Blogs > Power to the People

Following energy issues in the state of Connecticut and beyond.

Tuesday, May 19, 2009

A Breach of Faith

The Fourth of July is still a month and half off, but you can expect some real fireworks from today's state Department of Public Utility Control hearing with the United Illuminating Co.

UI went before the DPUC last week to argue that the 8.75 percent return on equity that the regulatory agency approved for it in a February rate case was scaring off investors. Skittish investors meant the company had difficulty accessing the capital it says it needs for the basics of the utility business: replacing poles and wires as well as building new substations. Or at least that's the story UI officials tell.

But to paraphrase a line from Mark Twain, reports of UI's difficulty accessing capital have been greatly exaggerated. How else would you explain the company's announcement late Monday that it plans to offer 4 million of its shares in a registered public offering and an additional 600,000 shares to investment banks?

No company with any smarts brings its shares to market if it doesn't think there's a market for them. So clearly, even with an 8.75 percent return on equity, there must be plenty of buyers for these shares.

UI officials aren't talking right now because securities regulators require a company maintain "quiet period" leading up to stock offerings. Given some of their recent moves, that's probably a good thing because it's harder to put your foot in your mouth when that orifice is shut.

Connecticut Attorney General Richard Blumenthal smells blood in the water on this one. You could almost hear our esteemed Attorney General salivating on the other end of the phone line Monday night as he spoke of acts of deliberate deception on the part of UI that he said “shreds the company’s credibility with the public and with regulators.”

Blumenthal has said he will seek fines and other sanctions against UI and has said he will seek to reduce the company's return on equity even further.

Being threatened by the Attorney General is bad enough, but it's not even the first time that the threat of reducing UI’s return on equity has been used. An exasperated DPUC Vice Chairman John Betkoski III did the exact same thing last week when UI began laying out its case for increasing the return on equity.

It takes real talent to tick off a DPUC Commissioner and an Attorney General in the space of one week. Today, we'll see what UI officials can do for an encore

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