May 6, 2013
United Illuminating Company (UI) has made a formal request with the Public Utilities Regulatory Authority (PURA) to increase electric distribution rates by $95 million over the course of two years. Attorney General George Jepsen, among others, is in opposition to the increase, stating that the utility rates should be decreasing rather than increasing.
If the rate increase is approved, distribution rates would increase by 26 percent in the first year ($69 million) and by an additional 9 percent in the second year ($26 million). For the average residential customer, this means an 8.7 percent increase on electric bills during the first year and another 3 percent the second year. According to UI, the increased funding would go towards the replacement of aging infrastructure, reliability, and improving its delivery system for extreme weather events such as the major storms that occurred in 2011-2012.
In the filing, UI also requested to raise its return on equity (ROE) to 10.25% in order to attract capital needed to make infrastructure investments. In UI’s last rate approval, PURA allotted an 8.75% ROE, but a February 2013 compliance filing showed that actual ROE for that period was well above the allocation at 10.34%. The ROE increase request would account for $11.4 million of the proposed $95 million hike.
The Office of Consumer Counsel (OCC) – an independent state agency responsible for representing CT’s utility ratepayers – condemns the ROE request, stating that “UI should not have trouble attracting capital for infrastructure investment without the increase.”
In a press release, Attorney General Jepsen stated, “I believe that, based on the evidence presented in this proceeding, the rates proposed by UI are far above levels that are just and reasonable. UI has the highest electric rates in Connecticut and has consistently met or exceeded its authorized return on equity. UI has failed to show that it requires even higher rates to cover reasonable operating costs.”
Attorney General Jepsen argued that evidence shows that a rate increase of $11.5 million during the first year would be appropriate. However, this increase would be offset by the return of $14.4 million in overearnings from 2010 and 2012 (plus interest) to UI’s ratepayers. With this, a rate reduction of at least $2.9 million in the first year would be suitable, according to the Attorney General.
Connecticut residents pay some of the highest rates in the nation for electricity, with Hawaii, New York, and Alaska the only states paying higher rates for electric supply. Residents and businesses can save on their electric bills by selecting a retail electricity provider with lower electric supply rates than UI. Use the Compare & Switch tool (at the top of the page) to view rates and plans in your area.