UI angered by state's cut in requested rate hike
Despite a 49 percent increase in profits so far this year, the United Illuminating Co. is outraged over a proposed $54 million reduction in its latest rate hike request.
In a strongly worded objection, UI last week called a draft ruling by state regulators to trim its rate increase from $91 million to $37 million a "disturbing outcome" that threatens the financial stability of the company.
"If left unchanged, the draft represents a stunning departure from the law, ratemaking principles and longstanding precedent," UI said in written comments.
"Such a substantial write-off (for which there is no basis) significantly threatens the company's financial health," UI said, adding that debt ratios would increase, credit ratings would be impacted and investors could take a "negative view" of the company.
State Attorney General George Jepsen said he supports the state Public Utilities Regulatory Authority's draft decision to reduce UI's rate increase. The utility provides power for the Bridgeport and New Haven regions.
"I applaud PURA's consideration of the impact of UI's rates on its customers and its sound analysis of the law and the facts on most of the issues," Jepsen said.
"I will continue to advocate for electric rates that are no more than just and reasonable, and I have asked PURA to make additional changes to the draft to more fully protect UI's customers," Jepsen added.
UI is the only electric utility currently asking state regulators to raise its rates. Connecticut Light & Power Co., due to the merger of its parent company, Northeast Utilities, with the Massachusetts-based North Star, cannot seek rate hikes for several years.
UI's objection came on the same day its parent company, UIL Holdings Corp., announced a 49 percent increase in second-quarter profits compared to last year.
UI reported net income of $17.9 million in the second quarter of this year, an increase of $5.9 million from the same period last year.
"All subsidiaries reported improved financial performance for the quarter and year-to-date," said James Torgerson, UIL's president and chief executive officer.
Torgerson attributed the rise in profits to a return to "near normal weather, an increased transmission rate base and the impacts of natural gas conversions."
"We are in the midst of a formal regulatory process," Schain said. "Once parties have commented on the draft decision, PURA will review and issue a final decision. So at this point we are in the position similar to a judge handling a case."
A final decision on the rate case is expected later this month.
Both UI and CL&P faced severe criticism during the last two years over lengthy power outages following major storms like Hurricane Sandy, Tropical Storm Irene and a freak October snowstorm, which left some customers without power for as long as two weeks.
State regulators lowered UI's proposed rate hike in part by decreasing its profit margin and refusing to pass costs for certain operations to ratepayers, including a new $120 million operations center in Orange.