ORANGE, CT – February 7, 2023 – Frank Reynolds, President and CEO of United Illuminating, a subsidiary of AVANGRID, Inc. (NYSE: AGR), today testified before the Energy and Technology Committee during an information forum on Regulators and Energy Distribution.
Remarks as submitted to the Committee:
“Good afternoon. Chair Needleman, Chair Steinberg, Ranking Member Fazio, Ranking Member Buckbee, and distinguished members of the Energy and Technology Committee. Thank you for inviting me to testify during this informational forum on regulators and energy distribution.
“My name is Frank Reynolds, and I am the President of AVANGRID’s Operating Companies in Connecticut and Massachusetts, which include United Illuminating, Connecticut Natural Gas, Southern Connecticut Gas, and Berkshire Gas. I join you today in my capacity as President of United Illuminating, along with our General Counsel, Kenna Hagan, and Director of Wholesale Power Contracts, Christie Prescott, to provide our insight and perspective on matters related to the energy distribution system.
“But I am also here to echo the sentiments that have been expressed by the members of this committee, by Governor Lamont and his administration, and by our customers – we have an energy problem in our state. The increase in energy supply prices, set by out-of-state generation companies and driven by a broken power market in New England, is harming our customers and hard-working families across Connecticut. Energy supply prices 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 winter. We at United Illuminating and our parent company, AVANGRID, consider this unacceptable, and that is why we’ve worked with the Lamont Administration to take urgent action providing direct financial relief to our customers. However, it is clear we need long-term, sustainable solutions to this problem.
“Connecticut has a well-earned reputation for its national leadership on clean energy and climate change, and UI is proud of the work it does to support our climate goals, work that includes investments in the electric system to facilitate electrification of buildings and transit and the interconnection of renewable energy resources large and small. We’re fortunate to enjoy such terrific partnerships in this effort, with the Lamont Administration, the business community in Connecticut, and the General Assembly, particularly the members of this committee. Together, we continue to make tremendous progress toward a cleaner, more reliable, more resilient grid.
“UI is a proud Connecticut company and has been a member of the communities we serve for over 100 years. Our service territory represents 17 municipalities along Long Island Sound, serving approximately 341,000 customers and operating 3,600 miles of electric distribution lines. We are a subsidiary of AVANGRID, which is headquartered in Orange, and has become a valued member of the Connecticut community in its own right - investing over $9 billion in the state since 2008, employing 1,800 Connecticut workers and supporting over 10,000 indirect jobs. Our employees live in the community, work in the community, and help the community thrive – coaching little league and youth basketball, volunteering at local pantries and organizations, and donating to terrific organizations like the Ronald McDonald House, which I had the opportunity to visit just before Thanksgiving. Through our own contributions and the work of the Avangrid Foundation, we’ve made over $5.7 million in charitable donations to nonprofits and other community organizations across Connecticut. Let me be clear, these donations are shareholder dollars; our customers do not pay for any of these donations in our communities.
“We take pride in powering our communities, from the vibrant cities of Bridgeport and New Haven to the historic towns of Woodbridge and Shelton. And our employees demonstrate an unshakeable commitment to service, which was on display during the recent Christmas storm. With severe weather coming in just days before the holiday, many of our line workers cancelled travel and other plans to answer the call to service, working throughout the weekend to ensure power was restored to every single home in our territory before Christmas Eve on Saturday night. While I was out meeting with our folks in the field, one line worker I spoke with told me this would be just the fourth Christmas he would spend with this seven-year-old son – in other years, he was out working the lines and restoring power to our customers. Thankfully, this year we finished the job in time for him to enjoy Christmas with his family. Then, on Monday morning, he joined a crew of UI workers and headed up north, to assist with ongoing restoration work at our sister company, Central Maine Power, which was hit with far more severe impacts from the holiday storm.
“This is what I mean when I talk about the commitment to service that is the guiding principle for our company. And it is in that spirit that we join you today. Everyone knows we are living through difficult times. Prices are rising across the economy for everyday essentials, from groceries to rent, putting a strain on the pocketbooks of hardworking families. That is why the prices set by the energy generation companies are so harmful. And ultimately, this is an issue not only about fairness, but about transparency.
“When customers open their energy bill every month, the bulk of the bill will be split between two charges – wires (transmission and distribution), and generation (energy supply). The distribution is our cost – what we charge to maintain the poles and wires and substations that deliver electricity to residences and businesses. This is a highly regulated rate with oversight from the Public Utilities Regulatory Authority. This year, that charge will account for roughly 30 percent of the bill.
“The other 70 percent our customers pay for is energy supply – a standard service rate the utility companies are required by law to procure under the supervision of a PURA authorized process on behalf of our customers. Customers can also shop for this supply, but most opt for standard service. This is strictly a pass-through cost at no markup or profit. UI only delivers the electricity customers use, and does not influence or control the supply price, even though we are required to include and collect the cost in our monthly bills.
“It is worth noting that UI’s transmission and distribution costs have remained flat for the last six years. Currently, we’re before PURA for a rate case to align distribution rates with the critical investments we need to make to build the grid to support a clean energy future. This is an incredibly transparent, year-long process, with public hearings, testimony, interlocutory orders, intervenors. We’ve already received and responded to 1800 data requests, and are incredibly forthcoming in justifying our costs and proposed investments. We are seeking an increase of 4.9% to support the critical investments that will unlock long-term savings and benefits for our customers. Later this month, we’ll begin public hearings and look forward to providing more information about our plan.
“Now, contrast this with the rate hike set by five out-of-state energy generation companies this winter – a 107% increase implemented with zero transparency or accountability. These are companies that in 2021 pulled in over $340 billion in revenue. For months, we’ve been calling upon the generation companies to open their books, as we do, and justify these costs. We’ve yet to hear a response. This must change.
“As I said earlier, this is all driven by a broken energy market. Deregulation’s purpose was to drive more efficient operation of and investment in electric generation supplies – bringing down overall costs. While most of the region saw decreases in electric supply costs, that was principally driven by cheap natural gas rates. The market focus on “least cost” fuel sources has led to an over reliance on gas for electric generation, including imported liquified natural gas - no longer the fuel of least cost. With the move away from more expensive coal and oil for electric generation, and concentration of the build out of gas assets despite the region’s lack of sufficient interstate gas pipeline infrastructure, our region is vulnerable in ways it hasn’t been in decades.
“On Christmas Eve, ISO New England called for a power caution, a chilling step toward a situation where we might see rolling blackouts across the region to maintain the integrity of the grid. We seem to be one prolonged cold snap away from an energy crisis that could leave families across New England in the dark for hours at a time. To fix this, and bring the New England energy market into a state of good repair, we must look at our generation mix, and work with states across the region to ensure that we are planning and securing the right mix of energy resources – large scale renewables, transmission, battery storage, and backup generation – to meet the needs of our customers and communities. UI and AVANGRID stand ready and willing to work with the Lamont administration on helping to accelerate the transition of our generation to cleaner sources.
“Though we don’t control the energy supply or prices, we understand the harm it is causing our customers. That is why we worked together with the Lamont Administration to craft an urgent relief plan that will provide roughly $40 of direct financial assistance to each customer enrolled as financial hardship monthly between January-April. We’ve also directed $3.3 million to Operation Fuel to help them provide aid to Connecticut families in need. We’re also holding events and open houses across our service territory where customers can meet face-to-face with our representatives and learn more about the programs we offer to help them manage their bill, including energy efficiency. We’ve hosted two of these events so far, with tremendous turnout. Customers are looking for assistance to manage these cost increases, and helping our customers is our highest priority.
“But it is time for the generation companies, which are profiting from these price hikes at the expense of hardworking Connecticut families, to come to the table, as we have, and provide financial relief to the customers suffering the burden of these costs. It is simply the right thing to do, and with these energy supply costs hitting customers this month, long overdue.
“Before I hand the floor to my colleagues, who will speak in more detail about our work to maintain the electric distribution system, I would like to thank this committee, and commend you for the work you do. For months, we’ve been calling for transparency and accountability from the energy generation companies. Thanks to this hearing you’ve called today, you have an opportunity to ask questions and, finally, get some answers from the power generators, demand basic transparency, and urge them to offset their cost increases with direct financial relief. We are grateful to this committee for its efforts, and look forward to continued partnership to deliver solutions for hardworking families across Connecticut.”
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