New Year, New State Energy Tax

It was supposed to end last year, but as of Jan. 1, a decade-old charge on Connecticut electricity bills lives on as an energy tax to help plug the state’s budget gap.

Policymakers often decry the high cost of energy in Connecticut, but most legislators voted this year to keep those costs high. In 2010 they adopted the new tax and again raided the Connecticut Energy Efficiency Fund to make the state’s fiscal ends meet.

Lawmakers seized upon the Competitive Transition Assessment (CTA) as an additional supply of funds for the state budget crisis. Consumers have been paying the CTA for years, in order pay off the utilities’ “stranded costs”—that is, debt incurred to fund energy infrastructure investments prior to deregulation in 1998.

While the charge was supposed to end on Dec. 31, 2010, for CL&P customers (and in three years for United Illuminating customers), it will be extended on CL&P consumers’ bills now, and UI’s later.  Because the CTA is based on use, Connecticut businesses will be affected much more than residential consumers.

For example, the average residential customer uses approximately 700 kilowatt hours of electricity per month and would pay approximately $2.50 more per month. But a large business can easily use 500,000 kilowatt hours per month, which means the surcharge-tax would increase their electric bill by more than $1,700 per month–or over $20,000 per year. It’s clearly a tax, because the charge has nothing to do with the services provided by the electric utility.

Incoming State Sen. Joe Markley (R-Southington) has filed a legal complaint seeking to block regulators from imposing the surcharge. Connecticut consumers also pay about $90 million into the Connecticut Energy Efficiency Fund (CEEF) specifically for programs to help them control energy use and cost. But in its quest to close the budget deficit, the legislature voted to take one-third of the CEEF money collected over an eight-year period.

Solving the state’s fiscal crisis is critically important, but it should not be done at the espense of energy consumers in Connecticut.

For more information, contact CBIA’s Kevin Hennessy at 860.244.1979 or kevin.hennessy@cbia.com.