Misguided Energy Bill Threatens Connecticut’s Economy and Consumers

Forget the fact that electricity prices in New England’s market have fallen by nearly 50 percent. Advocates of a return to monopoly controls continue their efforts to handcuff electricity competition. Lawmakers in the Nutmeg state are pushing an 11^th-hour legislative proposal that will put Connecticut’s economy and energy consumers at risk of increased rates.

The legislation was introduced with no public hearing and only 24 hours for stakeholder review or input. If enacted by lawmakers, it would impede market entry by competitive power suppliers and force consumers to purchase power from a monopoly-protected provider.

The bill would dramatically reverse Connecticut’s retail electricity competition policy without any opportunity for public participation. This decision is questionable at best, considering 88 percent of Connecticut consumers polled this month said they supported competition in electricity and more than 10,000 emails have been sent to lawmakers in support of choice over the past week.

Competition’s benefits are clear in the wholesale electricity market serving Connecticut and New England. Prices fell 48 percent in ISO New England in 2009, from $80.54 per megawatt-hour (MWh) in 2008 to $41.99 per MWh in 2009. Thousands of customers now receive their power from a competitive power supplier and Connecticut is the regional leader for demand response, with 33 percent of all enrollment within ISO New England. The state has benefited from increased reliability and power sources with $4 billion in regional transmission investment and another $5 billion planned.

In comparison, restricting competition threatens to raise rates across the state. The state Office of Policy Management and the Department of Public Utility Control jointly concluded that “most of the provisions of this bill will result in significant increases in ratepayers’ costs and will have a considerable state budgetary impact.” Ratepayers would be held captive to rate increase proposals by their incumbent utility if they are ordered to build new generation without competition’s incentive to hold costs down.

The legislation also considers withdrawing from ISO-NE in favor of another ISO or a Connecticut-only ISO, a flawed idea rejected as uneconomic by Maine after two years of review. The state would be liable for remaining financial obligations to regional transmission owners for regional assets through ISO-NE without any return on investment.

Recent events in Michigan offer an object lesson in why policymakers should not limit or roll back competitive reforms in response to transient market conditions. Michigan legislation limited competition to 10 percent of a utility’s electricity load. Within a year, the cap had been reached, and more than 1,000 businesses were on a waiting list for more competition. Meanwhile, electric rates spiked 10 percent.

Those who ignore history are doomed to repeat it. The Connecticut legislation would slam the door shut on the state’s burgeoning competitive electricity market. State lawmakers should stand up for their constituents by rejecting this legislation and preserving the significant economic and environmental benefits competition is creating for consumers.

Joel Malina | May 4, 2010