October 3, 2014

AG Jepsen to PURA: CL&P Rate Increase Request Unwarranted and Unsubstantiated

In a brief filed today, Attorney General George Jepsen urged the state Public Utilities Regulatory Authority (PURA) to reject an application by the Connecticut Light & Power Company (CL&P) seeking a $221 million increase in its rates and to approve rates that are no more than just and reasonable as required by state law.

"Connecticut consumers – especially those on fixed or limited incomes – should not have to absorb any unwarranted increases in their cost of living, which this application would have them do," Attorney General Jepsen said. "Electricity is far more than a modern convenience. It is a necessity, and the safe, reliable and affordable provision of electricity is critical to public health and safety. CL&P's customers are counting on PURA to ensure that the electric utility rates approved will be no more than absolutely necessary."

If granted, CL&P's requested rate would represent a rate increase of more than 20 percent on the delivery portion of customer's bills and an overall rate increase of seven percent for the average customer. In his brief, the Attorney General argues that CL&P's proposed rates are excessive and unwarranted and that the company has failed to meet its burden of showing that a 20 percent distribution rate increase is necessary or appropriate. Overall, the Attorney General identified and recommended that PURA adopt more than $90 million in downward adjustments to the company's rate request.

The Attorney General said that CL&P's analysis for its requested return on equity, or ROE, of 10.2 percent is based on flawed analysis and is out of touch with market conditions. He supported the Office of the Consumer Counsel's ROE recommendation of no more than 8.9 percent; however, the Attorney General said PURA should further reduce the authorized ROE to reflect the reduced business and operations risk from revenue and sales decoupling.

Further, Attorney General Jepsen said that CL&P should be penalized at least $28 million – $9.4 million per year for three years – for its inadequate and deficient performance preparing for and responding to the major storms in 2011. In a previous proceeding, PURA found CL&P's response to Tropical Storm Irene and the October 2011 Nor'easter were sufficiently inadequate and deficient to warrant an appropriate penalty to its ROE in its next rate case.

Additionally, the Attorney General urged PURA to reject CL&P's proposal to raise its residential customer service charge 60 percent – from $16 to $25.50 a month – as unnecessary, overly burdensome and poor public policy, and said that PURA should not approve any customer service charge above the $16 per month currently charged.

"The $221 million per year rate increase requested by CL&P is unwarranted, unsubstantiated and would result in rates that are more than just and reasonable," the Attorney General said. "PURA should reject CL&P's application and instead set rates that reflect reasonable adjustments to the company's request. PURA should also impose an appropriate penalty to the company's authorized ROE for its poor management performance during the 2011 major storms. The cumulative effect of these adjustments would greatly reduce the harmful impact that CL&P's proposed rate increase threatens to have on its customers."

Assistant Attorneys General John Wright and Michael Wertheimer are assisting the Attorney General with this matter.

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