Gov. Dannel P. Malloy disclosed plans late Tuesday to create a new Department of Energy and Environmental Protection, a move expected to enhance energy planning efforts while reducing spending across three existing agencies.

The proposed merger, to be included in the budget Malloy will propose next week to cover the next two fiscal years, also could signal a weakening in some eyes of the state’s Public Utility Control Authority, though full details of the governor’s plans weren’t released Tuesday.

“Merging these two functions under one leader will allow the state to act cohesively in two vitally important and directly related policy areas, particularly in terms of economic development, siting, permitting and other issues,” Malloy said in a statement released at the close of the business day.

The new governor, who repeatedly criticized state government during last fall’s campaign for doing too little to reverse some of the highest electric rates in the nation, also is grappling with the largest budget deficit in Connecticut history.

Malloy’s plan centers on merging the departments of Environmental Protection and Public Utility Control. The united agency also would house the 12-employee energy planning unit now within the Office of Policy and Management.

The administration predicted that the new department would merge two closely related functions, coupling environmental conservation and regulation efforts with energy planning and pricing.

“Under this new agency, we will better integrate and coordinate our state’s energy and environmental policy in order to strengthen our ability to protect the environment; to clean, conserve and lower the cost of energy; and to set the table for rapid and responsible economic growth,” the governor’s statement said.

Malloy notified key legislators in both parties of the outlines of his plan in a series of telephone calls.

“I’m pleased at the recognition that we need an agency that is devoted to energy policy,” said Rep. Vickie O. Nardello, D-Prospect and co-chairwoman of the legislature’s Energy and Technology Committee. She said she believes the chance to run a larger agency than the DEP — with an expanded role — would help attract top quality applicants for the commissioner’s post.

“I do believe for the right person this could offer a wonderful opportunity,” Nardello added. “We still have to see the details of the governor’s proposal, but I’m encouraged.”

“This is a good sign. It shows he understands the nexus between the environment and energy,” said Jessie Stratton, the director of government relations for Environment Northeast. “He’s made very clear that he gets it.”

Timothy F. Bannon, the governor’s chief of staff, described combining the functions as the “rationalization of government.”

He played down the late and perfunctory announcement of the administration’s first proposal for consolidation.

“When the cake is ready, it comes out of the oven,” he said. “Rather than sit on it, the governor wanted to get it out there in front of the public.”

Bannon said the administration has a candidate in mind to run the new agency, but the consolidation was not an attempt to make the job more attractive.

“This is not building a job in order to attract a candidate,” he said.

Legislative leaders in both parties, who were given an outline of the plan in calls from the governor, applauded the concept.

“I think it’s promising,” said Senate President Pro Tem Donald E. Williams Jr., D-Brooklyn. “I think it signals that the governor is very interested in energy policy.”

“The devil is in the details,”said Senate Minority Leader John P. McKinney, R-Fairfield, but he added, “The idea of having all our energy assets under one roof is a good one.”

Republicans proposed the creation of an energy department years ago, but creating a new department with the state facing a $3.7 billion deficit is not feasible, he said.

Though full details of the merger were not available late Tuesday, the governor’s office said the new agency would feature two energy-related bureaus to complement environmental protection functions.

The energy planners from the Office of Policy and Management would enter the new Bureau of Energy Policy and Efficiency, which also would promote effective management of energy costs and usage within state facilities, while components of the  DPUC would be housed within Bureau of Utilities Control.

Unlike many larger state departments, the DPUC is led by a five-member authority. That group’s primary charge is to regulate utility rates and services and adjudicate questions and disagreements about related statutes and regulations.

The authority has been the subject of periodic criticism from legislators for going beyond its adjudicatory role and developing energy policy — an argument that could be quashed by the governor’s reorganization plan.

Naugatuck Republican Kevin Del Gobbo, a former state representative who named authority chairman in 2009 by then-Gov. M. Jodi Rell, could not be reached for comment Tuesday evening.

Malloy’s budget office confirmed that the new department would be funded across two segments of the state budget — as Environmental Protection and Public Utility Control currently are.

A relatively large agency within state government — though not the size of giants such as Corrections, Children and Families, or Motor Vehicles — Environmental Protection currently has a $76.9 million annual budget with just under 700 positions. It’s resources come primarily from the $17.7 billion General Fund, the single-largest component within the $19.01 billion total state budget.

With 115 employees, the DPUC has a $20.1 million budget kept in a small, specialized fund that manages that department and the Office of Consumer Counsel.

The administration did not disclose Tuesday what appropriation it would propose for the combined agency, nor the level of staffing it would recommend.

McKinney, who said that DEP has been underfunded for years, said he wants to see how many resources go to environmental protection under the merger plan.

“As someone who cares about DEP and what they do…I want to make sure DEP is not lost,” he said.

Malloy’s proposals for the 2011-12 and 2012-13 fiscal years must close a projected deficit of $3.67 billion in the first year, a gap equal to nearly one-fifth of all current spending.

Keith has spent most of his 31 years as a reporter specializing in state government finances, analyzing such topics as income tax equity, waste in government and the complex funding systems behind Connecticut’s transportation and social services networks. He has been the state finances reporter at CT Mirror since it launched in 2010. Prior to joining CT Mirror Keith was State Capitol bureau chief for The Journal Inquirer of Manchester, a reporter for the Day of New London, and a former contributing writer to The New York Times. Keith is a graduate of and a former journalism instructor at the University of Connecticut.

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