offshorewind projects' financial stability threatened by Trump administration's work halt order, as stated by Fitch regarding Eversource
In a recent turn of events, Eversource's utility in New Hampshire, Public Service Co. of New Hampshire, is facing some challenges. The company's low-risk business profile, largely due to more than half its rate base falling under the Federal Energy Regulatory Commission's (FERC) jurisdiction, has been put to the test.
Last month, the New Hampshire Office of the Consumer Advocate challenged a news of $100.7 million, wanting the Public Utilities Commission (PUC) to reverse various aspects of its decision. This decision included a temporary rate increase of $61.2 million.
Eversource received a Return on Equity (ROE) of 9.5% from the rate decision, a figure that the Office of the Consumer Advocate contends should be 8.1% given New Hampshire's low-risk investment environment for utilities.
Meanwhile, the Trump administration has issued a stop-work order on the Revolution Wind offshore wind farm, a project in which Eversource previously held a 50% stake. Eversource Energy sold its share in the project last year to Global Infrastructure Partners (GIP), but remains obligated for certain project costs.
The stop-work order has created significant uncertainty and could cause large cost overruns or abandonment. As a result, Fitch Ratings has placed Eversource Energy and its utility subsidiaries on "rating watch negative."
If the lawsuit is successful, construction on the project may resume, limiting cost overruns. Eversource must ensure that GIP receives a 13% pre-tax internal rate of return on its investment in Revolution Wind.
In a bid to ensure transparency and protect residents from rate hikes, New Hampshire's Democratic Governor, Kelly Ayotte, has not yet named a new candidate to replace Daniel Goldner as Commission Chairman of the PUC. Ayotte ended Goldner's term last Monday, citing his support for the rate news.
Fitch Ratings considers the regulatory environment in New Hampshire to be balanced. However, they view FERC as one of the most "constructive" U.S. utility regulators due to timely cost recovery and formulaic rates of return.
Eversource is a publicly traded company with regulated utility subsidiaries serving about 4 million customers in New Hampshire, Connecticut, and Massachusetts. The company recorded about $360 million of liabilities when it sold its share in Revolution Wind to GIP to reflect increased construction costs and delays.
Ørsted, which owns half of the Revolution wind project with GIP, has asked the U.S. District Court in Washington, D.C., to lift the work-stop order on the project off the coast of Rhode Island and Connecticut. The outcome of this lawsuit could significantly impact Eversource's financial standing.
As the situation unfolds, Ayotte has started a search for a replacement to ensure the regulatory process at the PUC is transparent, accountable, and protects citizens from rate hikes.
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