UI Showdown On Church Street

The latest dispute between New Haven and United Illuminating sparked a heated face-to-face confrontation over unfinished business, as two UI execs crashed a press conference at their doorstep.

Mayor John DeStefano and Attorney General Richard Blumenthal held a press event outside UI’s downtown headquarters Friday morning to protest the company’s request to boost shareholder profits — a request that will likely lead to a rate hike for customers down the line.

At a hearing Monday, the Department of Public Utility Control will hear oral arguments on a motion to reopen UI’s rate hike case.

Blumenthal and DeStefano plan to face off with UI execs at the hearing, which is set for Monday at 11 a.m. at the DPUC headquarters at 1 Franklin Sq. in New Britain.

They didn’t plan on Friday’s fight, which laid bare a frayed relationship between the City of New Haven and an institution that has been in the city for 116 years.

“Dumb Growth”

At 11 a.m. Friday, the mayor set up a podium outside the UI headquarters at the Connecticut Financial Center at 157 Church St., right next to City Hall. He and Blumenthal protested UI’s request for a higher cap on profits, as the company slashes its management and operations budgets. The company Tuesday unveiled plans to defer about $60 million in maintenance and infrastructure work.

“We need to show this company there are limits to greed in Connecticut,” declared Blumenthal.

DeStefano seized the opportunity to link the current fight to a past one: UI’s plan to abandon its downtown New Haven corporate offices when the lease expires in 2012, and centralize its offices in a new corporate office space in Orange. The mayor has blasted the move as counterproductive to smart growth and transit-oriented development.

If UI is hurting for capital money, the mayor argued Friday, it should abandon its relocation plans.

DeStefano was backed up in this criticism by Secretary of State Susan Bysiewicz, New Haven State Sen. Martin Looney, Branford State Rep. Lonnie Reed, Fairfield County’s state Sen. Anthony Musto and members of the Connecticut Fund for the Environment and Fight the Hike. They called the move “dumb growth.”

The press conference drew a slew of cameras, citizen activists, aldermen — and UI administrators, who sat quietly as the accusations flew. Then DeStefano, visibly red in the face with anger, called on two top executives to take the mic.

They did.

“Let’s Go Right Now!”

Jim Torgerson, CEO of UI, and Anthony Vallillo, president of UI, defended the move as being in the benefit of all ratepayers in the state. The move would eventually save customers $25 million over 20 years, said Vallillo.

The conversation quickly devolved into a yelling match.

Vallillo argued that the taxes on UI’s infrastructure, including its poles and substations, would still flow to the city — “no matter where we’re located.”

Yes, jumped in DeStefano — “with all the intended pollution.” He was referring to English Station, an old UI plant in Fair Haven that the company got rid of in 1999. The site remains a toxic brownfield, according to the mayor.

Photo“You gave it to someone with no liabilities and ability to rehab it and took your profits and left a dirty site in a neighborhood where thousands of children live,” said the mayor. “So let’s go over right now, Tony, with Jim, to English Station, and show you what you’re leaving to the City of New Haven. We’ll go right now, with all of these cameras.”

“It’s not an operating plant, hasn’t been for years,” objected Vallillo.

“You cut it loose,” charged DeStefano — “like you cut loose your customers and like you’re cutting loose the people who can’t access a car to get to work.”

Click on the video at the top of the story to watch the full exchange.

The UI duo said that in downtown New Haven, employee parking is expensive and downtown stoplights are not well-coordinated. The new digs in Orange will have plenty of parking, they said, and would be near a new train station that’s proposed for Orange. DeStefano shot back that a new train station would come only out of the pockets of state taxpayers.

At one point, the mayor went over to a crowd of a dozen supporters and got them to start chanting, “Fight the Hike!”, drowning out the UI execs’ comments. DeStefano personally tore into Vallillo, accusing him of driving a Jaguar and living in Orange. (Vallillo denied the latter charge.)

Customer “Ultimately” Pays

At the podium, Torgerson also defended his company’s motion before the DPUC — then admitted the cost of the request would inevitably fall on customers’ laps.

“We’re not asking to increase [electricity] rates at this time,” explained Torgerson.

Following months of public protest, the DPUC in February issued a final decision rejecting UI’s request for a $81.1 million, two-year rate hike. Instead, the DPUC ordered UI to pay its customers a one-time reimbursement totaling $970,000. It also lowered the ceiling on UI’s permitted rate of return on equity from 9.75 percent to 8.75 percent.

UI is asking the DPUC to revisit that decision. The company made the request in a March 13 letter, at a time when the stock of its parent company, UIL Holdings, had plummeted by 40 percent since Dec. 31. The letter argues that the cap on the return on equity is hurting the company’s ability to attract shareholders and raise capital. (Click here to read the letter.)

Torgerson said that this time, instead of asking to raise customers’ electric rates, the company is asking only for the DPUC to raise its permitted profit ceiling. At 8.75 percent, the ceiling is the lowest of its kind in the nation, he argued. He said the company has an obligation to provide sufficient returns for its shareholders, and needs to raise the ceiling in order to do that.

He didn’t mention that since he wrote the letter, the stock has largely rebounded, delivering a 45 percent increase in profits for the first quarter of this year compared to last. Torgerson also didn’t mention, at first, that raising the ceiling on profit margins would eventually be passed on to the customer.

He was later pressed by a reporter on how the company planned to raise profits without adding to customers’ monthly bills. Torgerson replied that the company wouldn’t ask for a rate hike right away, because of the economy, but would likely do so down the line.

“Ultimately, you would be paying for that, yes,” he said.