UPDATED: PURA chops $15.3M from CT Water’s revenue request, but approves increase over current level
Contributed | pixabay.com/photos/drop-of-water-drop-impact-ripples-578897/
A drop of water.
The Public Utilities Regulatory Authority on Friday morning approved a final decision that reduces a water utility’s proposed rate increase by roughly $15.3 million.
Connecticut Water Co. filed an application for a rate amendment in October 2023, which requested $140 million in revenue, starting with the July 1, 2024 rate year. That amount marked an 18.4% increase over CT Water’s currently authorized $118.25 million in revenue.
PURA’s approval gives CT Water $6.45 million, or 30%, of the $21.8 million increase it sought. CT Water also has the opportunity to earn an incremental $1.2 million in executive compensation upon achieving performance targets.
PURA issued a draft decision in May, which tentatively approved a $120.99 million revenue requirement for CT Water.
CT Water filed a written exception opposing the reduction. The brief says CT Water 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.”
PURA conceded to at least some of CT Water’s wishes, adding $3.71 million on top of the revenue total it contemplated in the draft decision.
Also, PURA approved a return on equity of 9.3% for CT Water, which is higher than the company’s current return on equity of 9%, but lower than the 10.5% return on equity that it requested.
In the draft decision, PURA proposed setting CT Water’s return on equity at 9.2%, but the agency decided to increase it to 9.3% in the final decision.
PURA said its decision will lead to customer service enhancements and expand CT Water’s water rate assistance program from a flat 15% discount on eligible low-income customers’ water bills to a three-tiered program to ensure customers pay no more than 2% of their annual income on water bills.
PURA’s 270-day review of the rate application involved three public hearings, audits, inspections, testimony, evidentiary hearings and exhibits.
Most of the comments submitted were in opposition to CT Water’s requested increase.
The Office of Consumer Counsel asked PURA to reject CT Water’s application and restrict its revenue and return on equity to current levels.
PURA also received positive comments about CT Water’s employees’ responsiveness and the company’s environmental and conservation efforts.
CT Water provides water service to over 107,000 customers in 60 Connecticut towns and has more than 240 employees.
CT Water President Craig Patla issued a statement Friday afternoon that said PURA approved "just 30% of the amount we feel is necessary to meet our obligations to customers, employees, communities, investors and the environment."
He said the decision could result in higher customer costs in the long run, noting that the company "has been warned by credit agencies of a possible downgrade in the company’s credit rating due to the outcome of this proceeding."
A credit rating downgrade would increase the interest rates that the company receives when borrowing money.
"With a significant amount of required investment over the next five years to meet federal requirements such as PFAS treatment, the challenges of increasing cyber security attacks on utilities, and the ongoing efforts to replace aging infrastructure, a lower credit rating will create higher interest rates for the company and, in turn, increased expenses for customers in the future," Patla said.
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