UI Offers Plan to Offset Rate Hikes with Customer Dollars

Gov. Ned Lamont and Attorney General William Tong announced a plan today for United Illuminating to offset a proposed May electric bill increase by returning money the company over-collected from customers after the federal corporate tax rate was slashed in 2017.

UI offered a plan to regulators that would use $41.55 million of savings from federal tax cuts and an additional $5 million from the company to offer bill credits that will offset a proposed electric rate increase starting May 1 – about $10-15 a month for the typical residential customer.

UI – a subsidiary of Avangrid that serves about 338,650 customers in the New Haven and Bridgeport areas – also agreed not to raise the distribution portion of its rates until May 2023,  though distribution rates are just one portion of overall rates, which could still increase over that time.

“This settlement allows us to provide meaningful benefits to our customers, many of whom continue to be impacted by the economic effects of the COVID-19 pandemic,” Frank Reynolds, president and CEO of United Illuminating, said in a news release. “If approved, it will not only avert a bill increase in the near term but will also help keep rates stable in the foreseeable future.”

The settlement is the result of an investigation by PURA into an interim rate decrease for UI and Eversource, which was required by the utility accountability law passed last September.

The $41.55 million UI is offering as bill credits comes from the 2017 federal corporate tax rate cut from 35 percent to 21 percent. UI budgeted for the higher tax rate, collecting more than necessary after the corporate tax cut. 

UI was already required to return that money to customers, but as part of the offer the company agreed to speed up that return in order to provide customers with larger credits to help with bills until the end of December 2022. According to PURA, this is the first proposal UI has made to return that money to customers.

“We pay far too much for our energy here in Connecticut, and families need and deserve stability as we emerge from this economic and public health crisis,” Tong said in a news release. “United Illuminating came to the table prepared to make real concessions, including contributing millions of dollars of their own dollars to ease the burden on local ratepayers. It makes such a difference to have corporate leadership firmly committed to Connecticut. Eversource, the ball is in your court now.”

In response to a query from CT Examiner, Eversource said that it has already returned the money the company over-collected as a result of the 2017 tax cut. As part of its seasonal increase, Eversource has proposed either increasing rates so that the average residential bill would cost about $12.55 more a month starting in May, or spreading those costs out over 2022 and 2023.

“The announced resolution is a good step forward for UI customers. Eversource already passed federal tax credits back to Connecticut electric customers totaling more than $150 million through rates set in 2018,” Eversource spokesperson Tricia Modifica said. “We also filed a proposal on March 1 in our pending case before PURA that includes different options to reduce the impact to customers and help to manage bills – similar to the approach taken by UI and the other settling parties. It’s important to know we have a number of proposals before regulators and we’re committed to our discussions with them so we can do what’s in the best interest of our customers.”

UI outlines a rate increase

In December, PURA ordered Eversource and UI to base future rate proposals on actual expenses rather than on projections — which can be inaccurate — a change that UI warned could lead to a steeper rate increase this year.

According to UI a typical residential bill would increase about 8 percent under the company’s proposal, based off of historical expenses, compared to 5 percent for a proposal based off of projections.

The credits announced by UI should entirely offset the rate increase proposed to take effect May 1 — that increase is to recover costs from 2020, including the state mandate to purchase power from the Millstone Nuclear Power Station and improvements to the New England transmission system and UI’s own distribution system. 

COVID-19 raised UI’s expenses significantly above what it expected last year, and are much higher than what the company expects in the coming year. Those costs include $44.35 million that UI had expected to collect with a July 2020 rate increase. That rate hike was cancelled by PURA in response to a backlash from customers faced with unexpectedly high bills during the pandemic. 

UI also raised a third option, that if the projections are used, and the company spreads the costs over two years, the typical residential bill would increase less than 3 percent.

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