UI: PURA decision forces it to cut $70M in investment projects, delay grid upgrades
United Illuminating CEO Frank Reynolds
United Illuminating (UI), a subsidiary of Avangrid, said Wednesday it has reduced its capital investments by $70 million as a result of state regulators’ 2023 decision to significantly reduce its rate increase request.
That decision, in which the Public Utilities Regulatory Authority (PURA) unanimously approved a roughly $23 million increase in the utility's annual revenues — far below the company's request for a $131 million increase over three years — was upheld last week by a state superior court judge.
In a news release, UI said the 87% reduction of its requested increase has forced it to cut its capital budget in half, which will affect what it calls “critical reliability investments.”
“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,” UI said. “The cuts will also significantly delay grid infrastructure upgrades, including clean energy projects.”
Gov. Ned Lamont issued a statement criticizing UI's decision.
“Withdrawing capital investments only harms ratepayers, who already pay exorbitant prices for utilities and deserve a safe, reliable and affordable grid," Lamont said in his statement. "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. This is a disappointing move at a time when we are collaboratively trying to lower monthly bills, increase our supply, and strengthen our utility infrastructure.”
UI President and CEO Frank Reynolds, however, said his utility is "deeply concerned about the number of projects and programs that PURA’s decisions have forced us to defer, with direct impacts on our customers, communities, and our front-line workforce.”
Reynolds said 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.”
He added that, without the “necessary support from state regulators,” more cuts will likely need to be made.
UI states that, despite its budget cuts, its actual return on equity (ROE), a measure of its profitability, continues to decline, falling to 3.55% for the 2024 year-end report in its most recent quarterly filing with PURA.
By comparison, PURA’s decision in the company rate case allowed for an ROE of up to 8.63%.
The company said its degrading profitability “is eroding investor confidence in Connecticut utility companies, which will raise the costs of debt and thereby increase costs for customers.”
It noted that financial rating agencies have expressed increased concern over the “unstable regulatory environment” in the state, with Bank of America recently commenting that Connecticut has “probably” the “worst regulatory environment in the U.S.”
In December, S&P and Moody’s issued credit rating downgrades for UI’s sister companies, Connecticut Natural Gas (CNG) and Southern Connecticut Gas (SCG), and S&P similarly downgraded Eversource Energy and its subsidiaries.
Credit rating downgrades force utility companies to offer premiums to investors to sell their debt, which is used in part to finance infrastructure investments. The premiums are paid for by customers.
UI serves 345,000 residents and businesses across south-central Connecticut.
Editor's note: This article was updated to include the statement from Gov. Ned Lamont
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