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PURA reduces Connecticut Water's fee increase by 18 percent

State regulators proposed that Connecticut Water customers pay two percent more starting in July—the company had asked for an increase nine times higher.

The Public Utilities Regulatory Authority released a draft decision Wednesday denying Connecticut Water's request for a nearly $22 million annual revenue increase, which would have represented an 18.4 percent higher average rate. Instead, it approved a nearly $3 million annual revenue increase, which represents a 2.3 percent higher rate. Under PURA's proposal, the company can receive an additional $1 million per year as part of executive compensation if it meets certain performance goals.

Attorney General William Tong, one of the parties representing customer interests in the tariff case, supported PURA's decision in a written statement.

“Connecticut consumers have borne the burden of incessant rate increases for years. Ratepayers – especially those on fixed or limited incomes – simply cannot be forced to pay such an excessive, unjustified increase in their water bill,” Tong said. “I thank PURA for opposing this proposal and for doing the right thing by Connecticut families and consumers, and I urge them to stand by their resolution as they work toward a final decision.”

The government regulator's reductions compared to the company's application are mainly based on lower allowable capital, operating and maintenance costs.

PURA reduced the return on equity from the 10.5% required by Connecticut Water to 9.2%, based on what it considered a reasonable profit for the industry. The regulator also said the company had not demonstrated that some of the investments submitted to justify the increase were “used and useful” because they were not yet in operation.

PURA suggested that the company could increase its revenue by an additional $1 million to compensate executives if it met certain performance targets. These would include metrics such as payment regularity, payment coverage, defaults and average monthly delinquency. To earn additional revenue, performance must improve compared to the historical record, as measured by established indicators.

The last rate adjustment occurred in July 2021, when Connecticut Water requested a $20 million increase, but PURA only approved $5 million.

The Connecticut Water rate dispute follows two other cases PURA settled last year, one from United Illuminating and another from Eversource-owned water company Aquarion. In both cases, regulators rejected the utilities' demands — with a smaller increase than UI asked for and a rate cut for Aquarion — and focused on closely examining capital spending and the profits the companies made. This has fueled tensions between PURA and the utilities.

Connecticut Water is the state's second-largest water utility and is owned by California-based SJW Group. The company supplies water to 107,000 customers in 60 cities across the state and also provides wastewater to Southbury.

The company had requested an increase because it said it had received back $135 million it had invested in infrastructure, as well as higher operating costs due to inflation, increased borrowing costs due to higher interest rates and the extension of the hardship assistance program.

Investments made by Connecticut Water included solar arrays in Clinton and Colchester to reduce energy demand, a groundwater treatment plant in East Windsor, a 5.3-mile interconnector between the Somers and Stafford water systems, 3,500 feet of new mainline in Middlebury, and a million-gallon storage tank in Plainfield. These investments were accompanied by an expansion of the water rate assistance program, which provides a 15 percent discount to low-income customers.

Consumer protection attorney Clarie Coleman said PURA's decision reflected feedback from all stakeholders involved in the process, even though her office had proposed an even lower rate increase than regulators.

“If ultimately adopted, this proposed resolution will help maintain water affordability for Connecticut Water Company customers while ensuring the company can continue to provide clean drinking water,” Coleman said.

The rate review process began last October when the utility submitted a request to change its rates. The agency's Office of Education, Public Information and Enforcement, Office of Consumer Services, Department of Energy and Environmental Protection, Office of the Attorney General and the Heritage Village Master Association participated in the process. Two virtual and one in-person public hearings were also held.

PURA's final decision in this case will be published on June 28.

Connecticut Water said it “respects and appreciates” the regulator's process and expects it to modify some of the measures included in the proposal.

“The draft decision contains areas where we believe a final decision should be modified, and we look forward to presenting our position as required by the tariff process before the final decision is made in June,” Connecticut Water President Craig Patla said in a written statement.

Anna Harden

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