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March 10, 2025

Electric utility CEO says last year’s ‘meager’ return of 3.55% will defer investment, raise bills for customers

HBJ PHOTO | BRIAN AMBROSE United Illuminating President and CEO Frank Reynolds stands outside a Connecticut Natural Gas operations center in East Hartford after an interview with the Hartford Business Journal in November 2023.
By Andrew Larson

United Illuminating’s return on equity (ROE) fell to 3.55% last year, less than half of the company’s allowed ROE of 8.63%, president and CEO Frank Reynolds announced Monday.

Calling the returns “meager,” Reynolds said UI will be forced to defer investments, such as new substations and protective flood walls, which will adversely impact reliability and resiliency..

The company informed its regulator, the Public Utilities Regulatory Authority (PURA), of its 2024 ROE in a filing Friday.

Return on equity is a measure of a utility’s profitability. It is calculated by dividing distribution net income by shareholder equity, which is the company’s assets minus its debt. PURA sets the maximum ROE that each utility can attain, but does not guarantee that it can be achieved.

“These are the returns with which we compensate our lenders for investments in critical reliability and resiliency projects, and ones this low will force us to defer most investments and offer premiums to lenders, passed on to customers, for the projects we cannot defer,” Reynolds said.

He continued: “Thus, these meager returns will result in both higher bills and decreased service quality – a lose-lose for the 345,000 residents and businesses we serve – while making it impossible for utilities to meet the demands of the moment: increased capacity to support AI, greater electrification, onshoring of more manufacturing and industry, and more.”

Reynolds said the company’s ROE was the result of financial damage caused by PURA, which sets utility companies’ rates, revenue and costs.

“Today’s report is indisputable evidence that those revenues, which make up less than a third of the residential bill, are entirely insufficient,” Reynolds said. “Yet PURA has shown an incredible – and frankly, irresponsible – lack of urgency in correcting it.”

Last year, PURA cut UI’s $130 million revenue increase request to $22 million. UI has appealed the decision in court. 

UI is currently seeking a rate increase from PURA, which is under review.

In November 2024, UI requested a $105 million increase in revenue to support more than 200 major infrastructure projects. The increase would raise rates by about 9.3%.

“UI’s new rate case provides PURA another opportunity to finally provide UI the support we have needed for years to ensure continued excellent service for our customers,” Reynolds said. “We urge PURA to take seriously its own obligations ‘to monitor and consider the financial condition of the utilities [it] regulates’ and return our company to more solid financial footing on behalf of our workers, our municipalities and all the customers we serve.” 

UI says that in order for its ROE to be sufficient, it must at least exceed UI’s costs of borrowing, which is currently 4.6%. Last year, UI’s year-end ROE was 4.35%.

Several credit rating agencies have recently decreased UI’s credit rating, underscoring its financial hardships.

United Illuminating subsidiaries, Southern Connecticut Gas (SCG) and Connecticut Natural Gas (CNG) also filed their 2024 year-end ROEs with PURA on Friday.

SCG’s ROE was 5.8%, below its allowed ROE of 9.15%; CNG’s ROE was 8.77%, below its allowed ROE of 9.15%.

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