New Haven Independent

Sandman, a New Haven alderman, drove up to New Britain to protest Southern Connecticut Gas Co.’s plan to raise rates at a time when the company is being investigated for earning more profit than the law allows. He spoke during the public comment section of a hearing Friday morning on the overearnings of SCG at the Department of Public Utility Control (DPUC).

Sandman arrived with one purpose: to fight the rate increase. He left the hearing with a second purpose: to close a legal loophole that allows SCG to pull in an additional percentage point of earnings over what the law allows.

On The Road

Speaking from behind the wheel of his Honda sedan on the ride up to New Britain Friday, Sandman described part of his opposition as personal. He heats his home with SCG natural gas.

When he first moved into his house in 1998, Sandman said, he used to keep the thermostat at 72 degrees and pay a monthly bill of between $200 and $250. Ten years later, his keeps the thermostat at 62 degrees and pays twice as much.

Sandman is also fighting the hike on behalf of his Beaver Hill constituents, who are already pinched in tough economic times. “I know people make choices: ‘Do I buy groceries or gas for the car?’” he said. “It’s not, ‘Do I eat out or not?’”

Sandman is worried about what might happen to his neighbors if the increase goes through. “They’re not going to pay their bills. They’ll have their gas turned off and either freeze or move. It’s not good. People are at their breaking point.”

Sandman Speaks

State regulations prohibit Southern Connecticut Gas from earning more than a 10 percent rate of return of equity (ROE). However, from December of 2007 to June of 2008, the company was taking in as much as an unadjusted 14.17 percent ROE. Friday morning’s DPUC hearing was part of a process to investigate this situation and determine what actions to take to remedy it. The company may be required to issue rebates to its customers.

Sandman was the first to arrive in the hearing chamber. He took a front row seat. The room filled up with DPUC staffers and SCG officials in suits, and shortly past eleven the hearing was called to order by the lone presiding commissioner, Anne George. Sandman took the floor for his public comment.

Speaking as a homeowner, manufacturer (Sandman works for his family business, a plastics company in West Haven), and alderperson, Sandman decried the rate hike, the overly complicated monthly gas bills, and the “overcharging” of consumers.

“We need to simplify the monthly billing statement,” he said. “Take the out alphabet soup abbreviations.”

Sandman asked that the “DPUC order SCG to refund us what they overcharged us with interest” and asked that DPUC consider lowering the current profit rate.

“I come before you this morning to express my feelings of disgust with SCG overcharging us ratepayers and strongly protest any increase in rates. “

Commissioner George recognized the receipt of a letter of protest from Sandman and nine other New Haven alders. (Read that letter here.)

She also reminded him that there is a difference between overcharging and overearning. Overcharging is when a company knowingly charges for more product than it delivers. Overearning, which is what SCG has been doing, is when a company’s predicted expenses and incomes differ from its actual expenses and incomes such that it takes in more revenue than is legally allowed.

Sandman replied that he appreciates the difference.

Sandman’s was the only public comment.

A 1 Percent Loophole

As the hearing began, administrators from SCG faced tough questioning from DPUC staffer Jim Sutphin (pictured). As the hearing proceeded, it became clear that SCG was interpreting state regulations in a way that was favorable to the company.

While the regulations define overearning as an ROE of over 10 percent, an overearning adjustment is not “triggered” unless the ROE exceeds 11 percent. SCG has interpreted this to mean that it can hold on to profits up to 11 percent, not 10 percent.

“It is the our belief that between 10 percent and 11 percent the company is not overearning,” said James Earley (pictured being sworn in, at left), SCG’s vice president.

It was shortly after this statement that Sandman decided to leave the hearing.

“I’m sure their lobbyists wrote that law,” he grumbled as he walked back to the parking garage. “I’m going to talk to [State Rep.] Toni Walker and [State Sen.] Toni Harp, tell them to close the loophole in the law.”

“There’s no incentive for them to operate an efficient organization,” he continued back in the car, following his GPS’s directions to New Haven. “When they’re too efficient, they overearn and then they have to give the money back.”

“You know for six months you’re overearning, why are you overearning in June too?” Sandman said. “That’s the question. They’re pushing the envelope. They’re pushing the envelope.”

Sandman said that his next step will be to reach out to his colleagues and constituents to make sure that the DPUC keeps hearing opposition to SCG’s rate hike proposal. “The commission needs to see that it actually affects people,” he said.

Being on the Board of Aldermen has shown him what a difference it makes when affected people show up to meetings, Sandman said. That’s why he drove to New Britain to speak out.

“It’s good that they heard from me,” he said.

60 Cents Per Day

Contacted by phone, SCG’s director of public affairs, John Dobos, said that he couldn’t comment on Sandman’s statement at the hearing. “We don’t comment during an active docket,” he said.

Asked about SCG’s reasons for seeking a rate increase after overearning for seven months, Dobos said, “The rate case is forward into the future, The overearning is already in the past.”

A rate change — which has been announced in a letter of intent but not yet been formally proposed — would take eight or nine months, he said. “It wouldn’t go through until after April 2009.”

Dobos said that the rate of increase would be between 11 and 12 percent, amounting to an average of 60 cents per day for residential heating customers.

Asked if SCG would be seeking to hold onto anything over 11 percent ROE rather than 10 percent ROE, Dobos said, “That’s the way the law is written. It’s up to the DPUC.”