United Illuminating said Wednesday that is has cut nearly $70 million worth of investments in its Connecticut service territory as a result of regulators’ decision to deny much of the utility’s request for a rate increase on its customers in 2023.
Those cuts, which company officials alluded to in recent statements bemoaning their financial position, mark the latest exchange in an escalating public feud between the state’s two largest electric utilities and their regulators at the Public Utilities Regulatory Authority.
The announcement also comes less than a week after a superior court judge dismissed most of the company’s claims that PURA acted unfairly by denying United Illuminating’s request for more than $100 million in additional revenues in its most recent rate case.
A spokeswoman said Wednesday that the company is has yet to determine whether it will appeal that decision.
“PURA’s decision to underfund the company’s rate request by 87 percent has required UI to cut its capital budget in half,” a company press release, emailed Wednesday, read.
“As a result, the company has been forced to defer programs and projects that involve proactive replacement and system advancement, such as substation infrastructure upgrades, underground cable replacements, aging distribution line asset replacements, system capability investments, fleet vehicle replacements, and Information Technology (IT) investments. The cuts will also significantly delay grid infrastructure upgrades, including clean energy projects,” the statement read.
Connecticut’s largest utility company, Eversource, made a similar announcement last year that it was cutting more $500 million worth of investments in the state over five years as a result of its frustrations with PURA’s regulatory approach.
A spokeswoman for PURA declined to comment on UI’s announcement Wednesday.
Rob Blanchard, a spokesman for Gov. Ned Lamont, issued a statement Wednesday criticizing the company’s announcement, which he noted comes amid efforts to address Connecticut’s stubbornly-high energy prices.
“Withdrawing capital investments only harms ratepayers, who already pay exorbitant prices for utilities and deserve a safe, reliable, and affordable grid,” Blanchard said. “Time and again the courts have upheld PURA’s rate decisions and despite this, the strength of our grid may be impacted because the latest rate increase decision didn’t go UI’s way.”
The authority, led by Chairwoman Marissa Gillett, has generally sought to apply stricter scrutiny to the costs utilities incur on infrastructure projects and other investments that are then passed along to customers through utility rates. Company officials have chaffed at that approach, arguing it makes it harder for them to borrow money needed to make further investments.
United Illuminating CEO and President Frank Reynolds pointed to a decision in December by Wall Street credit rating agencies to issue a negative outlook for two of the utility’s affiliated gas companies, citing Connecticut’s “challenged regulatory environment.”
“The financial uncertainty brought on by Connecticut’s unstable regulatory environment is forcing us to implement a bare-bones investment plan while deferring proactive system upgrades, which will lead to more frequent outages, slower response times, and higher costs for our customers,” Reynolds said in a statement.
PURA’s approach has been defended by the Office of Consumer Counsel, a separate agency tasked with representing utility customers in cases before regulators.
“UI has repeatedly insisted that customers must pay for all of its investments, including when the company has failed to prove that investments are reasonable and beneficial” Consumer Counsel Claire Coleman said in a statement Wednesday. “UI’s refusal to accept the clear standards of utility regulation is disappointing. UI should take this opportunity to turn the page and focus on fulfilling its evidentiary duty in the pending rate case currently before PURA, so that customers can receive reliable, innovative and affordable service.”
In a separate statement earlier this month, Reynolds said that the utility’s actual return on equity fell to just 3.55% last year, well below the 8.63% rate of return that was approved by PURA. United Illuminating reported earning more than $24.4 million in profits last year from its distribution network — the portion of the grid regulated by PURA — according its recent filings with regulators.