HARTFORD (LN) — The Connecticut Supreme Court on Tuesday reversed a trial court’s dismissal of an appeal by The Connecticut Light and Power Company, holding that the lower court erred by deferring to the Public Utilities Regulatory Authority’s rate-making discretion without first determining whether a 2018 settlement agreement was ambiguous.
The court held the agreement facially ambiguous regarding how the utility, which does business as Eversource Energy, could recoup capital costs incurred from five catastrophic storms that struck the state between October 2017 and May 2018.
PURA had ordered the utility to deduct more than $17 million in storm-related capital spending from its new capital tracker request, indicating the funds would be recoverable in the company’s next general rate case if deemed prudently spent. The trial court upheld PURA’s decision, concluding the agency had discretion under state statute to resolve the matter as it had done.
The Supreme Court disagreed, ruling that PURA’s rate-making discretion is constrained by binding settlement agreements it has approved. The court stated that the proper analysis must begin with an examination of the settlement agreement’s terms to determine if the language is clear and unambiguous.
The court identified three sources of ambiguity in the agreement. First, the term “emergent equipment failures,” which the utility argued encompassed storm damage, was susceptible to multiple dictionary definitions and inconsistent usage. Second, the agreement was unclear on how to handle capital spending that significantly exceeded the budget projections filed in the 2017 rate case. Third, it was ambiguous whether the agreement distinguished between catastrophic storms and other major storms for capital recovery purposes.
The court concluded that the settlement agreement was facially ambiguous as to how capital spending on storm recovery was to be treated, and that the available administrative record failed to clearly resolve that ambiguity.
The court remanded the case to the trial court so it could resolve the ambiguities in light of the complete administrative record or remand the case to PURA for consideration of all evidence relevant to resolving the ambiguities.
The panel included Chief Justice McDonald and Justices D’Auria, Ecker, Alexander, Dannehy and Bright.