United Illuminating Files Appeal of PURA’s Final Decision in Rate Case

ORANGE, Conn. — September 18, 2023 — United Illuminating, a subsidiary of Avangrid (NYSE: AGR), today filed an appeal in the Superior Court of the Judicial District of New Britain from the final decision of the Public Utilities Regulatory Authority (PURA) in its rate case (Docket Number 22-08-08).

The final decision issued by PURA on August 25, 2023, has substantial legal and administrative problems, threatening to disrupt UI’s financial health and severely impacting:

  • Customers, employees and local suppliers and their workforce
  • UI’s ability to invest in the electric grid
  • Storm resiliency and grid improvement efforts necessary to increase reliability
  • Connecticut’s forward progress on the clean energy transition.  

Due to these drastic impacts and consequences, the decision calls for relief from the courts.

PURA’s Final Decision Out of Step with State Needs 

PURA’s final decision fails to promote the strength and reliability of the electric grid and prevents us from responsibly partnering with the state in the clean energy transition.

While PURA claims it has set a return on equity (ROE) of 9.10%, it is attempting to mask the true impact to UI’s business by disallowing historical costs related to incurred capital and operating expenditures, . The actual ROE produced by the Final Decisions is substantially lower because the Final Order extinguishers $32.3 million in deferred assets producing an actual ROE of 2.5%. By comparison, the next-lowest return on equity is 9.25% at Northern States Power in Minnesota and Consolidated Edison (“ConEd”) in New York. This unprecedented ROE will drive needed investments to other states and is insufficient to allow us to support the critical investment in reliability and modernization that Connecticut needs.

Well established Supreme Court precedent holds that utility companies can recover reasonably incurred costs and can earn a fair and reasonable return on assets used to serve customers. In opposition to this important precedent, PURA’s decision denies UI recovery of investments made in 98 projects critical to the strength and reliability of the electrical grid and impacting many of our most vulnerable communities.

Only a healthy utility with the partnership of its regulatory authority can invest in its infrastructure to promote the transition to a clean energy future. The decision entirely fails to meet this standard, stymying the goals of the Administration and the progress Connecticut must make towards a greener electric grid. For example, in July, Governor Lamont announced that Connecticut will require vehicle manufacturers to deliver 100% electric vehicles by 2035. However, in clear conflict with that policy, PURA rejected UI’s proposal to install 900 EV charging stations throughout its service territory, delaying the development of a modern, clean transportation system as the state moves to phase out the sale of internal combustion engine vehicles in just over 10 years.

PURA’s Decision Exacts Significant Financial Harm on UI and Connecticut’s Economy 

The decision issued by PURA will lead to unprecedented financial harm to UI. The unlawful disallowances of the Final Order will lead to a $31.9 million annual loss. In comparison, UI’s total income last year was $60 million. Finally, the regulatory impact of deferred assets and associated carrying costs will total $32.3 million. In addition, PURA unlawfully denied recovery of $118 million, in incremental net plant-in-service additions in contradiction of the record evidence and without any reasonable or valid explanations.

As a regulator, PURA has a responsibility to ensure that utilities have the tools they need to ensure safe, reliable electric service for its customers. However, PURA’s decision impedes that critical mission by deferring crucial investments in:

  • Distribution infrastructure that meets replacement criteria
  • Critical substations that serve thousands of customers
  • Construction Vehicle Fleet that meets replacement criteria
  • Resiliency investments that help customers avoid fewer outages during extreme weather events
  • Capacity investments that will accelerate the electrification of the economy and protect customers from long-duration outages
  • Facility investments to ensure UI employees have a safe, effective work environment 

Avangrid is a proud Connecticut company and an economic driver for the state creating over 500 jobs separate and apart from UI and without any requests for state subsidies.  Avangrid and UI support more than 10,000 direct and indirect jobs across the state.  Despite its strong track record, according to the Economic Impact Report, PURA’s decision will have an implied impact of over $300 million on Connecticut’s gross domestic product (GDP) while making it more difficult for UI to invest in the local economy – driving further deterioration of the regional business environment.

PURA’s Decision Deviates from its Longstanding, Established Standards and Precedent 

For more than 25 years, PURA has found the level of detail in the filing and record sufficient to meet our burden of proof, pursuant to the Standard Filing Requirements. For decades, PURA allowed cost recovery of assets, including investments in our community to provide safe and reliable service for customers. However, without notice and contrary to longstanding regulatory precedent, PURA arbitrarily changed its expectations for the level of detail it required and withheld cost recovery accordingly. PURA also incomprehensibly reversed its own prior precedent on decades-long investments that were held to the highest standards and mirrored other regulatory agencies in states across the country. For instance, the Commissioners voted to approve UI’s Facility Consolidation Plan in 2005, 2008, and 2013, which UI used as a guide over multiple rate case cycles to support investments totaling more than $100 million. This includes the sale of the Bridgeport Avenue property, valued at $17 million alone, which was denied recovery in this decision.

At no time during the year-long rate proceeding did PURA indicate that the information we provided would be insufficient to meet their standard. The Authority called the decision a “roadmap” for utilities to follow as they transition to a performance-based ratemaking standard. However, roadmaps are put in place before a journey is taken, not afterwards. For the Authority to hold us to a standard it did not establish prior to its draft decision, when the record had closed, violates the basic tenets of fairness and due process.

PURA’s Decision Continues to Neglect Action on Critical Energy Supply Issues

PURA and other public officials claim that the decision protects ratepayers. However, neither Connecticut’s regulatory leaders nor its lawmakers have taken needed action to address the true driver of high energy costs in Connecticut, which is the immense increase in energy supply costs. Those costs, which are set by out-of-state generation companies, have increased more than 150% over the last three years, with the typical Connecticut family seeing a price spike on their monthly bill of nearly $80 this past winter, accounting for nearly 70% of their electric bill.

This decision fails to take any action to address this critical problem, which is likely to lead to high energy costs for customers again this coming winter. On behalf of our 341,000 customers, we will continue to advocate tirelessly for state leaders to pursue solutions to this extreme price volatility while working in partnership to accelerate the transition to a clean energy gird that breaks our reliance on volatile, global fossil fuel markets.

Record Shows Overwhelming Public Support for UI and its Employees

PURA has claimed that its draft decision received overwhelming public support, but it is clear the Authority is ignoring the collective voice of UI employees, customers, contracts, and community business leaders, who together submitted more than 65 letters raising their concerns over the impacts that these drastic cuts will have on our ability to invest in critical infrastructure and the local economy.

Since the release of the draft decision, various public officials have suddenly felt the need to make clarifying statement voicing support for UI’s employees. These qualifications make clear that our public and regulatory leaders know this decision will ultimately harm UI’s workforce, which provides an essential service that is the lifeblood of the Connecticut economy. The final decision attacks our employees on compensation, on our request to expand our teams to promote safety and reliability, and on their ability to uphold our exceptional quality of service, which is the most offensive outcome to our front-line workers who take immense pride in their dedication to serve our communities.

PURA’s Action on English Station is an Abuse of Discretion

Contrary to recent statements, United Illuminating continues to meet our commitment to cleanup English Station, which the company sold over 20 years ago. To date, UI has invested more than $18 million to complete interim asbestos abatement in the main power plant building, including 14 boiler rooms, interim cleanup measures in another boiler room, and the demolition of the former Station B building. UI even went above our requirements by demolishing a building at the site when bricks began falling to ensure the safety of the community. These are clear actions, not failures, and we will continue to meet and exceed our regulatory and legal agreements with the state of Connecticut and work with all parties to ensure English Station is cleaned up.

Ultimately, PURA is acting beyond its legal authority in applying a twenty-basis point adjustment to UI’s ROE to enforce its view of the Partial Consent Order; state environmental regulations, including compliance with the Consent Order, are exclusively under DEEP’s jurisdiction. PURA’s circumvention of proper jurisdictional channels reflects the Authority’s increasing and improper use of ROE penalties as a tool to coerce policy outcomes far beyond the proper financial analysis in establishing ROE. 

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Media Contact:

Sarah Wall Fliotsos

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