CT Water: PURA’s proposed rate cut ‘ignores the true cost of serving customers’
PHOTO | CONNECTICUT WATER
A Connecticut Water truck.
Connecticut Water Co. has joined a chorus of utility operators bemoaning the regulatory environment in Connecticut, saying it’s under pressure from investors and credit rating agencies.
Connecticut Water, which serves more than 107,000 customers in 60 municipalities in Connecticut, filed a written exception with the Public Utilities Regulatory Authority (PURA) contesting a proposed decision filed in late May.
In October 2023, Connecticut Water requested a $21.4 million increase in revenue, 18.1% more than the current level, to help recover roughly $135 million in costs related to drinking water and wastewater infrastructure investment.
In a proposed decision, PURA tentatively approved a $2.7 million revenue increase, with an opportunity for an additional $1.1 million based on performance.
PURA has until Friday to issue a final decision. Any authorized increases would take effect July 1.
Connecticut Water’s written exception states that PURA’s proposed decision, along with other recent rate case decisions, are having a deleterious effect on investor sentiment.
"The company is under pressure from debt rating agencies as well as equity investors to demonstrate that past decisions are not indicative of the ability to achieve returns consistent with other utilities in other states," the brief states.
If PURA adopts the proposed decision, Connecticut Water’s return on equity would increase by 20 basis points to 9.2%. Connecticut Water says that, based on prevailing industry averages, its ROE should be increased to a minimum of 9.3%
Also, Connecticut Water took issue with PURA reducing its operation and maintenance expense by $5.7 million, which “ignores the true cost of serving customers,” according to the brief.
The company said that without fair returns, it will be more difficult to attract capital.
"Debt and equity capital providers will not, and cannot be expected to, continuously invest money where they will not receive adequate credit quality protection or equity capital returns," the brief states.
PURA also recently cut $40 million from a revenue increase requested by Eversource Energy Co. subsidiary Aquarion Water Co., which provides water to 236,000 customers in Connecticut, Massachusetts and New Hampshire.
Aquarion filed an appeal in Superior Court, but a trial court judge upheld PURA’s decision. The state Supreme Court has agreed to hear the case.
Last month, Moody’s Ratings downgraded Aquarion’s credit rating one notch, noting its weakening financial profile.
Moody’s said that Aquarion’s rating change was due to “adverse regulatory or political decisions,” following PURA’s decision to reduce Aquarion’s revenue and lower its return on equity.
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