Lawmakers likely to revisit controversial utility surcharge

By Keith M. Phaneuf

State legislators have an opportunity to slash about 40 percent off of a controversial surcharge on consumer electricity bills or to eliminate a planned raid on a popular energy conservation program--but not both.

And given the controversy the two fiscal maneuvers have sparked since their adoption last May, it's not surprising officials are feeling pressure from both sides now.

"In my perfect world, I would like to do a little bit of both," Sen. John Fonfara, D-Hartford, co-chairman of the Energy and Technology Committee. "But this is not my perfect world."

A big imperfection in state government's world is the $3.67 billion deficit projected for the next fiscal year, a shortfall equal to nearly one-fifth of current spending. And Fonfara said legislators have to be ready to pick their fiscal priorities as never before.

At issue is nearly $956 million in borrowing built into the current, $19.01 billion state budget and the $141 million needed annually for each of the next eight years to pay it off.

The Democrat-controlled legislature and former Gov. M. Jodi Rell, a Republican, enacted a three-pronged plan to place nearly $1 billion in state spending on the shoulders of energy consumers.

A charge of 0.379 cents per kilowatt hour - or $2.65 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 this month and running through June 30. It will raise $40 million for the General Fund.

A charge of 0.47 cents per kilowatt hour - or $2.42 per month for the typical residential customer - starts in July, again on CL&P customers only. It's designed to raise $112.9 million per year to help cover the debt on the $956 million in bonding. 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 annually from the $82 million reserved for the Energy Conservation and Load Management Fund, which helps households cut their heating bills while creating hundreds of energy efficiency jobs.

But legislators have been rethinking that plan since the last fiscal year ended with a surplus $310 million above expectations when the current budget was adopted. Lawmakers could use that bonus to reduce the $956 billion borrowing target by almost one-third--and the corresponding $141 million in annual debt service by the same ratio.

But who reaps the benefit?

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

Sen. Eileen Daily, D-Westbrook, co-chairwoman of the Finance, Revenue and Bonding Committee, already has proposed shielding the energy conservation fund.

And Fonfara said that while he would like to provide ratepayers with more relief, investments in the energy conservation fund pay the biggest returns.

That fund not only supports hundreds of jobs in the energy efficiency and weatherization fields, bit it also helps pay for home energy audits that can promote everything from new windows and weather-stripping to improved insulation to cut home heating costs dramatically, said Christopher Phelps, executive director of Environment Connecticut, a nonprofit energy efficiency advocacy group.

"If you're asking where you get the most return, the most long-term effect, it's the energy conservation fund," he said.

United Illuminating spokeswoman Anita Steeves said Tuesday that the utility, which largely serves Fairfield County, believes protecting the energy conservation fund from further raids should be the legislature's immediate priority. "It provides opportunities to lower customer bills and it supports green jobs," she said.

But Sen. Kevin Witkos of Canton, ranking Senate Republican on the Energy committee, said "I don't think it's that simple."

The new utility surcharge, which minority Republicans in both chambers opposed last spring, amounts to "a hidden tax that wasn't distributed fairly," Witkos said. "If this borrowing is being re-examined, the whole thing deserves to go to a new public hearing."

CL&P officials objected strongly last spring when its customers were 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. CL&P customers finished paying that charge in December, while UI ratepayers won't be through until October 2013.

"This has been an unfair burden on our customers and it's something more and more people are realizing is out there," CL&P spokesman Al Lara said, also calling for a public hearing on the debt service plan. "We would expect that any legislative decisions take place after an open discussion that takes into account the burdens that have been placed on our customers."

Gov. Dannel P. Malloy's budget director, Office of Policy and Management Secretary Benjamin Barnes, said Tuesday that the administration hasn't developed a position yet on re-distributing the debt service, but echoed Witkos in saying the solution isn't obvious.

The energy conservation fund "has laudable goals" and does help promote efficiency and create jobs, Barnes said. But he noted that it isn't the only energy efficiency fund within the state budget, and that the governor also campaigned strongly on the need to control excessively high electricity rates.

"Both approaches have significant merit," Barnes added. "I would want to have a pretty careful evaluation first."