Yesterday, PURA released a draft of its final decision on a rate increase proposed by Connecticut Water last October. PURA’s draft decision dictates a 2.5 percent rate increase, considerably lower than the 18 percent increase proposed by Connecticut Water.
“Connecticut consumers have borne the burden of relentless rate increases for years now,” said Attorney General William Tong, in a statement released by his office last night. “Ratepayers – particularly those on fixed or limited incomes – simply could not be forced to pay for such an excessive, unwarranted hike on their water bill.”
Tong, whose office helped represent PURA in the rate case, has been a noted opponent of recently proposed utility rate increases; last year he urged PURA to reject the proposed rate hikes of both Aquarion Water Company and electric utility United Illuminating.
In addition to the 18 percent rate hike, Connecticut Water, which serves 107,000 state residents across 60 municipalities, also asked to raise its return on equity (ROE) to 10.5 percent, a 1.5 percent bump from its current ROE of 9 percent. PURA’s draft decision calls for limiting the company’s return on equity to 9.2 percent, per the AG Office’s recommendations. Return on equity is the percentage of funds taken out of a utility company’s rates to pay its investors and encourage increased investment in infrastructural maintenance and future capital projects.
If the draft decision is made official, Connecticut Water’s annual revenue would be raised by roughly $3 million, falling far short of the $21.8 million in additional annual revenue the company asked for in its original proposal. Despite this wide gap in numbers, Craig Patla, president of Connecticut Water, released a statement saying the company “respects and appreciates” the work of PURA on the case thus far.
“We remain committed to being good partners in the PURA rate case process,” read Patla’s statement. “The same goal drives both Connecticut Water, PURA, and all parties involved in the process – to ensure current and future generations receive high-quality, reliable water service.”
Patla went on to say that the company’s proposed increase looks to recover $135 million in infrastructure investment that is not currently factored into the company’s rates. He also said the decision “includes areas where we think a final decision should be amended,” and that the company looks forward to pleading its case further before a final decision is made in June.
A page on Connecticut Water’s website outlines specific infrastructure projects in need of recompensation as the installment of various solar arrays in Clinton, Colchester and Naugatuck, a $12 million groundwater treatment plant in East Windsor, a 5.3 mile connection between water systems in Somers and Stafford, 3,500 feet of new main to improve water quality in Middlebury and a new 1 million gallon storage tank in Plainfield.
“The primary drivers of this request are the more than $135 million invested in our water and wastewater system infrastructure that have been made to ensure reliable service and high-quality drinking water for families and communities, and higher operating costs driven by inflation, neither of which are included in current water rates,” said Patla in a statement.
In PURA’s draft decision, it highlighted legal precedent stipulating that rate bases can only factor in the costs of projects or initiatives deemed to be “used and useful” by the public and that expenditures are only eligible for compensation if they are “prudent and reasonable.” Rate base is the cumulative cost or value of projects and initiatives completed by a utility that are eligible to be compensated through its service rates.
PURA determined that approximately $25.9 million worth of Connecticut Water’s proposed rate base failed to meet the “used and useful” and “prudent and reasonable” criteria. As a result, while the company requested a rate base of $718.46 million, PURA only approved a rate base of $692.52 million. The primary reason given by PURA for the discrepancy in the rate base it approved and the rate base the company proposed was that a utility’s unfinished projects could not be considered “used and useful.”
While Patla indicated inflation as a necessitating factor for the company’s proposed rate hike, concerned residents who testified over the course of the three public hearings held on the case didn’t buy it. According to the draft decision, 164 oral and written comments were submitted, with the majority of testimony being in opposition to the rate increase.
“Most of the oral and written comments were in opposition to the Application; with the most common reasons being the requested increase was greater than the current inflation rate, the impacts of the proposed revenue requirement increase on fixed income households, particularly elderly customers, and the impacts of the proposed increase on low-and middle-income households,” read the draft decision.
On the flip side, the proposed decision also made note of testimony which praised the company’s responsiveness to municipalities and residents, as well as its commitment to environmental and conservation efforts.
Ultimately, Connecticut Water has until June 10 to provide any written exceptions to PURA, and both parties will engage in oral arguments on June 13. A final decision is scheduled to be delivered on June 28.
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