Nearly $1.8 billion slated to come off most Connecticut consumers’ electric bills over the next decade would remain in place to help balance the state budget under a plan adopted Tuesday by the legislature’s Finance, Revenue and Bonding Committee.
The Democrat-controlled panel voted 37-19, largely along party lines, to approve the so-called securitization bill, which would sell that future revenue at a discount to raise $1.3 billion in 2010-11.
The committee, which had warned it might make no recommendation on what many members have called the most controversial provision in the next budget, decided against an alternative securitization proposal based on a new Keno lottery game.
Gov. M. Jodi Rell, who allowed the preliminary $18.93 billion budget adopted last September for 2010-11–including a $1.3 billion revenue item to be generated through securitization–to become law without her signature, issued a brief statement calling the plan “not the solution I would pursue.”
She did not disclose whether she would sign or veto a bill including the plan, however.
Though the prospect of selling future state revenues for pennies on the dollar is unpopular, Rep. Cameron C. Staples, D-New Haven, the committee’s House chairman, said leaders ultimately decided the panel had to make a recommendation. “It’s already in the budget,” he said. “This is something we committed to as a legislature, and quite frankly, so did the governor.”
“I think, all things considered, it’s the best option we have,” Rep. Carlo Leone, D-Stamford, said.
If a securitization plan is not enacted this year, the $725.7 million deficit projected for 2010-11 by the legislature’s nonpartisan Office of Fiscal Analysis potentially could grow beyond $2 billion.
Further complicating matters, OFA is projecting a much larger, $3.88 billion shortfall built into the 2011-12 budget.
Staples and the panel’s other co-chair, Sen. Eileen M. Daily, D-Westbrook, both had said the six securitization proposals offered in a February report by Rell’s budget office and Treasurer Denise L. Nappier met with bipartisan disapproval from rank-and-file lawmakers in both chambers.
Democrats tried to insist this plan does not represent an increase on ratepayers, but rather a decrease in a potential reduction in rates in the future. It targets $1.8 billion, or 56 percent, of the $3.2 billion in cumulative charges slated to come off of the bills of Northeast Utilities and United Illuminating customers over the next decade.
Daily noted that 44 percent of the expiring surcharges would not be reassigned for securitization. “There is still some left which we hope is rate relief,” she said.
“The fact that we don’t call something a tax doesn’t not make it a tax,” said Sen. Andrew W. Roraback of Goshen, the ranking Republican senator on the finance committee. The Democrat-controlled legislature could have avoided what amounts–by any name–to a huge burden on ratepayers by cutting state spending immediately as the economy slipped last fiscal year, he said.
The panel’s other ranking Republican, Rep. Vincent J. Candelora of North Branford, said about two-thirds of all consumer electricity charges are paid by businesses. “This is not a good decision for job creation in Connecticut,” he said.
The billing surcharges currently reimburse the state’s two major utility companies for costs they incurred 12 years ago as part of a sweeping industry deregulation. NU is scheduled to be fully repaid by December, and UI by 2013.
Richard A. Soderman, a lobbyist for Northeast Utilities, said earlier this month that the company is seeking state approval to boost rates, and might not be able to maintain all of its 4,000 employees if some increase is not granted.
Rep. Robert Megna of New Haven, one of two Democrats on the finance committee to vote against the bill, noted that a small portion of Connecticut’s electricity customers would be exempted from this burden.
About 6 percent of electric customers, roughly 100,000 households and businesses, are served by municipal electric departments and don’t pay monthly to cover NU and UI’s deregulation expenses.
Jeff Butler, president of NU subsidiary Connecticut Light and Power Co., said Tuesday that “with this bill, the legislature is effectively imposing a hidden tax on only a portion of Connecticut taxpayers – our Connecticut Light and Power customers.”
“It is a blatant gimmick,” Butler added. “This is not simply bad budgeting. It is bad public policy that singles out our customers to bear an unfair burden.”
Rell’s statement said, “Ratepayers, who have paid these charges for the last 10 years, have rightfully been expecting the charges to soon be expiring–by the end of this year for Connecticut Light & Power customers and in 2013 for United Illuminating customers.”
But Rell and Nappier also targeted the surcharge money in one of the securitization options they offered in February. They proposed taking 37 percent of the rate relief, rather than 56 percent as the Finance Committee bill does, and to make up the difference by diverting consumer bill payments normally transferred into clean energy and conservation programs.
“Some sort of securitization is necessary,” Rell added, without saying whether or not she would veto the committee bill if it reaches her desk. “This option, however, is the least desirable for Connecticut’s beleaguered families.”
Most of the other securitization proposals offered by Nappier and the Rell administration were dismissed shortly after they were offered.
These included:
- Installing electronic tolls.
- Selling discounted mainstream revenues like the income or sales taxes. This only would increase the deficit projected for 2011-12, since those levies already are state government’s two chief revenue sources.
- Selling state buildings and other physical assets.
- And securitizing annual payments from a settlement reached in 1998 with five major tobacco firms.
Another option besides utility surcharges that drew a close look involved selling a combination of revenues from existing lottery games and a new Keno game.
But committee leaders said it was bogged down by several problems. As much as $120 million per year over the next decade, or $1.2 billion total, would involve the sale of existing lottery revenues, which would expand the projected deficit two fiscal years from now.
Establishing a Keno game could jeopardize the millions the state gets as its share of slot machine revenue from Connecticut’s two casinos, and significant segments of both the House and Senate remain opposed to the expansion of legalizing gambling. The legislature’s Public Safety Committee also rejected a bill to legalize Keno in March.