By State Senator Dan Debicella

The General Assembly has approved an energy reform package in the hope of solving the problems Connecticut has faced in the past year. We all know the problems—skyrocketing energy rates, record gas prices, and no relief in sight. The energy reform package we passed will help, but it failed to address some of the fundamental energy issues we face.

I believe the General Assembly deserves a “C” for the bill we passed. Despite its good points, the bill will not result in lower rates for another 4 to 5 years. We need relief now, and the Democratic leadership in the legislature failed to include items that could have provided immediate and permanent relief.

I did vote for this bill because it does include good ideas – just not enough for immediate relief or addressing the fundamental problems. My thoughts on the bill can be summed up as the good, the bad, and the ugly.

The Good.
The energy reform package includes several measures to reduce demand in the long run, and provide some limited ways to increase supply. To reduce demand, the bill provides funds for conservation projects, such as incentives for energy-efficient heating and cooling systems. It also creates a pilot for “advanced metering”, which would require companies to charge lower rates at off-peak times and allow higher rates at on-peak times – thus, rewarding people who go easy on air conditioning and other energy-hungry appliances when not at home.

On the supply side, several provisions of the bill will result in a small increase in electricity, and, thus, lower prices. One provision will allow UI to create plants to handle peak energy needs - typically during the summer - when costs rise dramatically with demand. Another provision allows towns and businesses to create “energy improvement districts” with mini-power generation plants. For example, Sikorsky could buy generators to provide its own electricity.

Each of these provisions is good, but none are earth-shattering. At best, they will provide some rate relief by 2009 or 2010, as demand will moderately decline and supply will slowly increase.

The Bad
Decreasing energy costs in 2010 is a good thing, but we need to reduce rates now. Skyrocketing energy costs are hurting families and businesses now. Republicans offered two great ideas to reduce rates immediately, but they were both voted down 12-24 on the Senate Floor - with all Republicans voting “yes” and all Democrats voting “no”.

Our first idea was to cut the sales tax on energy, currently 6% in Connecticut. Technically known as the PCS tax, it becomes more and more expensive as energy rates go up—and with a huge surplus the state can afford to give a break to ratepayers. I co-sponsored a proposal to eliminate this tax, which would provide an immediate 6% reduction in our UI bills. While this would not totally offset the 50% increase we experienced earlier this year, it would have helped.

The second idea was to eliminate the 25 cents per gallon gas tax for the summer. Gas now costs well over three dollars a gallon, and we try to alleviate that costs by cutting state gas taxes wherever we can. With a budget surplus of over $800 million, we can easily afford the $120 million it would cost to cut this tax and give the money back to drivers. Hopefully, our proposed gas tax cut ends up in the state budget . . . but it is not part of this energy bill.

The Ugly
The worst part about this bill is that it fails to address the fundamental problems with electricity in Connecticut—that we do not have sufficient energy supply or consumer choice. Demand continues to rise but supply does not, so the natural result is higher prices. We can lower prices in the long run by promoting more competition in two key markets: the market for electricity consumption and the market for electricity generation.

Right now, over 98% of Connecticut’s electricity consumers buy from UI or CL&P. We need to create a competitive market so consumers can choose from among many different energy providers. If consumers can shop around, rates will come down.

Increasing energy supply is also critical to reducing rate; supply must keep pace with demand. But our current “de-regulated” environment is actually only half de-regulated. That is, we do not allow the UI to produce electricity, but we impose heavy price regulation on independent electricity generators. The result is that not a single new power plant has been built in Connecticut since deregulation. We need to change the law to allow new electricity generation to come online in a profitable way.

The bottom line is that the bill we passed will do some good in the long term, but will not solve either our immediate problems of high prices or the underlying problem of insufficient supply. I will continue to fight for broader energy reforms that lower our rates because our families and small businesses desperately need relief.