United Illuminating’s appeal over a rate hike denial in 2022 was rejected Thursday by the state Superior Court in New Britain.
The ruling upholds the Public Utilities Regulatory Authority’s decision, which had denied UI’s request to increase its annual revenue by $131 million and approved a $23 million increase instead. The increase only affects the delivery portion of the bill.
The court also upheld PURA’s decision to reduce the allowed return on equity, which is a percentage of the total investment companies can charge customers as profit, and an almost $2 million annual penalty for failing to clean up the defunct English Station power plant in New Haven.
UI had asked to increase its return on equity to 10.5% but PURA set it to 8.63%. The company appealed the decision in September 2023, claiming PURA had acted arbitrarily and outside its statutory authority and that the decision constituted a constitutional confiscation.
The Superior Court rejected almost all of UI’s claims.
“The court finds that PURA’s decisions are supported by substantial evidence in the record and are within PURA’s broad regulatory discretion,” the ruling stated.
The company declined to comment on the decision.
UI, which serves 345,000 customers in 17 municipalities in Fairfield and New Haven counties, warned when it filed the appeal that rejecting the rate increase would mean cutting profits by half.
On Monday, the company reported a 3.55% return on equity for 2024, well below the authorized rate. UI President and CEO Frank Reynolds said the figure should serve as a warning to state officials and regulators.
“A return on equity this low renders us unable to access capital on the market,” Reynolds said in a written statement. “These meager returns will result in both higher bills and decreased service quality.”
Rate cases, the procedures by which companies adjust delivery-related rates, have been a source of tension between utilities and regulators since Marissa Gillett took over as PURA chair in 2019. The companies argued that changes in cost recovery criteria resulted in increased regulatory uncertainty. Those who support Gillett argue that she enforces stricter accountability for companies, which is especially relevant as energy costs continue to rise.
Connecticut has one of the most expensive electricity rates in the country. The issue sparked debate last year after an increase in the public benefits portion of the bill, which funds government-mandated programs like the Millstone purchase agreement and assistance for customers facing financial hardship.
State Sen. Norman Needleman, D-Essex, chair of the Energy and Technology Committee, said the court case was a victory for ratepayers.
“For years now, after consistent action by PURA to rein in rate cases and save ratepayers money — including this case, where more than $100 million in potential spending was cut back — I only grow more confident they’ll prevail when challenges are heard in court,” he said in a written statement. “If utilities want to increase the rates they charge, they need to file thorough, evidence-based arguments supporting their claims. Otherwise, they’ll continue seeing outcomes like these.”
Consumer counsel Claire Coleman also celebrated the court ruling.
“While UI has attempted to minimize the shortcomings of their rate increase request, the ruling affirms that PURA’s decision was a fair result based on the evidence, or lack thereof, in the record,” she said. ”We expect the company will exercise their right to appeal this decision, but my team and I stand ready to combat ongoing efforts to weaken Connecticut’s regulatory framework.”
Attorney General William Tong praised the penalty against UI for failing to clean up the defunct New Haven power station.
“Every day that English Station remains a contaminated eyesore is a slap in the face to the State of Connecticut and New Haven families,” Tong said in a written statement. “How United Illuminating mishandled English Station is one of so many examples of this foreign-controlled company abusing Connecticut families. They take huge profits from Connecticut ratepayers — who can barely afford the skyrocketing bills — and want to leave us to clean up their mess.”
UI said when it appealed PURA’s decision that it was continuing to work on the cleanup of English Station, a property it had sold 20 years earlier, and had invested more than $18 million in asbestos abatement, other cleanup measures and demolitions.
In January 2024, Tong filed a lawsuit against UI claiming its insufficient progress in remedying pollution at English Station, thus not complying with the conditions established by PURA when it authorized UI’s merger with Iberdrola in 2015 to form Avangrid. The company then committed to investing $30 million in remediation.