Unions representing workers at two state gas companies have joined management in condemning a proposed rate decision by regulators that would cut company revenues to levels lower than they were six years ago, before a years-long spike in inflation.
In a letter to Gov. Ned Lamont and Attorney General William Tong, the presidents of four front line unions at Avangrid subsidiaries Connecticut Natural Gas and Southern Connecticut Gas warn that a draft rate decision last week by the Public Utilities regulatory Authority will hurt their ability to deliver reliable service.
“We know from our combined 117 years of experience in utilities how important the service we provide is, and how essential it is that we protect the safety, reliability, and resiliency of these systems,” the letter said. “None of what PURA chooses to do in these proposed decisions will promote these critical objectives.
“There are no winners in this approach: not our customers, not the vital frontline workers we represent, and not Connecticut’s long-term goals of affordable, sustainable energy.”
The unions are focused on draft decisions by PURA on Oct. 9 that propose rejecting 4 percent and 9 percent rate increases respectively for CNG and SNG. Instead, the draft decisions propose rates that would cut $75 million from the company’s combined revenues, a figure that exceeds their combined net revenue of $63 million last year.
The draft decisions would reduce the money the two companies can raise through rates to finance operations to levels below what they were authorized in 2017 and 2018, when they were last before the authority for rate approvals.
Lamont did not immediately respond to the letter. In recent months, Tong has consistently opposed rate increases by state utilities and on Thursday he said executives at Avangrid’s corporate owner, the Spanish multinational Iberdola, “do not seem to understand their obligations to their Connecticut customers and workers.”
“Let’s remember how we ended up here,” Tong said. “CNG was over-collecting millions of dollars from Connecticut families. While some of that was returned to ratepayers, a big chunk of that went straight to shareholders as profit. That’s completely unacceptable, especially given the astronomical utility bills we are seeing right now. After that was reported, CNG and SCG had the gall to go to PURA and demand millions of dollars more in new revenue. Not surprisingly, their filings were riddled with padded profits and unjustified expenses.”
The union leaders said in their letter that, if the proposed PURA cuts are adopted next month, “they will create an immediate, seriously negative and adverse effect to CNG and SCG’s financial health. As a result, our jobs, and the jobs of the hundreds of hard-working people we represent, will be made much more challenging by the cuts that CNG and SCG will be forced to make.”
The two gas companies applied with regulators for a rate increase a year ago, asking for a combined $60 million to cover “increased supply chain costs and inflation, better reliability and resiliency for customers, and new hires across all divisions,” the letter said.
“Since these companies last filed rate cases in the late 2010s, there have been years of inflation, supply chain cost increases, salary increases, and additional needed investments in the safety, reliability, and resiliency of the infrastructure serving almost 400,000 customers of our 175-year-old+ companies,” the letter said.
“If our equipment fails because our company can’t afford to replace or upgrade it because of PURA’s actions, and customers are left waiting, who will take the blame: some vague conception of “company management,” or us – the women and men who work in the field every day to serve our customers?,” the letter said.
Should all four PURA commissioners adopt the two, draft rate decisions proposed by Chairman Marissa Gillett, it would lower monthly bills by about $12 for natural gas customers in the southwest corner of the state.
The tentative gas company decisions, which could change after analysis by the full authority, has set up another skirmish in what has become a long running dispute between Gillett and the state’s two principal utilities, Avangrid and Eversource. Eversource has notified PURA that it plans to seek approval to raise rates at its Yankee Gas subsidiary.
A series of PURA decisions adverse to the utilities — including the draft, gas company decisions — have resulted in a succession credit rating downgrades by Wall Street analysts over the last year.
Supporters of Lamont’s appointee to chair PURA, Marissa Gillett, have applauded the rate decisions, arguing the utilities have profited excessively under lax regulatory enforcement in Connecticut. The utilities argue that PURA under Gillett has acted more like an advocacy than regulatory agency and rate decisions have been arbitrary, contradictory and in some cases illegal.
SCG had asked for a $43,238,833, or 9.92 percent, increase over its currently approved revenue of $436,004,126, for a total revenue requirement of $479,242,959. The company asked for a return on equity of 10.2 percent up from the current 9.25 percent. The draft decisions approved a 9.2 percent return on equity.
The draft decision said most of the reduction from the company’s request is attributable to the method by which PURA wants SNG to pay customers for that portion of the money it collected through customer bills to pay its federal income tax obligation.
When PURA last set customer rates in 2017, the federal tax rate was 35 percent. When the tax rate was reduced to 21 percent, SNG was instructed by PURA to continue collecting at the higher rate and await instruction from regulators in its next rate case on how to reimburse customers for the difference, Avangrid Chief Accountant Andrew Vanluling said.
“This money is now being returned to customers as a $29 million annual credit over three years” the draft decision says.
The draft decision also said “the Authority makes findings on myriad issues” including criticism of the company’s customer service response.
In the case of CNG, the draft decision authorizes the company to raise about $403 million over the next year, about $39 million, or 8.8 percent, below what it was permitted to collect from customers in its last rate decision in 2018.
CNG had asked for 4.46 percent or $20 million increase over its currently approved revenue of $442 million. The company asked for a return on equity of 10.2 percent, up from the current 9.3 percent. The tentative decision approves a 9.2 percent return on equity.
The draft decision said most of the reduction from the company’s request is money due ratepayers from surplus revenues from gas sales.
“This money is now being returned to customers as an $8 million annual credit over three years,” the draft decision says.
CNG also was faulted for its customer service.
