Customers of two downstate gas companies would see lower bills if state utility regulators adopt a tentative decision that would slash the companies’ revenue requests by amounts that exceed their combined profits.

The state Public Utility Control Authority has issued draft decisions that reduce rate increases sought by Avangrid subsidiaries Connecticut Natural Gas and Southern Connecticut Gas by more than $75 million. Avangrid said Wednesday the two companies produced combined net revenue of $63 million last year.

The draft decisions would reduce the amount of money the companies raise through rates to finance operations to levels below what regulators set in 2017 and 2018, when the companies were last before the authority for rate approval.

Should all four PURA commissioners adopt the two draft rate decisions proposed by Chairman Marissa Gillett, it would lower monthly bills by about $12 for 400,000 natural gas customers in the southwest corner of the state.

The tentative gas company decisions, which could change after analysis by the full authority, has set up another skirmish in a long running dispute between Gillett and the state’s two principal utilities, Avangrid and Eversource. Eversource has notified PURA that it also will seek approval to raise rates at its Yankee Gas subsidiary.

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“The revenue decrease is more than the profit at each of the companies,” Avangrid Chief Accountant Andrew Vanhuling said. “That makes it very difficult to sustain. We have to make significant cuts. Anything that isn’t absolutely necessary, it has to get cut.”

Attorney General William Tong applauded the draft decisions, to which he said his office contributed,

“CNG over-collected millions of dollars from Connecticut families, then had the gall to ask for millions more,” Tong said.

“This was a non-starter. We combed through every cent of CNG and SCG’s applications. Both were riddled with unjustified profits and unnecessary expenses. PURA was absolutely right to impose these significant rate decreases for CNG and SCG. Connecticut families are getting slammed by skyrocketing utility bills right now, and we’re going to keep fighting at every step of these proceedings,” he said.

Since Gillett’s appointment as PURA chairman by Gov. Ned Lamont in 2019, the regulatory agency has hit the utilities with decisions that have reduced rate increase requests and, in the case of Eversource’s Aquarion Water Company, reduced rates below what they were a decade earlier.

Gillett supporters applaud the decisions, arguing the utilities have profited excessively under lax regulatory enforcement in Connecticut. The utilities argue that PURA under Gillett has acted more like an advocacy than regulatory agency and that rate decisions have been arbitrary, contradictory, and in some cases illegal.

Avangrid president and CEO Frank Reynolds on Wednesday criticized the tentative gas company decisions.

“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,” he said. “These exorbitant decreases, which exceed the net income the companies earned last year, will almost certainly lead to immediate credit rating downgrades.”

Hours after PURA’s release of the draft decisions, finance advisors Guggenheim Partners and Mizuho Americas issued notices calling them “worse than expected” and decisions that show “a challenging regulatory environment in CT.” Earlier this year, Wall Street lowered credit ratings of Eversource subsidiary Connecticut Light and Power and Avangrid subsidiary United Illuminating based on perceptions of a negative Connecticut regulatory environment.

Dan Canavan, vice president for regulatory affairs at SNG and CNG, predicted the draft decisions, if adopted, will lead to more credit reductions, meaning customers will have to pay for higher costs associated with the hundreds of millions of dollars utilities must borrow to finance operations.

“Down grades will lower out credit score,” he said. “When people buy the bonds of both these companies, they want to know whether regulatory climate in Connecticut allows recovery of costs.”

The SCG draft decision said PURA authorizes the company to raise about $400 million over the next year, about $37 million or 8.4 percent less, than what the company was authorized to raise from customers in its last rate case, which was approved in 2017.

SCG had asked for $43,238,833 or 9.92 increase over its currently approved revenue of $436,004,126, for a total revenue requirement of $479,242,959. The company asked for a return on equity of 10.2 percent up from the current 9.25 percent. The draft decisions approved a 9.2 percent return on equity.

The draft decision said most of the reduction from the company’s request is attributable to the method by which PURA wants SNG to pay customers for that portion of the money it collected through customer bills to pay its federal income tax obligation.

When PURA last set customer rates in 2017, the federal tax rate was 35 percent. When the tax rate was reduced to 21 percent, SNG was instructed by PURA to continue collecting at the higher rate and await instruction from regulators in its next rate case on how to reimburse customers for the difference, Vanhuling said Wednesday.

“This money is now being returned to customers as a $29 million annual credit over three years,” the draft decision says.

The draft decision also said “the Authority makes findings on myriad issues” including criticism of the company’s customer service response.

In the case of CNG, the draft decision authorizes the company to raise about $403 million over the next year, about $39 million or 8.8 percent, below what it was permitted to collect from customers in its last rate decision in 2018.

CNG had asked for 4.46 percent or $20 million increase over its currently approved revenue of $442 million. The company asked for a return on equity of 10.2 percent, up from the current 9.3 percent. The tentative decision approves a 9.2 percent return on equity.

The draft decision said most of the reduction from the company’s request is money due ratepayers from surplus revenues from gas sales.

“This money is now being returned to customers as an $8 million annual credit over three years,” the draft decision says.

CNG also was faulted for its customer service.