Trump administration's offshore wind halt directive poses potential financial threat for Eversource, according to Fitch rating agency.
In the state of New Hampshire, a significant development is unfolding in the energy sector, with Eversource Energy and the Public Utilities Commission (PUC) at the centre of the news. Eversource Energy, a publicly traded company serving around 4 million customers in New Hampshire, Connecticut, and Massachusetts, has found itself in a contentious situation. The company is currently embroiled in a legal battle over a rate hike for Public Service Co. of New Hampshire (PSNH), a subsidiary of Eversource.
The PUC's decision, announced last month, included a $100.7 million rate increase for PSNH, a reduction from the initial request of $102.8 million. However, the New Hampshire Office of the Consumer Advocate has challenged this decision, urging the PUC to reverse various aspects of it.
The Office of the Consumer Advocate contends that the Return on Equity (ROE) should be 8.1% given New Hampshire's low-risk investment environment for utilities. Currently, Eversource Energy received a 9.5% ROE in the PUC's decision.
One of the key issues at hand is the proposed fixed charge, which the Office of the Consumer Advocate wants to limit from climbing over time to $43 a month from $14 last year.
The news escalated further when the Trump administration issued a stop-work order on the Revolution Wind offshore wind farm, a project in which Eversource Energy previously held a 50% stake. Eversource Energy sold its stake to Global Infrastructure Partners (GIP) last year, but remains obligated for certain project costs.
Ørsted, which owns half of the Revolution wind project with GIP, has asked the U.S. District Court to lift the work-stop order. If the lawsuit is successful, construction on the project may resume, potentially limiting cost overruns.
Fitch Ratings placed Eversource Energy and its utility subsidiaries on "rating watch negative" due to this order. Fitch stated that Eversource must ensure GIP receives a 13% pre-tax internal rate of return on its investment in Revolution Wind. The stop-work order creates significant uncertainty and could cause large cost overruns or abandonment, according to Fitch.
In response to the rate hike news, New Hampshire Governor Kelly Ayotte, a critic of the increase, did not reappoint Commission Chairman Daniel Goldner. Ayotte has since begun a search for a replacement to ensure the regulatory process is transparent and protects Granite Staters from rate hikes.
Jefferies equity analysts noted the negative reaction of the NH Governor and other key stakeholders, but distribution rates for Eversource should be largely locked-in for a period of time.
This ongoing saga in New Hampshire's energy sector underscores the importance of balanced decision-making in utility rate hikes and the role of consumer advocacy in protecting ratepayers' interests. The outcome of this complex situation will have far-reaching implications for Eversource Energy, its customers, and the state of New Hampshire.
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