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August 12, 2024

Avangrid takes aim at PURA, asking top regulator to recuse herself from rate case

Marissa Gillett
By Andrew Larson

Avangrid Inc., the Orange-based energy company, has asked the head of the Public Utilities Regulatory Authority to recuse herself from participating in its gas companies’ ongoing rate case, after directing an employee to alter a web page that may have been relevant to the case.

In a filing on Thursday, Avangrid subsidiaries Connecticut Natural Gas Corp. and Southern Connecticut Gas Co. accuse PURA Chairman Marissa Gillett of improper ex parte communications with PURA’s Office of Education, Outreach and Enforcement (EOE).

“Although extraordinary, this request is necessitated in light of the PURA Chairman’s ex parte communications  directing a party to the proceeding to alter PURA’s website content relied on by the companies during hearings, among other concerns,” the filing states.

Also, because the EOE appeared to be prejudiced, the companies asked PURA to strike the testimony, exhibits, discovery and briefs submitted by the organization.

“This is the only remedy available at this point to address the prejudice to the companies caused by PURA’s decisions to block the companies’ valid and appropriate challenges to (the Office of Education, Outreach and Enforcement’s) evidentiary submissions during the proceeding that is not concluded,” the companies said.

Separately, the companies are seeking an extension of time to explore a potential settlement of the docket, which could render moot their motion for recusal and to strike the EOE evidence.

The companies said they’re seeking to resolve the docket by settlement rather than litigation, based on recent  statements by the Lamont administration encouraging resolution of disputes by consensus. 

A PURA spokesperson said: "As a quasi-judicial agency, PURA cannot comment on pending matters before the authority. Parties and intervenors have seven days to comment before PURA rules on the motion."

In the rate case, Connecticut Natural Gas (CNG) is seeking to increase its rates by nearly $20 million, allowing it to achieve a return on equity of 10.2%. 

Attorney General William Tong has said CNG should actually decrease rates because CNG earned $8 million above their authorized return on equity of 9.3% last year.

Southern Connecticut Gas has proposed to increase its rates by $40.2 million, increasing its distribution revenues by about 19%, which would cause ratepayers' bills to increase by more than 9%. 

United Illuminating

Recently, Frank Reynolds, president and CEO of United Illuminating (UI), another Avangrid subsidiary, said a recent PURA decision continues to put his company in jeopardy as well.

In a 2023 rate case, PURA cut 22% of UI's $131 million proposed revenue requirement over three years.

For the 12 months ending June 30, UI’s return on equity, which is a measure of its profitability, was 3.94% – “substantially insufficient to attract investment to fund operations and capital projects,” the company said in an announcement last week.

Although PURA authorized a return on equity of 8.63%, PURA’s constraints appear to be preventing UI from achieving returns anywhere near that level, he said. 

“How low must UI’s profitability sink before Connecticut policymakers acknowledge that PURA’s decision-making has rendered us incapable of adequately funding our business and attracting the capital we need to provide safe, reliable service to our customers?” Reynolds said.

UI has raised concerns about its return on equity before.

 “Today, it is clear we undersold our concerns,” Reynolds said. “Investors can now make a higher return in their bank’s savings account than by investing in our company due to the uniquely punitive constraints imposed by PURA and the unstable regulatory environment they continue to inculcate.”
 
Reynolds said the company will not be able to “access the capital needed to build protective infrastructure like flood walls around our substations, to convert our remaining outdated meter fleet to smart meters or to replace 80-year-old substations with the most advanced technology for our customers’ benefit.”

According to UI, the problems stem from PURA instructing the company to write off nearly $24 million, while simultaneously prohibiting the company from including these write-offs when reporting its return on equity.

“In the company’s view, reporting ROE without the write-offs falls far short of representing the deep financial harm that PURA’s final decision in UI’s most recent rate has exacted on the company and its ability to serve its more than 343,000 customers,” the company said.

UI has filed a lawsuit against PURA, which claims PURA violated UI’s constitutional right to receive “just and reasonable rates” that cover its capital costs and operating expenses, and “do not impair its financial integrity.”

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