By Michael Kuser
Eversource Energy said Wednesday that it is increasing its capital spending over the next three years by $600 million, bringing the total to $7.1 billion through 2021.
“This incremental capital will be split between $300 million for electric transmission, $200 million for electric distribution and $100 million for natural gas distribution infrastructure investments,” Eversource CFO Phil Lembo said in an analyst call. “To be more specific, on the electric transmission system, we now plan to accelerate the upgrades of aging wooden transmission structures and expect to replace thousands of them with new steel poles over the next several years.
“The primary driver of this increased level of expenditure will be investments in resiliency and reliability,” Lembo said. He added that the figures do “not include any potential initiatives that may emerge from the grid [modernization] reviews in Connecticut or Massachusetts.”
Eversource, New England’s largest utility, offers retail electricity, natural gas service and water service to approximately 3.6 million customers in Connecticut, Massachusetts and New Hampshire.
Q2 Earnings Increase 5%
The company reported second-quarter earnings of $242.8 million ($0.76/share), up slightly more than 5% compared with $230.7 million ($0.72/share) in the same period a year ago.
Eversource’s transmission unit earned $112.7 million in the quarter, up nearly 17% from a year earlier, primarily because of higher investment in its electric transmission system.
The company’s electric distribution business earned $101.3 million in the second quarter, down more than 20% from last year primarily because of the sale of New Hampshire generation assets, higher property tax expenses and revenue decoupling for eastern Massachusetts customers. Distribution rate increases partially offset the decline.
Eversource earned $5 million from natural gas in the quarter, up 11% from the same period a year ago. Colder weather in 2018 increased natural gas sales in Connecticut, where sales are not currently decoupled. The company’s Aquarion Water unit, acquired in December 2017, earned $7.2 million in the second quarter.
Harsh storms this spring underscored the need to accelerate resilience investments, spending supported by state regulators, the company said.
The Massachusetts Department of Public Utilities this spring approved $133 million of additional grid modernization investments for NSTAR Electric over the next three years, in addition to $100 million authorized in 2017 for two battery storage initiatives and initial electric vehicle infrastructure.
The DPU also instructed NSTAR to file a three-year rate plan for continued grid modernization efforts beginning in 2021, which the company expects to submit sometime in 2020.
Growing demand in the Boston and Cambridge area prompted the company to upgrade several key substations.
On May 1, subsidiary Connecticut Light & Power’s new three-year rate plan took effect with an initial distribution rate increase of about $64 million. Two smaller increases will follow in 2019 and 2020.
Connecticut regulators also approved a base amount of $270 million per year in investments “aimed at making the grid more resilient, such as smart switches, enhanced tree trimming, upgrades to our poles and their integrity, and substation security,” Lembo said.
Eversource expects to file a separate grid modernization plan in Connecticut before the end of this year, he said.
Eversource and its partner Orsted formed Bay State Wind for offshore wind solicitations but lost out this spring as Vineyard Wind won the 800-MW award for Massachusetts and Deepwater Wind picked up orders in Rhode Island and Connecticut. (See Mass., R.I. Pick 1,200 MW in Offshore Wind Bids.)
Lee Olivier, Eversource executive vice president for business development, said the company did not want to dilute its earnings for the sake of winning.
“We put in a compelling bid with returns that were consistent with the current returns we have in transmission, and that was risk-adjusted,” Olivier said. “Now clearly others took a different view of that, perhaps took more risk and lower returns, but we’re not in this thing to win for the sake of winning.”
Eversource sees potential for up to 7,000 MW of additional offshore wind in the Northeast by the middle of the coming decade.
“We see the long-term offshore wind becoming a major component of the bulk power system in New England,” Olivier said. “In Massachusetts, you have an additional 800 MW of authorization; that will likely come in our opinion early next year. We will participate in that. You’ve got a bill in the Massachusetts legislature that would authorize another 1,600 MW of offshore wind.”
Connecticut on July 31 issued a request for proposals seeking 12 TW of clean energy, he said.
“It could be Class 1 energy [wind and solar] but also could be existing nuclear and hydro, so we see that as a potential opportunity for offshore,” Olivier said. “They have authorized essentially 2,400 MW of offshore wind that’s kind of a specific RFP to offshore wind and probably the first 800 MW will come up in late this year or early 2019.”