CNG, SCG Respond to PURA’s Draft Decisions in Rate Case

If finalized, PURA’s unprecedented revenue cuts, totaling $75 million across both companies, will lead to credit rating downgrades 


Credit rating agencies: draft decisions are “worse than expected,” “punitive,” and indicative of a “challenging regulatory environment in CT”


ORANGE, Conn. — October 9, 2024 — Today, Frank Reynolds, President and CEO of Connecticut Natural Gas (CNG) and Southern Connecticut Gas (SCG), subsidiaries of Avangrid, Inc. (NYSE: AGR), issued the following statement in response to PURA’s release of its Draft Decisions in the companies’ rate case (Docket No. 23-11-02) on Friday, October 4:

“While we continue to assess the extensive draft decisions and their far-reaching impacts, we reject the unprecedented $75 million revenue cuts across CNG and SCG. These exorbitant decreases, which exceed the net income the companies earned last year, will almost certainly lead to immediate credit rating downgrades, even by more than one rating. Already, credit agencies are evaluating these draft decisions as ‘worse than expected, ‘punitive,’ and demonstrative of ‘a challenging regulatory environment in Connecticut’ – all of which signal downgrades on the horizon.

Credit rating downgrades significantly impact customers’ experience of reliable, resilient, and affordable service. Because downgraded credit ratings cripple our ability to access capital at affordable rates, the investments needed to facilitate both reliability and a sustainable future for the natural gas industry will be deferred, and customers will bear higher prices as we are forced to offer our bonds at a premium. As PURA continues to chip away at true long-term affordability for our customers, they will continue to drive businesses out of the state. 

In these ways and others, PURA demonstrates in these draft decisions a clear lack of regard for our customers. By refusing nearly all funding for cybersecurity programs, PURA risks exposing our customers’ personal identifying information to bad actors, as American Water, the largest water utility in the U.S., found this week is all too real a threat. Eliminating support for a mobile command center risks inefficiencies and slow response times during emergencies and is out of step with best practices for utilities across the Northeast, even other natural gas utilities here in Connecticut. And by denying funding for any capital infrastructure investments after April 2024, PURA paralyzes our ability to build an energy system of the future, forcing us to meet tomorrow’s demands with yesterday’s resources.

From eliminating clean energy innovations to ludicrously denying the reality of inflationary pressures, to robbing the company of millions of dollars in tax line items, PURA riddles disparities and inconsistencies throughout the decisions. As a whole, these ‘death-by-a-thousand-cuts’ proposals can only lead us to conclude PURA is willing to accept junk-bond status for some of Connecticut’s oldest, most established companies. 

It could not be clearer that PURA has no plan to meet the energy needs of the 391,000 customers of CNG and SCG or the 3.6 million residents of the state. Decisions like this provide no alternatives or solutions, but rather only serve to financially destabilize the companies that Connecticut homes and businesses rely on to supply them with safe, reliable, and resilient service. PURA continues to send signal after signal that Connecticut is an unsafe and unwise place for capital investment, without which the state’s goals are simply aspirational as PURA continues to put obstacles in the way of Connecticut’s own objectives.

Enabling companies like CNG and SCG to invest in the safety and reliability of the natural gas distribution system should be the highest priority of Connecticut leaders. However, the current decisions suggest a greater focus on short-term political gains rather than on creating an affordable and sustainable energy future. Before a Final Decision in November, we call on PURA to return to the facts of our cases, which describe in full how our customers and businesses will be poorly served by the underinvestment indicated in these draft decisions.” – Frank Reynolds, President and CEO of CNG and SCG 


Background

 

  • In the CNG Draft Decision, PURA established a revenue requirement of approximately $403.4 million, which represents a $38.8 million/8.8% reduction of currently authorized revenues. CNG had a requested a 4.46% increase in revenues to fund essential reliability and resiliency projects across its service area. Previously, CNG had not requested an increase in rates since 2018.
     
  • In the SCG Draft Decision, PURA established a revenue requirement of $399.4 million, which represents a $36.6 million/8.4% reduction of SCG’s current revenue requirement. SCG had requested a 9.92% increase in revenues to fund essential reliability and resiliency projects across its service area. Previously, SCG had not requested an increase in rates since 2017.
     
  • One business day following the proposed cuts, Mizuho included in its Key Points, “No easy way to say it....LDC [local distribution company] outcome is worse than expected. AGR filed two small LDC rate cases where the utility was asking for a $63M rate increase based on a 10.2% ROE and 55% equity ratio. The draft decision is recommending a rate cut of $75M based on a 9.2% ROE and a 53% equity ratio.” Guggenheim wrote in part, “The proposed decision is punitive and shows a challenging regulatory environment in CT.”
     
  • The CNG and SCG teams continue to evaluate the Draft Decisions and their full impacts on the companies’ customers. The Draft Decisions can be found at the following links: 23-11-02 CNG PFD (state.ct.us) and 23-11-02 SCG PFD.pdf (state.ct.us)
     
  • On the current procedural schedule, Final Decisions in the CNG/SCG gas rate case is expected on November 18, 2024.

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