Budget battle lines being drawn over power plant tax

The first battle lines of the next state budget may have been drawn Thursday around a tax on Connecticut’s power plants that is set to expire in June.

Eleven legislators — including 10 of Gov. Dannel P. Malloy’s fellow Democrats — called for the electricity generation tax to expire as planned. Backed by officials from several business coalitions, they argued that continuing the tax would drive up electricity rates, send a dangerous message to businesses and threaten the economic future of one southeastern Connecticut community.

Meanwhile, the governor, who hasn’t ruled out extending the tax to help close a $1.2 billion deficit in the next budget, repeated his assertion that he doesn’t consider that a tax increase.

Power plants and other electricity generators “did participate in the ‘shared sacrifice’ the governor asked for,” Sen. Andrea L. Stillman, D-Waterford, said during a late morning news conference in the Legislative Office Building.

Stillman’s district includes the two nuclear power plants on Millstone Point that are owned and operated by Dominion Resources, based in Richmond, Va. That company is paying about $42 million of the $70 million the tax is projected to raise this fiscal year.

Malloy often cited the term “shared sacrifice” to describe his approach to closing the unprecedented, $3.7 billion deficit he inherited when he took office in January 2011.

The governor and legislature closed that shortfall with a combination of tax increases, union concessions, agency consolidations and other spending cuts.

But Stillman and others argued that power plants, which set their energy sale costs through long-term contracts, assumed that when state officials set a June 30, 2013, expiration date on the new tax, that they meant it.

“They chose to pay the tax themselves and bear it,” said Rep. Betsy Ritter, D-Waterford, whose district also includes the Millstone facility.

If the tax is extended, Ritter added, generators likely will pass the added cost along to ratepayers in a state that already has some of the highest rates in the nation.

Stillman and Ritter were joined Thursday by eight fellow Democrats: Sens. Andres Ayala of Bridgeport and Cathy Osten of Sprague and Reps. Steve Mikutel of Griswold, Ed Jutilla of East Lyme, Kim Rose of Milford, Linda Orange of Colchester, Jeff Berger of Waterbury and Ernest Hewett of New London. State Rep. Melissa Ziobron, an East Haddam Republican, also attended the press conference.

Malloy is scheduled to present his budget for the 2013-14 and 2014-15 fiscal years to the legislature Wednesday.

The governor’s spokesman, Andrew Doba, released a statement after the news conference. And while the administration didn’t indicate whether it would extend the tax, it again insisted doing so wouldn’t contradict the governor’s position that he won’t raise taxes.

“The Governor will be releasing the details of his budget next week,” Doba wrote. “That said, let’s be clear — extending a tax that is set to expire is not a tax increase. The fact is that generation rates have fallen 12 percent in the last two years. That means Connecticut residents are paying less for energy than they were two years ago. That means Connecticut businesses are paying less, so they can reinvest that money and create jobs.”

Opponents of the tax said they also fear extending it will cause more harm than just boosting electricity prices.

Dominion hasn’t said how it would react to an extension of the generation tax.

But the average price for electricity per megawatt hour has declined gradually in New England since 2008.

And as potential earnings shrink, Dominion has been scaling back its generation capabilities in the Northeast.

It sold a coal-powered plant in Salem, Mass., last August and is trying to sell another coal-burning facility in Brayton Point, Mass.

The company also announced in October that it intended to shut down a nuclear plant in Kewaunee, Wisc., next year for economic reasons.

Stillman and Ritter said the Millstone plant employs 1,300 of their constituents, adding they fear a tax extension could lead to job losses.

Officials with the Connecticut Business & Industry Association, the Eastern Connecticut Chamber of Commerce and the MetroHartford Alliance also said businesses outside of the electricity generation also are watching this tax closely.

“They can’t do business — they won’t do business — in a (tax) climate that isn’t somewhat predictable,” Tony Sheridan, chamber president, said.

Allowing the tax to expire as planned “sends a very strong signal to the private sector … this state means what it says,” said Oz Griebel, the alliance’s executive director.