UI defers critical needs in 2024; PURA’s 2023 Rate Decision affected company’s financial integrity

Last fall, UI detailed the economic harm of PURA’s Rate Decision

Background

Under Connecticut law General Statues § 16-19e(a)(4) – the level of rates approved by PURA must be sufficient for a public utility to recover its operating and capital costs, maintain appropriate staffing levels and financial integrity, and attract investors.

In the most recent UI rate case (Docket #22-08-08 [see application cover letter here], in which PURA issued its Final Decision on August 25, 2023), PURA rejected almost all aspects of UI’s proposed revenue increase, implemented unlawful penalties, and disallowed 87 percent of UI’s proposed revenue requirement.

The effect of those disallowances deprived UI of annual revenues of almost $32 million. UI issued a statement the company’s appeal of PURA’s Final Decision and each of the harmful impacts: United Illuminating Files Appeal of PURA’s Final Decision in Rate Case – UI (uinet.com)

By disallowing UI’s capital costs, UI’s profit margin — or Return on Equity (ROE) — shrank dramatically. UI says they can’t make critical investments in the grid, as they are funded in part through debt and equity. UI is now implementing significant austerity measures in order to preserve its financial integrity, while striving to provide safe and reliable power.

Austerity measures

• deferring infrastructure replacement of its oldest substations (e.g., Old Town substation in Bridgeport) that represent a performance risk to customers and a safety risk to employees;

• deferring replacement of fleet vehicles (i.e., line trucks) whose age/mileage qualifies them for upgrades; deferring replacement of outdated meters to AMI (“smart”) meter technology;
• and deferring reliability improvement projects on worst-performing circuits.

Project Deferrments

As a result of PURA’s 2023 Rate Decision, UI is deferring these projects:

• Infrastructure Replacement, including Old Town substation in Bridgeport and the Whitney Ave substation in Hamden

• Facilities that provide UI employees with safe, effective work locations

• IT/OT (Information Technology, Operational Technology obsolescence)

• Reliability Projects for customers on worst-performing circuits

• Resiliency, including Step Down banks

• Modernization supporting the state’s clean energy goals, including electric storage, electrification of the transportation sector, and automation

UI demonstrated the need for capital investment of $140.261 million in 2024 to fund the projects and programs in the eight categories of its capital plan.

In assessing the capital plan in light of the Rate Decision, the Company must defer approximately half of the investments, reducing investment in areas mentioned above.

The scaled-down plan is structured to meet the Company’s fundamental obligation to serve customers and will require capital investment in the range of $69.388 million. The balance of $70.873 million from the 2024 plan cannot be funded, UI says, at this point.