Earlier this month, Connecticut’s United Illuminating Company (UI) formally requested to increase distribution rates for the utility’s 329,000 plus residential customers starting in 2014. While customers’ bills won’t be greatly affected in 2014, there are underlying issues that some customers are speaking out about.
If approved, the hike will raise distribution rates by 1.5 cents per kilowatt hour (kWh), or about $10.50 per month for the average electric user in the utility’s service territory. UI is quick to note that this increase will be offset by the elimination of the transitional charge that went into effect in 2000 in order to offset costs associated with deregulation and electric choice in Connecticut. This charge, formally known as the ‘competitive transition assessment’, will be abolished beginning January 1, 2014.
The rate hike would raise about $65 million in 2014 (an 8.7% increase), and by another $26 million in 2015. The increased revenue is intended to go towards systems improvements as well as $52 million to cover damage from major recent storms, including Tropical Storm Irene and Superstorm Sandy.
Opponents of the rate hike understand that bills will be offset by the disappearance of the transitional charge. However, in a recent public hearing with the Public Utility Regulatory Authority (PURA), they were quick to point out that their belief that the utility is unjustified in raising rates. Connecticut citizens cited several arguments highlighting the profit-hungry nature of UI and its parent company, ULI Holdings. Despite the fact that Connecticut’s residents pay some of the highest electric rates in the nation, UI has one of the lowest returns on equity (ROE) of utilities in the nation. Customers are more concerned that the revenues will go towards investors rather than to actual infrastructure improvement spending.
Since the rate hike is distribution-related, all UI customers will be affected, no matter if they receive their electric supply from UI or a retail electricity provider. Connecticut has one of the highest percentages of customers that have switched to a retail electricity provider, about 46% of its residential customers. The other 54% can’t avoid the distribution rate hikes, but they can still shop around for a provider that has lower supply rates than UI in order to reduce their electric bills.