Connecticut Water Calls Rate Decision Harshest in Recent Memory

PURA issued a draft decision mostly rejecting a rate hike by Connecticut Water

A request by Connecticut Water to raise rates on its residential customers by about $10.50 a month was significantly cut down by regulators to an increase of about 50 cents a month, and the company would also implement a first-of-its-kind discount for low-income customers.

The Public Utilities Regulatory Authority last week issued a draft decision mostly rejecting the rate hike request from Connecticut Water, which is asking to increase rates by 20 percent to bring in an additional $20.2 million in annual revenue. The authority’s decision would allow an increase of less than 1 percent, adding about $762,000 in revenue. 

There is some variation between different areas with Connecticut Water service, but the increase to the company’s main system would increase the average bill by about $6.05 a year, PURA.

In a response to the draft decision, Connecticut Water said it would have to “promptly” ask for another rate increase to meet its financial needs. The company called it “among the harshest Connecticut utility rate decisions in recent memory,” and said it was inconsistent with PURA’s history of regulating the utility, and with the authority’s impending shift to a system of performance-based ratemaking. 

The company said that it should be allowed another $8.3 million in revenue that PURA disallowed due to “fundamental errors” in its draft decision. It said it would not “re-litigate” the rest of the increase they asked for, as it fell under the authority’s regulatory judgement.

Connecticut Water has acquired sixty smaller water systems over the past 25 years, and now serves nearly 350,000 customers across 60 Connecticut towns. It says it needs the rate increase to make up for the costs of investing $265 million into its infrastructure since its last general rate case in 2010.

In comments to the state regulator, customers have questioned the timing of the request to raise rates, considering the company’s merger with San Jose Water in October 2019 – saying the company should have become more financially efficient considering the merger and its acquisition of smaller water systems.

The authority’s draft decision rejected Connecticut Water’s request to raise rates to recover money from millions of dollars of planned improvements, telling the company its spending plan was “aggressive” and that it needed to look at ways to decrease spending while making prudent investments during the “present, difficult economic times.”

The authority also cut about $72 million from the company’s proposed $575.5 million rate base – the value of the company’s capital and property that it earns a specified rate of return on. That cut reduced the company’s income from its return on the rate base by nearly $9 million.

PURA cited significant disparities between figures reported in the company’s rate application and what it told regulators in its annual report in 2020 – using the lower figures in the annual report to justify reducing the company’s rate base.

Tiered rates

PURA did approve Connecticut Water’s proposal to implement tiered pricing – which includes added fees for the largest residential water users as well as a new, first of its kind rate class that offers a 15 percent discount to low-income customers in households earning up to 60 percent of the state median income. That would reduce the company’s revenues by $1.2 million, which would be recovered “uniformly” through the rest of the company’s rate classes, according to PURA.

Brenda Watson, executive director of Operation Fuel, which provides assistance to customers struggling to pay utility bills, said the new Water Rate Assistance Program is an “innovative solution to a long-standing challenge,” and said the organization is encouraged that PURA is undergoing a broader investigation of discounted low-income rates for utilities.

On the other end, residential customers who use more than 18,000 gallons a quarter [6,000 gallons a month] would pay an additional $1 per thousand gallons they use beyond that threshold each quarter. The “average” residential customer uses 11,346 gallons each quarter, according to PURA.

Connecticut Water said it hoped the tiered pricing would send a signal to the largest residential consumers of water to limit their usage – especially for outdoor uses like watering lawns. It’s a goal PURA said is in line with state policies to reduce peak water demand, and would only be targeted to a small number of customers who use an amount of water that is well above average.

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