High court reduces record fines against NStar, National Grid for 2011 storm responses

The state's highest court Thursday reduced penalties imposed against two electric utilities for their response to a pair of 2011 storms, but upheld the standard used by Massachusetts regulators in evaluating how the companies performed after widespread power outages.

The Department of Public Utilities fined National Grid $18.7 million for its response to the outages caused by Tropical Storm Irene in August 2011 and by a rare October snowstorm. NStar was fined $4.1 million for the two storms and a third utility, Western Massachusetts Electric Co., was fined $2 million for the snowstorm only.

Hundreds of thousands of customers lost power after both storms, with some remaining in the dark for more than a week.

The DPU faulted the utilities for a slow response to reports of downed power lines; failing to provide timely updates to frustrated customers and local officials about when service may be restored; and in some cases for not having enough repair crews lined up in advance of the storms.

The Supreme Judicial Court, in its 46-page decision, ordered the fine against NStar cut in half, by $2 million, saying regulators did not prove their contention that the utility responded too slowly to downed power lines.

The total fine against National Grid was also reduced, but only by $900,000 to $17.8 million. The justices said the only violations DPU failed to prove were those alleged during the final two days of restoration efforts after both storms.

The court made no change in the fine against Western Massachusetts Electric.

"We recommended record penalties against the utilities, and the fines upheld today send a clear message that customers deserve better in future storms," Attorney General Martha Coakley, a Democratic candidate for governor, said in a statement.

The fines were the first imposed under a 2009 state law authorizing monetary penalties for inadequate storm preparation and response. A subsequent law ordered that any fines paid by utilities go toward customer rate relief.

Aside from the reductions that were ordered, the court concluded in its opinion that DPU "did not abuse its discretion in its imposition of monetary penalties."

The utilities had claimed otherwise in appealing the fines, arguing in court filings that regulators failed to conduct a proper review of post-storm efforts and relied more on opinion than fact in reaching their decisions.

The companies said the state used the wrong regulatory standard by determining whether they restored service to their customers "in a safe and reasonably prompt manner." The utilities instead argued for a narrower "prudence" standard, which would allow regulators less discretion to substitute their own judgments for those that were made by company managers in the days after the storms.

"We are pleased that the court invalidated penalties where there wasn't enough evidence to warrant them," Northeast Utilities, the parent of NStar and Western Massachusetts Electric, said in a statement. The company said it had greatly improved its emergency response plans since those storms.

National Grid said it was reviewing the court's decision.