In Advance of PURA’s Rate Decision, UI Return on Equity Falls to 3.13 Percent

UI's ROE would be 0.0 percent under normal financial principles, which PURA has prohibited UI from including in its reports

A graph demonstrating UI's Allowed Return on Equity vs. its Actual Return on Equity, from Sept. 2023 through July 2025

ORANGE, Conn. - September 9, 2025 - Today, Frank Reynolds, President and CEO of United Illuminating (UI), a subsidiary of Avangrid, Inc., issued the following statement regarding the company's August 6 filing with the Public Utilities Regulatory Authority (PURA) containing its second-quarter Return on Equity of 3.13 percent:

"As UI awaits PURA's decision in our new rate case, our deteriorating financial situation has made our application for support even more urgent. UI's profit margin, now in the range of just 3 percent, should make it absolutely clear: PURA critically underfunded our company in 2023. Their decision put at risk our ability to invest in the communities we serve to ensure the safety, reliability, and resiliency of the electric grid. Worse, there has been no upshot for Connecticut residents and businesses, as the Public Benefits Charge that PURA sets, which UI neither controls nor benefits from, has continued to drive our customers' bills upward.

"Even worse, PURA tried to mask the full scale and impact of its 2023 decision by forcing UI to write off its deferred assets, then prohibiting us from including the impact of their decision in Return on Equity reports. Under normal financial principles, which would include the impact of these write-offs, UI's Return on Equity would be zero percent.

"That's zero return on the capital our investors have loaned us to finance the investments our customers need for us to ensure best-in-class service: top-quartile reliability, excellent storm response, superior customer service, and everything else they rely on UI for, day in and day out.

"It's simple: just as no one provides a loan without any interest, nor can UI finance projects with such a low - even a nonexistent - return. UI's only mechanism for making critical investments is to attract investors, and UI quite simply cannot attract investors with such poor returns. This will both increase our customers' bills and worsen their quality of service.

"If PURA fails to correct this lose-lose situation in our new rate case, it will harm all our stakeholders - our customers, our workers, and Connecticut policymakers whose energy policy goals are predicated on a financially healthy utility.

"For the last 10 months, we have done our part to show how customers need the investments we are making and seek to make in our new rate plan. Now it is time - past time - for PURA to do theirs." - Frank Reynolds, President & CEO, UI

Background

• Put simply, Return on Equity measures a company's profitability. It 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).
• In UI's ongoing rate case (Docket #24-10-04), in which UI asked for $105 million in additional revenues to support more than 200 infrastructure investments, PURA is expected to issue a Draft Decision on September 10, with a Final Decision anticipated on October 28.
• For regulated utilities such as UI, PURA sets an upper limit on what utilities are allowed to, but are in no way guaranteed, to earn in their ROE. Following PURA's Final Decision in UI's 2023 rate case (Docket #22-08-08), the company is authorized to earn up to an ROE of 8.63 percent, inclusive of penalties. However, as the graph above demonstrates, UI is earning just above a third of its allowed ROE.
• For an ROE to be sufficient, it must, at the very least, exceed UI's costs of borrowing, which is currently 4.72 percent. The year-to-date actual ROE of 3.13 percent is, therefore, substantially insufficient to attract investment, which is essential to funding capital projects and operations. The ROE is also insufficient to allow access to equity, as the cost of equity in the market is not paid.
• A utility company that is not able to attract investment in the market has only two options: either the company must offer investors a premium to incentivize their investment, which are paid for by customers; or the company must defer all capital investments, which are essential to the reliability and resiliency of the energy system.
• As a result, UI is deferring investments, like new substations and rebuilding underground vaults for its front-line workers, to preserve its limited capital for new customer connections, state projects, and only the projects most essential to immediate-term reliability. Without significant improvements, customers will bear the consequences with poorer quality of service and higher rates. These consequences will be worsened as the company's falling ROE is coupled with decreased credit ratings, as UI's sister companies (Connecticut Natural Gas [CNG] and Southern Connecticut Gas [SCG]), as well as Eversource and all its subsidiaries, received in December. (See: CNG, SCG Respond to S&P Global Credit Rating Downgrades and CNG, SCG Credit Ratings Downgraded by Moody's Ratings; Outlooks Negative).

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