it gets reduced to distribution voltages and then sent along our streets and roads.  All utilities are adamant that overhead power distribution lines are more economic than underground power lines.  Of course, we live in a state with a legacy of over 4,000 miles of overhead power lines. 
  
  Numerous studies, almost exclusively prepared by persons deeply invested in the legacy system, profess that it remains best to stay with overhead distribution.  What is left unsaid is that since we are a coastal state with repetitive storm events, these power lines frequently come tumbling down, with two repetitive costs, tree trimming at a nominal $100 million per cycle, and storm recovery at up to $250 million per cycle.  The latter consisting of a periodic re-capitalization of infrastructure conducted under emergency conditions at extraordinary cost. Harder to quantify are outage costs from loss of refrigeration and food spoilage, frozen pipes and flooding, commercial business interruption etc., which affected ratepayers are coerced to absorb. 
  
  Meanwhile our major cities downtowns have underground distribution that is approaching 100 years of being in place with little to no maintenance costs.  Even more interesting is that pretty much all suburban and rural new developments built by private developers in the last 50 years are almost exclusively built with all underground utilities.  Be assured that the private developers are not building this way because it costs more, but the demonstrated reliability and avoidance of storm damage is plain to see.  Relative to putting electric distribution underground, our regulators have never blinked an eye toward socializing the costs of burying natural gas piping, which along with water and sewer pipes can only be placed in the ground.  Water and sewer might be essential services, but natural gas was less necessary, until our past Governor made it a policy to expand, seeking to replace then more costly and more polluting heating oil.

• Since our regulatory bureaucracy also governs monopolies for unavoidably underground water, sewer, and natural gas, another great imprudence in squandering of ratepayer money is the regulators being oblivious to the big ticket cost for these utilities.  Specifically, breaking up pavement, trenching, backfilling and re-paving.  If the public utilities were indeed regulated, there would have long ago been a consensus, protecting the ratepayer-taxpayer interests, to avoid ongoing duplication of costs due to each underground utility separately locating and placing their underground work absent any sensible and orderly co-location, e.g., arrange orderly placement of utilities in defined lanes with street openings coordinated to eliminate repetitive unnecessary duplications. 
  
  A big part of the exorbitant cost of Boston’s Big Dig was unscrambling the spider web of haphazardly placed underground utilities which ultimately were rerouted into orderly utility corridors.  Today’s reality that we must get off fossil fuels has ended the previously legislated natural gas expansion, when miles and miles of gas piping were placed underground, yet completely ignoring coordinated placement of electric and communications utilities which could have been simultaneously placed underground very economically by sharing the trenches.  Perhaps even a glancing look at the $22 billion Big Dig utility rework might have inspired some sensibility, but examining exemplar utility experiences was ‘out of sight, out of mind’ for regulators with little to no industry technical savvy.

• Connecticut electricity is the most egregious utility ratepayer cost burden, clearly benchmarked against all other states.  However, telecommunications utility service has become equally overpriced on account the absence of competent regulation.  Internet is almost as essential as electric power, which along with cable TV, is provided sole source in most towns, often costing ratepayers more than electricity. 
  
  It is exasperating that our state government has enabled PURA to step aside and allow the now essential utility of Internet and its first cousin Cable TV to be grossly overcharged.  PURA has been happy to limit its regulatory power to governing the near obsolete landline Plain Old Telephone Service.  PURA should have adapted to the modern world, and as fiduciary of the ratepayers, be diligent in bringing the power of State Government to oppose the absence of concern by federal authority. 
  
  Connecticut Internet and Cable TV pricing has no clarity of published rates for discrete services and ratepayers are instead confronted with an arcane bundling of service packages, absent any transparency of pricing.  The only advertised tariffs are teaser rates for recruiting new customers while existing customers are denied access to any rate flexibility amounting to unabashed price discrimination.  It is time for PURA to step up!  

OK we have examined a few basic elements of how Connecticut has taken the crown of most expensive electricity, and perhaps communications as well, in the contiguous 48 states.

So how to fix this?  

Step one is to put an end to the political patronage system for appointing commissioners, whereby two former legislators, and an out-of-state recruited lawyer-lobbyist, conduct oversight and decision-making over technically complex critical state infrastructure, absent any appropriate education other than learning as they go along.  No different than any governing body requiring appropriate technical qualification, how is it that Connecticut installs lay persons having no bench depth of specific education or credentials to serve as Commissioners?

It is time to establish basic qualifications and a job description for PURA’s commissioners.  The patronage system had swelled to five unqualified commissioners prior to Gov. Malloy cutting it down to three.  In the distant past there was at least one commissioner having technical expertise.  The only remotely technical qualification within the current PURA commissioners is the chair holding a Bioengineering degree, not exactly the preferred discipline for a utility regulator. 

The newest patronage appointee holds a degree in Public Health, even more distant a skill set for the job, who when voted out as a state representative, went to work lobbying for an electric utility and a fuel cell company that enrich themselves through a deficit of regulation.

Rather than a collection of appointees of the body politic, who stumble and bumble their way through learning how to regulate through self-education and commiseration with the utilities they are supposed to regulate, why not have a rationally qualified group of experienced individuals, such as a commission comprised of apolitical, non-bureaucrat industry professionals, having pertinent experience, recruited from industrially-recognized, successful private practice professionals, as follows:

• Attorney

(Power contract and regulatory law for public and municipal utilities, encompassing all services, inclusive of independent power producers, commodity and services suppliers for fuel, electric and communications)

• Consulting Engineer

(Design and construction of infrastructure for electric, gas, water, sewer, data and telecommunications, system operations and maintenance, and sustainability)

• Consulting Environmental Scientist

(Private practice experienced air, water, acoustic, project siting, electromagnetic fields, radioactive materials)

• Project Developer/Operator

(Siting and permitting, techno-economic analysis, Engineer-Procure-Construct project delivery)

Step two is to examine seriously if the “regulated public utility” model could be rehabilitated, or is it time for a major realignment:

• A number of states have enjoyed competent regulation, with which the regulated monopoly model has and continues to work well to delivering services at fair pricing.
• Within Connecticut and numerous other states, there are municipal utilities, which usually provide service at lower costs than regulated public utilities.

It is important to recall that it was a weather event that led to the monopolization of the electric power and communication businesses.  An 1888 Blizzard devastated the Eastern seaboard from Maine to Maryland laying down up to five feet of snow accompanied by wind gusts of 85 mph.  Utility poles came tumbling down into a ruinous spider web of power and communication wires.  Multiple utilities owned the wires, government had little power to oversee the restoration, and it took months to restore services. 

The public demanded government intervention. 

The electric industry leader of the day, Samuel Insull, advocated that utility infrastructure exists as a natural monopoly, and advocated for state-regulated monopolies.  Insull gave a famous speech asking for states to grant “cost plus a reasonable profit”.  The monopoly model secured initial investment to capitalize utility infrastructure, almost exclusively directed at large cities, leaving rural and semi-rural towns in the dark, much as today’s utility outages where small towns are the last to get service restoration after storms take the wires down.

Having relinquished control of Connecticut’s electric and telecommunication utilities to foreign corporations, the state’s power to effect reorganization is somewhat compromised.  However, inasmuch as it was so easy for the original owners to divest, there may be an option for a reacquisition of the ownership to Connecticut domestic corporations, with regulatory controls to assure competent management and ongoing regulation.

Otherwise, in a validation of Sam Insull’s projected fears, the lowest cost utility services in Connecticut (and for most of the USA) have been demonstrated to be as provided by Municipal Utilities, serving towns and cities that did not relinquish control to the state’s monopolization mandate. 

Though Connecticut is comprised of 169 towns, there already exists cooperation between towns as well as the state through mutual aid for emergency services, regional school districts, resident state troopers, and other cooperative arrangements.  Much as every building in Connecticut complies with the State Building Code, it would be very straightforward to privatize the utilities no different than how numerous privately held engineers and electricians uniformly design and build the electric systems of single or multi family residences, commercial and industrial facilities. 

Proper regulation of our utilities must include a shift in the willingness to be innovative in examining our energy resources that have been for the most part overlooked. 

We have assets and options that need closer attention, especially for our potential to shift to sustainable energy and the requisite energy storage, such as:

• Expansive parcels of land that are too rocky and rugged for agriculture or the built environment, but appropriate for siting of solar energy arrays, rather than foolishly siting solar farms on arable farm land (that we may yet need in view of climate change affecting our nation’s former default agricultural footprint).
• Interstate highway and railroad right-of-ways, whose margins afford clear solar access to place solar panels with unobstructed solar exposure alongside these routes.
• Connecticut’s rivers affording potential for tidal energy.
• Lakes and other water bodies offering elevation changes (inclusive of 4,800 legacy mill dams most of which require rework for public safety) which with appropriate design could be used for energy storage in a more sustainable manner than batteries.
• Connecticut’s construction capabilities to expand offshore and onshore wind.
• Connecticut as an originator and early adopter of nuclear power.  We retain a significant number of engineers, technicians, and trades well versed in nuclear power from our long history of naval and commercial nuclear power.  It remains plausible that we could resurrect our once vertically integrated supply chain of nuclear power systems, which had included in-state production of fuel bundles through power generating machinery.

We have options but need effective governance.

Editor’s Note: This is the opinion of Joseph F. Camean, P.E.

About the Author: Joseph F. Camean, P.E. is a Marine and Mechanical Engineer with over 50 years of professional practice experience. Beginning with field work in construction and operations of fossil, nuclear, biomass, and chemical process plants, he progressed to Engineer-of-Record for numerous utility and infrastructure projects.  A Connecticut Power and Energy Society past president, Adjunct Professor at Central Connecticut State University, and Professor of Practice Emeritus of the U.S. Coast Guard Academy, he remains active in expert consulting, advocating for sustainable design and revitalization of America’s Industrial Base.