Gov. Dannel P. Malloy would use more than $350 million in budget surpluses across the past two fiscal years to mitigate a controversial electricity rate hike his predecessor approved to help balance her last budget.

But the governor could be in for a battle as clean energy advocates, key legislative leaders — and even the state’s largest utility company — are targeting those funds to protect a popular energy conservation program.

“These (electric) bills are too high already and I will make sure that we reduce that tax as much as possible,” Malloy said last week in his budget address to the General Assembly.

At issue is nearly $1 billion total — including $956 million in borrowing —  built into the $19.01 billion state budget adopted last spring and tied to Connecticut’s energy consumers.

Specifically, then-Gov. M. Jodi Rell and the legislature ordered a three-pronged plan to prop up the budget Malloy inherited when he took office on Jan. 5:

  • A charge of 0.379 cents per kilowatt hour – or $2.42 per month for the typical residential customer using 700 kilowatt hours per month – was imposed solely on Connecticut Light & Power Co.’s roughly 1.2 million residential and business customers starting in January and running through June 30. It will raise $40 million for the General Fund.
  • That surcharge climbs to 0.47 cents per kilowatt hour, or $2.65 per month for the typical residential customer, starting July 1. It is limited to CL&P customers at first and is designed to raise $112.9 million per year to help cover the $141 annual debt service on the borrowing, which would be financed over eight years. After October 2013, though, the rate on CL&P customers would be reduced and the 324,000 customers of United Illuminating, the state’s other major electric utility also would begin contributing toward the debt service.
  • And $28.7 million would be drawn each year for the next eight from the $82 million reserved annually for the Energy Conservation and Load Management Fund, which helps households cut their heating bills while creating hundreds of energy efficiency jobs. That $28.7 million also would be used to help cover debt service on the borrowing.

But state officials now have an opportunity to slash more than 35 percent off that plan.

That’s because the last fiscal year ended with a surplus $310 million above expectations when the 2010-11 was adopted. And the Malloy administration and Comptroller Kevin Lembo projected the current budget is running $43 million to $57 million in the black.

State officials could scrap the energy conservation raid entirely, wipe out 40 percent of the new surcharge, or some combination.

Malloy, who campaigned on a pledge to address electric rates that are among the nation’s highest, said last week that the plan adopted last year “is really just a way to tax us on our electric bills.”

The new governor isn’t the only one to refer to a new, controversial surcharge on consumer electricity bills as a “tax.”

Connecticut Light & Power Co., one of the state’s two largest utilities, has blasted the surcharge as a “hidden tax” and argued it is unfair that its customers are targeted to bear the initial brunt of the cost of this budget borrowing scheme.

Legislators defended the staggered surcharge arrangement noting they didn’t want to impose new burdens until utility customers finished paying off another surcharge that dates back to 2000 and involves a state-ordered deregulation process.

But CL&P indicated Monday that Malloy’s proposal wasn’t its first choice, given the alternatives.

“At CL&P, we have opposed this kind of burden being placed on our customers in any form,” CL&P President Jeff Butler said Monday. “If only a portion of that burden can be removed, we advocate restoring the energy efficiency fund first because those dollars support and create green jobs and help our customers use energy more wisely.”

But CL&P added that any effort to mitigate the utility bill surcharge is a positive step.

Various clean energy advocates also have espoused first protecting the Energy Conservation and Loan Management Fund, which supports hundreds of jobs in the energy efficiency and weatherization fields and also helps pay for home energy audits that can promote everything from new windows and weather-stripping to improved insulation.

“Consumers save $3 to $4 for every $1 that goes into the fund,” said former state Rep. Jessie Stratton, who co-chaired the Environment Committee as a lawmaker and now represents the private, nonprofit advocacy group Environment Northeast.

Stratton added that every $1 million invested in the fund supports an estimated 41 energy efficiency-related jobs.

The Senate chairmen of the Finance, Revenue & Bonding and Energy & Technology committees, Eileen Daily, D-Westbrook and John Fonfara, D-Hartford, have expressed similar arguments.

Rep. Vickie Nardello, D-Prospect, House chairman of the Energy & Technology, predicted lawmakers would closely analyze the issue but declined Monday to predict what counter-proposals might be made to the administration, adding the governor’s complaints about high electricity rates are valid. “Energy efficiency is a concern, but rates are also concern — always,” she added. “It’s a careful balance that we have to strike.”

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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