Hurricane Isaias may claim at least one CEO scalp

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

NEW YORK - Hurricane Isaias may claim at least one chief executive’s scalp. Connecticut legislators want the head of James Judge, the CEO of $30 billion New England utility Eversource Energy, on a pike as blackouts linger in the Nutmeg State. If regulators have any chops, they won’t stop there. A clawback of his 2019 pay should also be on their list. But if they want to create greater accountability over a utility that is effectively a monopoly, an Eversource breakup cannot be ruled out.

Some 4.3 million people lost power last week after rough storms hit the East Coast. As of Monday – just shy of a week after the state was slammed – Eversource had “substantially restored” just around a third of the roughly 150 towns listed on its website. That has prompted legislators from Governor Ned Lamont to Senator Richard Blumenthal to state Senator Norm Needleman to take a hard look at the company and promoted calls for Judge to resign.

Shareholders can’t be blamed for liking Judge. The stock has returned 16% annually, including dividends, for the past five years, substantially more than the S&P 500 Index. It also beat other utilities like $25 billion Consolidated Edison, which struggled to restore power in New York, and nearly as much as Google parent Alphabet. The failed response to Isaias has raised the question of whether that came at the expense of customers.

A 2011 merger between Northeast Utilities and NSTAR created Eversource. Even though it experienced week-plus long power outages from Hurricane Sandy in 2012, the company sliced its workforce 7% in the years to 2019, while revenue climbed. Meantime Connecticut customers forked over rates that were the second highest in the country as of April, according to the U.S. Energy Information Administration.

Eversource’s chieftain took home $20 million last year. That’s grotesque for a monopoly. To put it in perspective, it’s nearly twice the average pay for the CEOs running investment banking mega-boutiques on Wall Street, where competition is fierce. Judge’s paycheck is a good starting point for legislators looking for retribution.

Over the past week, as Eversource customers revved up gas generators and lit candles with little hope of speedy fixes, the company’s share price barely budged. That suggests customers are far too captive to the power giant. Legislators need to show them who’s boss.

 

CONTEXT NEWS

- Over 4.3 million people from North Carolina to Quebec lost power the week of Aug. 3, after Hurricane Isaias crashed into the East Coast, according to Reuters. As of Aug. 9, some 138,000 customers of Eversource Energy in Connecticut were still without power.

- Eversource’s Chief Executive James Judge received $19.8 million in executive compensation in 2019.

- On Aug. 8 Connecticut Senator Norm Needleman said that Judge should step down from running the company.