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3-year rate hike for United Illuminating approved but reduced by nearly $41M

A requested $98.3 million electric rate hike for United Illuminating Co. customers was reduced to $57.4 million in a final decision by Connecticut regulators.

On Dec. 14, the Connecticut Public Utilities Regulatory Authority, or PURA, authorized the three-step electric distribution rate plan with a $43 million increase starting Jan. 1, 2017, followed by an $11.5 million increase to go into effect a year later and a $2.9 million increase for 2019. In a move that PURA said was fair and reasonable, the ruling also reduced the Avangrid Inc. subsidiary's return on equity to 9.1% from its current 9.15%. According to SNL data, that is below the average ROE of approximately 9.6% that was authorized for electric utilities in rate cases across the U.S. in 2015.

PURA Vice Chairman John Betkoski III said in a news release that the ruling struck "an appropriate balance" between the utility's need for revenue to maintain a reliable, safe system and customers' expectations of fair and reasonable rates.

Under the approved rate increase, average residential electricity bills are expected to increase by approximately 3.25% starting in 2017 instead of rising roughly 5% as originally sought by United Illuminating. The PURA decision also lowered fixed monthly service charges by approximately 45% to a maximum $9.64 for most residential customers instead of either maintaining them at $17.25 or increasing them to $18.74 as requested by United Illuminating.

The Acadia Center, a New England clean energy advocacy group, applauded the lowering of United Illuminating's fixed service charges and said in a news release that the reduction brings them in line with surrounding states. The Acadia Center also said PURA's decision runs counter to a nationwide trend for higher fixed charges.

"Consumers everywhere prefer choice and control, and this lower monthly fixed charge will give customers substantially more control over their electric bills," said Bill Dornbos, Connecticut office director for Acadia Center. "The new rate design will also help promote energy efficiency and renewable energy, more closely aligning the state's electric rate structure with its energy policy."

In proceedings first filed July 1, United Illuminating initially requested a three-year rate increase of $100.2 million. The original plan also included a rate levelization mechanism to minimize the impact of increases on customers by deferring a part of the first- and second-year rate hikes and spreading recovery of those increases over the three years of the rate plan.

The company claimed in its filings that the need to recover infrastructure investment costs was the driving factor behind the rate increase proposal. Through the end of 2016, the company is operating under a rate freeze that has been in place since its former parent merged with Iberdrola USA Inc. in December 2015 to form Avangrid.

Following a recommendation from the Connecticut Department of Energy and Environmental Protection's Bureau of Energy and Technology Policy that United Illuminating's rate request be rejected and a recommendation from the Connecticut Office of Consumer Counsel that the three-year rate increase be lowered to $26.9 million, United Illuminating revised its request in a Sept. 29 filing. In its revised rate case, the company asked for a three-step $98.3 million rate increase with a 9.92% return on equity. On Nov. 23, PURA issued a draft decision authorizing a three-year rate increase of $58.8 million.

Avangrid chose not to comment until the full decision is further digested. (PURA docket 16-06-04)