The tentative state budget deal would strip as much as $175 million from clean energy funds, tapping surcharges on monthly utility bills and raiding a program lauded for leveraging hundreds of millions of dollars in private investments.
According to legislators briefed privately Wednesday on the deal, leaders also said they would continue to discuss the proposed diversions and consider adjustments before a vote is held.
Meanwhile, clean energy advocates protested the planned diversions from the Green Bank, Energy Efficiency Fund and Connecticut’s Regional Greenhouse Gas Initiative fund, arguing they could lead to higher utility rates, damage a growing energy conservation industry, and destroy Connecticut’s reputation with private investors in this field.
And Gov. Dannel P. Malloy and state Consumer Counsel Elin Swanson Katz said those diversions were tantamount to a tax increase using monthly utility bills.
“This is ratepayer money that is invested and brings great economic value,” Claire Coleman, climate and energy attorney for the Connecticut Fund for the Environment, said Friday. Diverting those funds “really makes no sense from an economic perspective.”
Legislators, who asked not to be identified, said the tentative deal would divert $27.5 million this fiscal year and again in 2018-19 from the Green Bank to help balance the General Fund.
Another $50 million per year would come from the Energy Efficiency Fund and $10 million annually would be drained from the state’s component of the greenhouse gas initiative — a nine-state collaborative effort that also funds various clean energy programs using assessments placed on major polluting industries.
Connecticut Green Bank a national model
Launched in 2011 by Malloy and the legislature, the Green Bank imposes a surcharge of 1/10th of 1 cent per kilowatt-hour on monthly electric bills. Totals for last fiscal year were not available Friday, but consumers contributed $26.4 million to the fund in 2015-16, said Dennis Schain, spokesman for the state Department of Energy and Environmental Protection.
The state uses that as seed money to leverage much larger sums from the private sector, all of which is invested in a clean energy industry that advocates say already supports roughly 35,000 jobs and is growing.
Funding is invested in renewable energy projects, energy efficiency programs, alternative fuel vehicles and other initiatives.
The Green Bank was hailed as a national model for mobilizing public and private investment to promote clean energy by Harvard University when it bestowed the Innovations in American Government Award on the program in mid-July.
“There are states all over the country replicating our Green Bank model, and at the same time we’re pulling out the rug?” Coleman said. “It makes no sense. And there’s nothing Wall Street hates more than a lack of certainty and states pulling back on commitments.”
Rep. Lonnie Reed, D-Branford, House chair of the Energy and Technology Committee, did not participate in budget negotiations and said she is grateful to legislative leaders from both parties “for negotiating non-stop to bridge this impossible and growing budget gap.”
Analysts say state finances, unless adjusted, will run $1.6 billion in deficit this fiscal year and $1.9 billion in the red in 2018-19.
But Reed said that “killing energy innovations that attract businesses and grow jobs will bring more economic devastation.”
She added that, “I fear breach of contact, breach of faith reprisals from private investors who were attracted to Green Bank by the public funding we used as seed money.”
The Green Bank reports on its web site that throughout its six-year history, the ratio of private investments to consumer payments and other state-dedicated resources is 10-to-1. It also projects Green Bank investments created nearly 13,000 jobs either within the clean energy field or in some other occupation supported by it.
Malloy prefers a more conservative estimate of an eight-to-one ratio, but said the point is the same.
A tax increase that raises energy rates as well?
“A $25 million cut (in state funds) could mean not spending $225 million” on clean energy, the governor said. “You make that kind of cut, you have a pretty profound impact, pretty quickly.”
The impact ultimately could include higher energy rates, the governor and others said.
“You are certainly not driving people toward savings on their energy bills,” Katz said. “It just becomes another tax, an incredibly regressive tax.”
Katz noted Connecticut’s poorest households already dedicate as much as 25 percent of their income to energy bills.
Malloy said Republican legislators and others who opposed formation of the Green Bank in 2011 argued it was a tax, even if the ratepayers’ funds were invested in programs that could reduce their home energy costs.
“But if you’re taking money from ratepayers … and then you say you’re not going to use it for the reason it was actually raised — which was to make ourselves more (energy) efficient — then it really is a tax,” the governor said.
The efficiency fund, which collected $215 million from electricity and natural gas ratepayers in 2016, supports many of the same clean energy programs as the Green Bank does, though it doesn’t draw resources directly from private investors. It would lose as much as $100 million to the General Fund across this fiscal year and next combined.
House Minority Leader Themis Klarides, R-Derby, said last summer — in response to a Senate Republican proposal to divert ratepayer funds from a conservation program — that many in her caucus felt that was not too far removed from a tax increase.
Klarides did not discuss specific diversion amounts this past week, but acknowledged some House Republicans — including herself — don’t like the diversions in the tentative budget deal.
“I was the person in our caucus that probably felt the strongest in regards to that,” she said. “That is one of those things when you have a caucus and you discuss the good, the bad and the ugly … that’s part of the ugly.”
House Majority Leader Matt Ritter, D-Hartford, also said he doesn’t like these diversions, but said the alternatives are grim as well.
I think people realize if you didn’t use that, you’re asking Chairwoman Walker to go through and make cuts to mental health or to cut towns again,” he said, referring to Rep. Toni E. Walker, D-New Haven, one of the leaders of the Appropriations Committee. “So people understood it was a trade-off.”
“We would have loved to keep the money there, but difficult choices had to be made,” said House Speaker Joe Aresimowicz, D-Berlin.
The executive director of Connecticut’s solar industry coalition, rejected House Democratic leaders’ arguments and said the diversion of ratepayer money to the General Fund is a gimmick.
“I hear some lawmakers claim they’ve made the ‘tough’ decision to raid the Green Bank in the name of continued funding for programs for children and the elderly,” said Michael Trahan, who heads SolarConnecticut. “I’d tell those lawmakers that hiding behind kids and old people to avoid making truly difficult spending cuts or increases taxes prolongs the chaos for everyone, including kids and the elderly.”