Shortly after Chair Marissa Gillett departed from the Connecticut Public Utilities Regulatory Authority (PURA), the two remaining commissioners changed proposed final rate case decisions, resulting in larger customer bill increases.  

Gillett, a reformer who lowered customer rates, handed in her resignation in mid September following years of attacks against her led by the state’s gas and electric utilities, Avangrid and Eversource. 

Under Gillett’s tenure as PURA’s chair, the agency attempted to institute new mechanisms to hold utilities accountable to their customers.

Higher UI bills 

The final decision on United Illuminating’s (UI) rate case, signed by remaining commissioners Michael Caron and David Arconti in late October, awarded the company $450.8 million in revenue. This was a $37.3 million increase from the $413.5 million allowed in the proposed final decision before Gillett’s departure. The approved revenue requirement in the final decision results in a monthly bill impact of approximately $9.99 to distribution rates for the average residential customer using 750 kilowatt hours of electricity. United Illuminating is Avangrid’s electric subsidiary.

Parties to the rate case can comment on the proposed final decision and PURA commissioners may or may not take those into account in their final decision. 

The final decision in UI’s rate case also increased the company’s Return on Equity (ROE) – the amount of money a regulator allows a utility to charge customers for the profit it returns to shareholders on the equity share of the company’s capital investments – from the ROE suggested in the proposed final decision. The utility’s ROE rose from the recommended 8.75% to 9.25%. Since this return is embedded in customer rates, a higher ROE directly increases the amount customers pay to provide profits to shareholders.  

In a press statement, Claire Coleman, the state’s Consumer Counsel, called the final decision’s rollback of some of the cost reductions her team advocated for “disappointing.” She added that, “Given that the final decision gives UI more revenue than the company’s own stated bottom line for providing safe and adequate service, I hope that UI will accept the decision rendered by its regulator and cease its practice of filing a battery of appeals.” 

Governor Ned Lamont appointed four new commissioners to PURA in October, who will join Arconti, a former Avangrid lobbyist and state legislator: Thomas Wiehl (who will be PURA’s new chair), Janice Beecher, Holly Cheeseman, and Everett Smith. Caron will depart the commission. 

Allowing imprudent costs to be recovered

One significant area where the final decision diverged from the proposed final decision was an increase in the costs UI was allowed to recover from ratepayers for plant additions – capital investments in its assets. 

Those included a rise in allowed costs incurred by the company to engineer utility poles to allow third parties, such as broadband internet companies, to attach various equipment. UI asked PURA to allow it to charge nearly all these costs to ratepayers instead of the third-party attachers. The proposed final decision disallowed all these costs – over $23.5 million – finding that the company “has not demonstrated that this cost is prudent.” 

While the final decision from Caron and Arconti agreed with much of the proposed final decision order’s findings on utility pole attachments, stating there is no “evidence of prudent and efficient management of this aspect of the Company’s franchise,” the commissioners allowed the company to recover these costs nonetheless, without additional explanation for the change. Instead, they warned UI that in the future these costs would not be approved without the company implementing changes to internal processes on how it apportions and calculates such expenses, together with proper documentation. 

The final decision also reversed the proposed final decision on two other plant addition projects – installing various duct and conduit systems – which the proposed final decision found were not “used and useful” and thus not recoverable from ratepayers. One of these projects cost ratepayers over $3.6 million.   

Increasing profits

The final decision increased the proposed final decision’s recommended Return on Equity (ROE) by 50 basis points.

In explaining its rationale for reducing the ROE, the proposed final decision berated the company for a performance that “did not reflect expert, efficient, and prudent management.” Importantly, it asserted, “several [areas] are not new and reflect a continuation, or in some instances, a further deterioration of the Company’s adherence to its broader public responsibilities.” Yet this strong language was nearly entirely removed from the final decision.

On the left, excerpt from the proposed final decision; on the right, excerpt from the final decision

One main point of divergence between the final and proposed final decisions on ROE reductions related to the company’s ongoing delays in its environmental remediations of English Station, a decrepit decommissioned power plant on the banks of the Mill River in New Haven.

The final decision agreed with the proposed final decision that the “protracted timeline on which the remediation of English Station continues to proceed, and the company’s failure to direct more of its resources (including the balance of its original $30 million commitment) to expediting the remediation effort, constitutes inefficient management.” Accordingly, it concluded, “a continued ROE reduction is warranted to provide continued incentivization for a more efficient and expedient completion of the Company’s remediation responsibilities as contemplated by the Merger Decision.” 

Moreover, both the proposed final decision and final decisions found that UI has been recovering from ratepayers its employee labor costs related to the station’s remediation work – contrary to PURA’s explicit previous direction not to do so.

Still, while the proposed final decision unequivocally scolded the company for “non compliance” and “deficient management” surrounding English Station and reduced its ROE by 20 basis points, the final decision, while noting these glaring problems, acknowledged the company’s “limited progress” in the remediation process and reduced the ROE by only 10 basis points. 

Customer service issues

The proposed final decision also reduced the ROE by 20 basis points due to ongoing customer service issues. These include problems providing customers “appropriate instructions, information, and explanations” and “properly identifying financial hardship customers.” The proposed final decision noted that PURA “found the same types of errors troublesome in the Company’s last rate case.”

Yet the final decision removed the ROE reduction based on poor customer service entirely. 

Both the proposed final decision and final decisions agreed on the need to reduce ROE by 5 basis points for non compliance with several of PURA’s previous orders, including the demand that it phase out its water heater rental program. 

“The Proposed Final Decision in UI’s rate case was unsalvageable, stemming from the former PURA Chair’s clear bias and procedural actions that a Connecticut Superior Court judge has now ruled illegal,” UI spokesperson Angela Baccaro said in an emailed comment to the Energy and Policy Institute. 

That statement refers to a recent ruling by Judge Matthew Budzik to toss out a previous Avangrid gas rate case decision by PURA under Gillette’s leadership. The decision, which has been remanded back to PURA for new proceedings, did not apply to this recently decided rate case. 

“If implemented, [the proposed final decision] would have exacted severe harm on UI’s 345,000 customers and 600-member workforce. PURA was right to set part of it aside in their Final Decision on October 28th,” UI’s Baccaro added.

UI did not respond on the record to a follow-up request by the Energy and Policy Institute asking how the proposed final decision’s recommended lower rates and UI profits “exacted severe harm” on UI’s customers. 

Throughout the rate case, UI argued that reducing allowable cost recovery for storm restoration would harm customers, and that reducing recoverable expenses for certain positions and employee benefits would harm the company’s workforce.

Operations & Maintenance expenses

The final decision increased other environmental remediation costs recovered from ratepayers from a mere $56,000 in the proposed final decision to over $3.8 million. This includes a remediation of the decommissioned East Shore gas plant in New Haven, which the proposed final decision found unlikely to be remediated during the rate year (the upcoming year) according to the company’s own schedule – and thus should not be shouldered by ratepayers. 

The final decision reversed much of this, saying that “it is reasonable to conclude that various East Shore remediation activities will occur in the Rate Year” based on the company’s filed documentation.  

The final decision also increased UI’s recoverable storm expenses by nearly threefold from the proposed final decision. Additionally, the final decision increased the total for employee compensation.  

Both versions agreed on denying UI’s request to recover from ratepayers various expenses that are unnecessary for providing safe and reliable service. These include over $1.2 million in legal costs associated with appealing UI’s previous rate case, an employee caregiver program expense, and a cafeteria subsidy. 

Caron and Arconti did keep the proposed final decision’s disallowances of UI’s expenses for branding, investor relations, and membership in the Electric Power Research Institute (EPRI), adhering to a 2023 state law that prohibits utilities from recovering such political and advocacy costs from ratepayers.

Yankee Gas increases 

In early November, shortly after UI’s rate case decision, PURA published its final decision in the Yankee Gas rate case, Eversource’s gas subsidiary. The two remaining commissioners, Arconti and Caron, signed off on the final decision that once again benefited the utility.

Three days after Gillett’s abrupt resignation, PURA released its proposed final decision for Yankee Gas. 

In the final decision, PURA awarded the company $802.2 million in revenue, a $41.7 million increase from the $760.5 million recommended in the proposed final decision. The final decision will result in an approximate total increase of $17-20 in average residential customer monthly bills, according to an estimate by the Office of Consumer Counsel.

The final decision approved a slight increase in ROE over the proposed final decision, from 9.30% to 9.32%.

Both the proposed final decision and final decision agreed that Yankee Gas must refund back to its customers a total of over $40.2 million in the next three years for the revenue of selling excess ratepayer-funded gas pipeline capacity. 

Eversource did not respond to a request for comment. 

“This is more disappointing news for Connecticut families heading into an already expensive winter heating season.” Attorney General William Tong said in a press statement following the final decision. “Once again, the utilities are being rewarded with a multi-million dollar rate hike after running their chief regulator out of town through relentless litigation and personal attacks.” 

Omitted project expenses 

One point in the Yankee Gas case where the final and proposed final decisions diverged related to capital projects the company did not include in its original application, but only later requested recovery from ratepayers. These projects, 72 in total, amounted to over $36.9 million. 

“Disallowing these costs is proper given the Company’s evidentiary burden and consistent with past Authority treatment of factually similar documentation deficiencies,” the proposed final decision said. “[D]ue to the inherent information asymmetry between the Authority and the Company caused by the Company’s sole control over key information necessary for the regulatory process, disallowance reflects sound ratemaking principles by incentivizing candor before the regulator.”

Yet the final decision allowed these project costs to be recovered from ratepayers.

Another point where the two versions differed relates to the rising costs of dismantling and removing assets as a factor in calculating the company’s depreciation costs. While the proposed final decision recommended a reduction of over $101.5 million to these costs, the final decision elected instead to reduce the company’s ROE by 5 basis points and mandate the company institute enhanced reporting requirements and an internal audit.

Yankee Gas allowed to recover some legal costs

The proposed final decision recommended the rejection of Yankee Gas’s attempt to recover from ratepayers $467,000 in its legal expenses. 

“[the] Company did not provide any policies, practices or procedures the Company undertakes in selecting an outside law firm, nor did it provide evidence that it took steps to competitively solicit outside law firms or to manage its outside legal costs prudently,” the proposed final decision said. “In short, the Authority was presented with a dearth of evidence upon which to make a prudence determination, rendering the record insufficient for the Authority to find that the Company’s legal expenses are prudent and reasonable.”

While the final decision agreed with the proposed final decision that a majority of these costs were unrecoverable – for instance, attempts to recover expenses for “legal matters that were resolved prior to the Rate Year” – it still allowed the company to recover from ratepayers over $118,000.