UI Statement on Return on Equity (ROE) Filing with Public Utilities Regulatory Authority

Company submits report of damaging Return on Equity of just 4.43% through March 31, 2024


ORANGE, Conn. — May 7, 2024 — Frank Reynolds, President and CEO of United Illuminating (UI), a subsidiary of Avangrid, Inc. (NYSE: AGR), today issued the following statement regarding the company’s regulatory filing with the Public Utilities Regulatory Authority (PURA) containing its calculation of an earned Return on Equity (ROE) of 4.43% through March 31, 2024:

“While UI is allowed to earn an ROE of up to 8.63 percent, our actual earnings in the first quarter reflected barely half that rate, demonstrating what happens when utilities are prohibited from collecting the revenue we need to support the lofty performance, reliability, and sustainability goals we all share.

As the courts recently held, PURA is obligated to consider the impact of its decisions on utilities’ ROE. In our most recent rate case, it is clear the Authority failed to do so, since the miniscule revenue increase PURA allowed in August was markedly insufficient to adequately fund our operations. While policymakers have thus far shrugged off the obvious warnings in these reports, UI’s financial condition continues to slump. The consequences are significant: when utilities cannot offer a return on investment that is comparable to similar companies, investors will choose other companies in other states to partner with. That will make maintaining, much less improving, our system to increase our customers’ experience of reliable, resilient power much more difficult, and it will put Connecticut woefully out of step with other Northeast states in building out the electric infrastructure needed to drive the clean energy transition.

Despite these expanding challenges, all of us at UI remain committed to maintaining our top-tier reliability, deploying 21st-century technology, and partnering with Connecticut policymakers to advance the clean energy transition. But those goals will remain out of reach as long as an unstable regulatory environment persists in the state of Connecticut. On behalf of our more than 343,000 customers and 500 employees, we will continue to advocate for a return to a consistent, predictable regulatory environment that will ensure our customers are provided the electric reliability, resiliency, and sustainability they are asking for and deserve.”
Frank Reynolds, President and CEO of United Illuminating (UI)


Background

  • For the preceding 12 months, PURA instructed the company to write off nearly $24 million, while simultaneously prohibiting the company from including these write-offs when reporting its ROE. Had UI included the write-offs in its ROE calculation, they would result in an ROE of just 1.21 percent. By comparison, the company is authorized, but in no way guaranteed, to earn an ROE of 8.63%, inclusive of penalties. The company’s actual first-quarter 2024 earnings are barely more than half its allowed ROE.
  • In the company’s view, reporting ROE without the write-offs falls far short of representing the deep financial harm that the rate case decision has exacted on the company and its ability to serve its more than 343,000 customers. UI is pursuing legal action against PURA in part for this stunning prohibition on transparent and complete reporting.
  • For an ROE to be sufficient, it must, at the very least, exceed UI’s financing costs, or the cost of borrowing. The current actual ROE of 4.43 percent is, therefore, substantially insufficient to attract investment to fund operations and capital projects. Ultimately, this will have a consequential negative impact on UI’s ability to invest in its infrastructure, like new substations and protective flood walls, with potential eventual consequences on customers’ quality of service.  

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