ORANGE — United Illuminating (UI) has posted a return on equity of 3.49% for the first quarter of 2025 in a filing with the state’s Public Utilities Regulatory Authority (PURA), which company President and CEO Frank Reynolds said makes investors “nervous.”
“Nothing good comes from a utility that is financially devastated,” Reynolds said in a prepared statement released Monday, May 12. “PURA commissioners recognize that. Legislators recognize that. Even our fiercest critics and opponents recognize that, at least in theory, energy companies like UI provide an essential service to our customers, and accordingly, regulators must enable them to do so.
“Yet, in practice, too many of these stakeholders are willing to overlook or dismiss the harms we have continued to raise about the financial state of our company. Perhaps it’s easier to fall back into easy tropes about businesses like ours ‘taking advantage’ of our customers. Or perhaps it’s politically inconvenient to question the consequences of PURA’s current leadership, whose inconsistent application of regulatory law and procedure has led directly to today’s dismal returns for UI, one of Connecticut’s oldest companies.”
PURA Chair Marissa Gillett, who led the decision to cut back the rate increase, was reconfirmed by the state legislature for a second four-year term last month.
Reynolds blames the poor return on equity on PURA’s decision not to grant the electric utility –a subsidiary of Avangrid Inc. – a sufficient rate increase last year.
“Whatever their reasons, it is becoming harder and harder for any of these stakeholders to ignore the facts: because of PURA’s decision in our rate case in 2023, our revenues have been entirely deficient to provide our essential service – the distribution of electricity – to a growing customer base,” he added.
“The impacts will harm our customers in every way. A return on equity of 3.49 percent makes debt investors nervous, and the premiums they will require to buy UI’s debt will end up on customers’ bills in the form of higher rates. That will force UI to limit its investments to only the most basic and necessary to keep the lights on in the immediate term. Longer-term but deeply needed capital investments – such as rebuilding Old Town Substation, a 60-year-old substation serving nearly 18,000 customers in southern Trumbull and Environmental Justice communities in Bridgeport – will have to be deferred.”
Reynolds is asking “regulators to step in and correct the harms they’ve allowed to continue for far too long, and to provide us the revenues we need for the quality of service our customers expect and deserve.”
“It’s PURA’s turn now, and the stakes are high: we hope they’re ready to meet them.”
Return on equity is a measure of a company’s financial performance, calculated by dividing distribution net income by shareholder’s equity (which is the company’s assets minus its debt).
For an ROE to be sufficient, it must, at the very least, exceed UI’s costs of borrowing, which is currently 4.72%, Reynolds noted. The year-end actual ROE of 3.49 percent is, therefore, substantially insufficient to attract investment, which is essential to funding capital projects and operations.
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