Debate pits energy efficiency fund against utility surcharge

A better-than-anticipated financial outlook for the current fiscal year has the state in the position of undoing some of the controversial measures it took in 2010 to balance the budget–but a debate is brewing over just what the priorities should be.

When the Senate adopted a measure last week that would reduce planned borrowing–which once stood at $956 million–down to $137 million, its top priority is first to restore an energy efficiency fund that was raided to help balance state finances. After that is resolved, according to the Senate action, any funds left over could be used to reduce or end an unpopular surcharge on electric bills.

But Gov. Dannel P. Malloy’s administration wants to flip those priorities, first mitigating or ending outright the charge on Connecticut Light & Power Co. customers’ bills, and then shoring up the Energy Conservation and Load Management Fund.

Further complicating matters, some lawmakers still want to redress what they say is an inequity in the surcharge: the fact that CL&P customers have been paying the charge since January, while it has yet to be applied to customers of United Illuminating or municipal electricity cooperatives.

“It’s still a little premature. We don’t know what the exact outcome will be yet,” Sen. Eileen Daily, D-Westbrook, co-chairwoman of the Finance, Revenue and Bonding Committee, said.

The Democrat-controlled legislature and then-Gov. M. Jodi Rell, a Republican, had enacted a three-pronged plan last May to borrow $956 million, raise another $40 million, and place the $141.6 million in annual debt service for the next eight years on the shoulders of energy consumers:

• 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 CL&P customers starting in January and running through June 30. It raised $40 million that went directly into the General Fund.
• A charge of 0.47 cents per kilowatt hour – or $2.65 per month for the typical residential customer – took its place in July, again on CL&P customers only. It was designed to raise $112.9 million per year for debt service. Only 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.
• And $28.7 million would be drawn annually from the $82 million reserved for the energy conservation fund, which helps households cut their heating bills while creating hundreds of energy efficiency jobs.

Shortly after last May’s budget vote, a last-minute increase in the projected 2010 budget surplus reduced the borrowing target needed to balance 2011 finances from $956 million to $646 million.

And the Senate voted last week to dedicate the $509 million surplus Comptroller Kevin Lembo is forecasting for the current year to lower that borrowing target down to $137 million.

It is still unclear whether the debt still would be financed over eight years and what the new annual payment would be, though it presumably would be far less than $141.6 million.

The Senate bill stipulates that the first entity to be spared as the debt requirement drops would be the energy conservation fund. Daily said that if only $137 million were borrowed – only about one-seventh of the $956 million target originally planned – the annual debt payment would shrink enough not only to spare the energy conservation fund from further raids, but also to curtail the utility bill surcharge.

But the Malloy administration has said its priorities are the reserve: first is to reduce or end that surcharge, and then to shore up the energy conservation fund.

The governor’s budget director, Office of Policy and Management Secretary Benjamin Barnes, has said the energy conservation fund has laudable goals but isn’t the only energy efficiency fund within the state budget.

Malloy campaigned strongly last fall on the need to control excessively high electricity rates in Connecticut.

One of the reasons the matter might not be resolved until the final days of the regular legislative session, which ends June 8, is because it might be possible – with a few budget adjustments or if the surplus grows even more – to eliminate the borrowing entirely and please all groups, Daily said.

But even if that is the case, the utility surcharge also sparked considerably acrimony during last fall’s state campaign season and some feel it already has done damage that needs to be repaired.

Southington Republican Joseph Markley, who was elected to the Senate, sued to block the Department of Public Utility Control from implementing the fee. Markley lost in Superior Court and his appeal was dismissed this past week by the Connecticut Supreme Court, which cited the state’s sovereign immunity in its decision.

“My underlying argument has not been refuted: the tax is inequitable, and it is improperly administered,” Markley said.  “Those charges have never been addressed-instead, my case has again been dismissed on a legal technicality.”

Richard A. Soderman, a spokesman for Northeast Utilities, CL&P’s parent company, said the Senate measure approved represents progress, “but we still feel there is more to be made.

Soderman said it is important to restore the energy conservation fund, but added that NU also believes that the utility surcharge – though it never should have been applied in the first place – unfairly placed all initial burdens solely on CL&P customers.

Sen. Paul Doyle, D-Wethersfield, agrees, and said Thursday that “there’s a question of fairness that needs to be addressed,” even if the borrowing no longer is necessary. CL&P customers have been paying in since January, and either they deserve a refund, or customers served by other utilities should be charged, he said. “I’m not letting it go.”