Joint Applicants' Response to Order Regarding Service Quality Issues
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BEFORE THE NEW MEXICO PUBLIC REGULATION COMMISSION IN THE MATTER OF THE JOINT APPLICATION OF ) AVANGRID, INC., AVANGRID NETWORKS, INC., NM ) GREEN HOLDINGS, INC., PUBLIC SERVICE COMPANY ) OF NEW MEXICO AND PNM RESOURCES, INC. FOR ) APPROVAL OF THE MERGER OF NM GREEN ) HOLDINGS, INC. WITH PNM RESOURCES, INC.; ) APPROVAL OF A GENERAL DIVERSIFICATION PLAN; ) AND ALL OTHER AUTHORIZATIONS AND APPROVALS ) REQUIRED TO CONSUMMATE AND IMPLEMENT THIS ) TRANSACTION ) Case No. 20-00222-UT ) AVANGRID, INC., AVANGRID NETWORKS, INC., ) NM GREEN HOLDINGS, INC., PUBLIC ) SERVICE COMPANY OF NEW MEXICO AND PNM ) RESOURCES, INC., ) ) JOINT APPLICANTS. ) ) JOINT APPLICANTS’ RESPONSE TO ORDER REGARDING AVANGRID SERVICE QUALITY ISSUES AND MANAGEMENT AUDITS Public Service Company of New Mexico (“PNM”), PNM Resources, Inc. (“PNMR”), Avangrid, Inc. (“Avangrid”), Avangrid Networks, Inc. (“Networks”), and NM Green Holdings, Inc. (together, “Joint Applicants”) hereby respond as follows to Attachments 3 and 4 in the Order Regarding Avangrid Service Quality issues and Management Audits and Suspension of the Filing Date for Statements in Opposition to the May 7, 2020 Stipulation issued by the Hearing Examiner on May 11th. ATTACHMENT 3 REQUEST 1: ROBERT D. KUMP PROVIDE A LIST OF ENFORCEMENT ACTIONS AND ENFORCEMENT MEASURES IN RATE OR OTHER PROCEEDINGS INITIATED OR CONCLUDED BY STATE AND FEDERAL REGULATORY AGENCIES SINCE JANUARY 1, 2016 AGAINST AVANGRID, INC.’S ELECTRIC AND GAS UTILITY SUBSIDIARIES AND THE RESULTS OF THE ACTIONS AND MEASURES. RESPONSE: While the attached list of actions and measures are not all “enforcement” actions/measures as Avangrid understands the use of that term, Avangrid is providing a list of all actions and measures that relate to state and federal energy regulatory compliance issues, including items that result in revenue adjustments, rather than fines/penalties. Please see JA Exhibit May 11 Order 1A through 1C. The list of actions and measures should be evaluated in the context of the regulatory construct in Connecticut, Maine and New York. In Connecticut, all utilities are subject to notices of potential violation. Most of the United Illuminating (“UI”) penalties were in proceedings where Eversource was also assessed penalties. The larger penalty amounts relate to storm restoration, which are not unusual given the weather and tree density in Connecticut. In the most recent storm investigation, UI fared far better than Eversource based on performance. The Public Utilities Regulatory Authority assessed Eversource a 90 bps Return on Equity (ROE) adjustment incentive and prescribed a $30 million penalty; whereas, for UI, PURA assessed a 15 bps ROE adjustment incentive and prescribed a $2.14 million penalty. Likewise, in New York, three of the four Orders to Show Cause listed on the table relate to storm investigations. Penalties related to storm restoration in New York are not unusual. Other major utilities in New York have been assessed penalties for storm restoration over the same time period. For example, in the Order to Show Cause related to Tropical Storm Isaias, the Commission assessed penalties up to $102 million for Con Edison, up to $19 million for Orange and Rockland, and up to $16 million for Central Hudson. See JA Exhibit May 11 Order 1D. The fourth Order to Show Cause on the New York list is a compliance item. Again, penalties for compliance items are not unusual in New York. In 2014, Con Edison settled a gas explosion case for $153 million. Charter Communications paid $12 million to expand broadband and invested $600 million to resolve an Order to Show Cause. National Grid paid $21 million in restitution (paid by shareholders) in 2021 for alleged contractor violations of a Commission order. The remainder of the items on the New York list are Negative Revenue Adjustments (NRAs), and are not fines or penalties. NRAs are assessed if a utility does not meet pre-defined Customer Service, CAIDI, SAIFI or Gas Safety/Records metrics. For New York State Electric and Gas Corporation (“NYSEG”) and Rochester Gas & Electric Corporation (“RG&E”), the vast majority of the Gas Safety/Records metrics are record-keeping violations and not safety-related per se. NRAs are included in the rate cases for most major New York utilities. Other utilities in New York have also paid NRAs, including during this period. For example, Consolidated Edison has recently paid a $5 million NRA relating to SAIFI.1 1 See http://documents.dps.ny.gov/public/Common/ViewDoc.aspx?DocRefId=%7B95F141AF-D5DF-4ADE-8E7B- BC17846C4D5A%7D Joint Applicants’ Response to Hearing Examiner 5-11-21 Order Case No. 20-00222-UT Response Date: May 18, 2021 Page 2 of 26 While NRAs have a downside revenue impact, NYSEG and RG&E’s rate cases also include Positive Revenue Adjustments, which have an upside revenue impact for positive performance, and should be considered for context when evaluating the NRAs (consistent with the performance- based ratemaking paradigm in New York). The list of Positive Revenue Adjustments for NYSEG and RG&E, for 2016-2021 follows: 2016 NYSEG Leak Backlog Management - $215K (end of year outstanding leaks) NYSEG Lost and Unaccounted for Gas - $64K (loss factor less than target) NYSEG Gas Cost Incentive Mechanism - $500K (capacity release management) RG&E Leak Backlog Management - $170K RG&E Lost and Unaccounted for Gas - $189K RG&E Gas Cost Incentive Mechanism - $367K 2017 NYSEG Leak Backlog Management - $215K NYSEG Lost and Unaccounted for Gas - $139K NYSEG Gas Cost Incentive Mechanism - $603K NYSEG Energy Efficiency Shareholder Incentive - $5.85M (cumulative incentive 2012 through 2017) RG&E Leak Backlog Management - $170K RG&E Lost and Unaccounted for Gas - $73K RG&E Gas Cost Incentive Mechanism - $355K RG&E Gas Enhancement Performance - $170K (gas expansion/new customers) RG&E Energy Efficiency Shareholder Incentive - $5.92M (cumulative incentive 2012 through 2017 2018 NYSEG Leak Backlog Management - $195K NYSEG Gas Cost Incentive Mechanism - $364K NYSEG Gas Enhancement Performance - $41K NYSEG Customer Terminations/Uncollectibles - $855K (minimize both number of terminations and uncollectible write-offs) RG&E Leak Backlog Management - $160K RG&E Gas Cost Incentive Mechanism - $173K RG&E Gas Enhancement Performance - $165K Joint Applicants’ Response to Hearing Examiner 5-11-21 Order Case No. 20-00222-UT Response Date: May 18, 2021 Page 3 of 26 RG&E Customer Terminations/Uncollectibles - $280 2019 NYSEG Leak Backlog Management - $190K NYSEG Gas Cost Incentive Mechanism - $183K NYSEG Leak Prone Pipe Replacement Mileage - $152K RG&E Leak Backlog Management - $155K RG&E Gas Cost Incentive Mechanism - $221K RG&E Gas Enhancement Performance - $155K RG&E Leak Prone Pipe Replacement Mileage - $124K 2020 NYSEG Gas Cost Incentive Mechanism - $200K (estimate) NYSEG Customer Terminations/Uncollectibles - $855K (COVID impact - will be reversed if waiver of COVID impacted NRAs is granted) RG&E Leak Backlog Management - $68K RG&E Gas Cost Incentive Mechanism - $200K (estimate) RG&E Gas Enhancement Performance - $155K RG&E Customer Terminations/Uncollectibles - $560K (COVID impact - will be reversed if waiver of COVID impacted NRAs is granted) In Maine, pursuant to MRSA Title 35-A, Section 1303, the Public Utilities Commission may open an investigation when it believes 1) any rate or charge is unjust or unreasonable; 2) a service is inadequate or cannot be obtained; or 3) an investigation of any matter relating to a public utility should for any reason be made. The investigation could, but does not always, involve an enforcement action. All of the Central Maine Power items on the chart are “Investigations.” And, four of the five items on the list involved allegations about metering, billing, and/or customer service processes. The Maine Public Utilities Commission (through an independent auditor) found that there was no systemic issue with the Company’s metering and billing system. However, the Commissioners were critical of CMP finding that CMP failed to implement proper testing of the SmartCare system prior to go-live; CMP’s implementation of SmartCare was imprudent; CMP’s SmartCare implementation experienced an unacceptable number of billing errors, delayed or estimated bills, bill presentment issues and unreasonable time required to address these issues; and the implementation issues were compounded by inadequate staffing, resulting in the inability of customers to contact a CMP representative. The company took actions to address those issues, including but not limited to adding a Vice President of Customer Service and other customer service personnel in Maine. Joint Applicants’ Response to Hearing Examiner 5-11-21 Order Case No. 20-00222-UT Response Date: May 18, 2021 Page 4 of 26 ATTACHMENT 3 REQUEST 2: ROBERT D. KUMP PROVIDE A LIST OF MANAGEMENT AUDITS ORDERED BY STATE AND FEDERAL REGULATORY AGENCIES SINCE JANUARY 1, 2016 WITH RESPECT TO AVANGRID, INC.’S ELECTRIC AND GAS UTILITY SUBSIDIARIES AND THE RESULTS OF THE AUDITS. RESPONSE: Management audits are a common tool used by regulators in the Northeast to review utility operations and management structure. Management audits are considered a best practice. They are prescribed by statute and are neither enforcement actions, nor are they remedies for lack of compliance with regulatory obligations. Enforcement actions are conducted via other regulatory processes such as Orders to Show Cause, and Notices of Potential Violation. All electric and gas companies in Connecticut, Maine and New York are subject to and have experienced periodic management audits. In all three states, management audits are typically conducted by a consultant hired by the public utility commission. The results of the management audits are not binding findings, but instead are recommendations that the relevant commission can reject, adopt or implement in either a new proceeding or in the utility’s next rate case, in its discretion. Given the common-place nature of management audits, as a practical matter, Avangrid anticipates there may be one or two of its utility subsidiaries undergoing a management audit in Connecticut, Maine, and/or New York at any given time.