Concerned that recent improvements in Central Maine Power’s service quality won’t be sustained, the Maine Public Utilities Commission on Tuesday ordered a preliminary investigation into the company’s management structure.
The regulatory body asked CMP to produce a “performance plan” that outlines steps the utility will take to maintain progress and address concerns raised by an independent consultant’s recent audit of how the evolving management of CMP and its parent companies influenced customer service. The plan is due Nov. 30.
The PUC left the door open for a fuller investigation, depending on what happens with the so-called summary investigation.
The PUC’s action follows an audit report issued in July by Liberty Consulting Group. The audit sought to determine how new management structures and service delivery affected the interests of CMP customers. It identified a number of management challenges for CMP but said the utility is likely equipped to overcome them.
To a large degree, the three commissioners had to decide whether the shortcomings identified in the audit were largely in the rearview mirror, or represented warning signs of potential trouble down the road.
CMP reacted Tuesday with a statement saying it will continue to serve customers led by a strong Maine leadership team committed to operational excellence. It noted that the company’s new chief executive officer, Joe Purington, has 28 years of experience with the company and began his post this week.
CMP is a subsidiary of Connecticut-based Avangrid, which was created in 2015 following the acquisition of a Connecticut utility. Iberdrola, a global energy company headquartered in Bilbao, Spain, is the majority owner of Avangrid.
Specifically, Liberty sought to determine whether the subsequent consolidation and the transfer of more decision-making and employee resources to the Avangrid level contributed to a decrease in customer service quality at CMP.
Liberty, a Pennsylvania-based utility consultant, concluded that Avangrid wasn’t “a fundamentally or irredeemably flawed operation.” But it found several problems involving the integration of Avangrid’s distribution utilities – including CMP – into a subsidiary known as Avangrid Networks.
Most notably, Liberty said Avangrid made decisions that favored shareholders at the expense of customers. It concluded: “Management’s overemphasizing of cuts in and limits on resources as a means for closing gaps in meeting the earnings expectations of the equity investment community has sacrificed effectiveness in providing service.”
Liberty said it found an organization in flux, first cutting resources, then increasing personnel, and guided by senior managers, some from overseas, who came and went quickly. It faulted Avangrid’s board of directors for not having more “independence, engagement, breadth of experience and focus on operations,” to provide guidance that’s more typical at large U.S. utilities.
The audit also noted CMP’s 640,000 Maine customers constitute only about 2 percent of Iberdrola’s worldwide customer base.
REGULATORS ON GUARD
Those revelations worried the PUC’s chair, Philip Bartlett.
In a separate case under review at the commission, CMP is asserting that it has met or exceeded state-ordered customer service quality benchmarks and wants the PUC to remove an ongoing penalty that has resulted in the utility losing almost $10 million in revenue over the past 18 months.
But it was clear Tuesday that Bartlett saw the penalty as an effective tool that had helped prod Avangrid to funnel more resources into CMP.
“I’m concerned that once the (return on equity) adjustment is lifted, the company’s focus could again slip without that significant financial incentive to improve,” he said.
Bartlett’s concerns were shared by the two other commissioners, Randall Davis and Patrick Scully. They also voted to order a summary investigation.
Dan Burgess, director of the Governor’s Energy Office, backed the PUC’s decision.
“The Mills administration supports the PUC’s decision to investigate CMP’s management structure,” Burgess said in a statement Tuesday. “We will follow these proceedings closely and strongly believe that Maine should use every regulatory tool within its power to ensure that our electric utilities are meeting their statutory mission to deliver safe, reliable, and adequate services at just and reasonable rates for Maine people. We welcome and applaud this new and stronger level of oversight.”
A summary investigation is the first step in the process of investigating CMPs management practices, according to the PUC. CMP’s performance plan must contain concrete actions for ensuring that fundamental operational needs are being met at the Avangrid and Iberdrola levels of management and leadership.
Liberty has an extensive background in reviewing CMP’s performance. It conducted a PUC-ordered inquiry into billing system problems in 2018 and found that corporate mismanagement was one factor driving those problems.
Liberty did find some more recent good news. It said Avangrid had taken steps since 2019 to make improvements at CMP such as restoring staffing levels in information technology and customer service, and to focus on providing effective service.
“However,” Liberty warned, “it remains prudent to question the sustainability of the positive changes that have occurred.”
Liberty’s reasons for caution included the history of Iberdrola’s U.S. operations, ongoing top-level management changes and unknowns that will follow the eventual resolution of ventures that have consumed attention and driven decisions at Avangrid, such as the $1 billion New England Clean Energy Connect, or NECEC, power line.
Avangrid owns NECEC. It is building a 145-mile, high-voltage transmission line through western Maine, but opponents have succeeded in putting a referendum question on this November’s ballot aimed at killing the project to bring hydropower from Quebec to Massachusetts.
CMP TOUTS IMPROVEMENTS
The PUC’s decision was welcomed by Maine’s Office of Public Advocate, which represents consumers in utility matters and had pressed for an investigation.
“Most importantly, the audit demonstrated a potential link between many of the operational issues that have been experienced by CMP customers and higher-level problems with CMP’s corporate structure and strategic direction,” said Drew Landry, the acting public advocate.
In a response after the audit’s release in July, CMP argued that the investigation wasn’t necessary. It noted that the audit found strong performance and meaningful improvements over the past few years. CMP highlighted this summary statement from Liberty: “Like all organizations, it can improve, cares about doing so and has taken efforts to get better.”
CMP underscored the recent progress it has made and that Liberty observed. That progress includes largely resolving billing and metering issues, a record of decreased customer complaints, and making organizational improvements, as well as adding workers to key customer service positions and a putting stronger focus on power reliability.
CMP also disputed the accuracy of some of Liberty’s findings and said it would address those if an investigation is opened.
The company noted, for instance, that it is answering more than 87 percent of customer calls within 30 seconds, exceeding the PUC target of 80 percent and providing timely, accurate bills more than 99 percent of the time since March 2020.
On Tuesday, CMP reiterated that it has made “demonstrable improvements” in customer service as measured by responsiveness to customer calls and billing accuracy and timeliness.
“The Liberty audit noted many steady improvements at CMP,” the company said, “and we remain committed to sustainable improvement across the company.”
Rep. Seth Berry, D-Bowdoinham, a vocal supporter of consumer-owned power in Maine, said the PUC acted laudably in ordering the summary investigation. Still, Berry said the PUC and other regulatory bodies are not set up to properly hold accountable large utility companies such as Iberdrola.
“The (Liberty audit) clearly warns that once the threat of a consumer takeover has passed and Iberdrola successfully acquires (utility) PNM in New Mexico, CMP may very well go back to its old ways,” said Berry, who is House chair of the Maine Legislature’s Committee on Energy, Utilities and Technology. “There is only one way to prevent that: take back the monopoly privilege, replace CMP and refinance our shared grid at a lower cost, and adopt a proven, superior business model for our future energy needs: consumer ownership.”