In addition to its appeal in Superior Court, United Illuminating filed a report this week with the Public Utilities Regulatory Authority alleging that its August decision to reject the company’s rate increase will damage its financial health and ability to deliver reliable services to its 343,000 customers.
In its August decision, PURA commissioners rejected UI’s proposed distribution rate increase of $131 million over three years in favor of a $22 million increase over one year.
At issue is the “return on equity” – the amount of profit authorized or actually returned to shareholders – that PURA established in its decision, which UI alleges is shockingly low.
In a statement issued by UI, whose parent company is Avangrid, company officials said that the utility uses a combination of debt and equity to finance its operations and capital projects, and depends on a healthy “return on equity” (ROE) in order to “attract investors and consequently afford capital infrastructure investments that promote reliability for its customers.”
In its report, UI representatives say the company’s return on equity (ROE) for the year ending September 30 is just 4.61%.
“The disturbingly insufficient ROE puts Connecticut far out of step with utilities in other states. While Connecticut already offers among the lowest authorized ROEs of any state in the country, with the next-lowest authorized ROE of 9.20 percent for a New York utility, an earned ROE of 4.61 percent is unthinkable and, in the company’s view, confiscatory, making it unconstitutional,” UI’s statement reads. “UI looks forward to adding this alarming report to its lengthy body of evidence demonstrating PURA’s failure to adhere to rate-making principles, basic standards of transparency, and the U.S. Constitution in its rate case Decision that exacted this untenable financial harm on the company.”
PURA’s final decision established the company’s return on equity (ROE) at 8.63% with an opportunity to earn up to 9.10% if it meets certain conditions and timelines to address performance and management issues. UI requested a 10.20% ROE.
PURA declined to comment on UI’s statement based on the pending litigation. Through its August decision, PURA set rates that went into effect Sept. 1, 2023.
In PURA’s decision, the ROE of similar utilities was explored, referred to as a proxy group.
According to the decision, the ROEs for the 21 companies in the proxy group ranged from 6.41% to 11.27%, with a mean of 8.71% and a median of 8.93%.
The state Office of the Consumer Counsel, meanwhile, has filed motions to intervene in UI’s administrative appeals.
“During the rate case over the course of the last year, my team succeeded in demonstrating major shortcomings in UI’s original rate application, and we are prepared to do it again,” Consumer Counsel Claire Coleman said. “Utility customers benefit from a proactive regulatory body that is willing to hold our utilities to applicable legal standards, and OCC will seek to ensure consumer interests are elevated in these appeals.”