Investor Call Delays Renewable Energy Debate
Department of Energy and Environmental Commissioner Daniel Esty said he had no intention of getting ahead of the legislative process when he spoke with a group of investors Tuesday, but the conversation delayed debate on legislation about Connecticut’s renewable energy strategy.
One day before the state Senate was expected to debate a revised version of the renewable energy strategy bill, Esty had a conference call with UBS, an investment bank with an interest in Northeast Utilities.
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In a phone interview Wednesday, Esty admitted that he should have probably canceled the phone call.
“In retrospect, I should have stepped back from the call,” he said. “I didn’t mean to get ahead of the legislative process.”
But some lawmakers were concerned Esty may have given investors information about the revised version of the bill before they received a copy it.
However, Esty maintains he spoke about broad concepts outlined by Gov. Dannel P. Malloy’s strategic energy proposal, and was asked a question about plans to move forward with increasing its renewable portfolio to 20 percent by 2020. The conference call which included 152 participants happened around 2 p.m. Tuesday.
Sen. Bob Duff, co-chairman of the Energy and Technology Committee, said he filed the revised copy of the renewable energy bill on Tuesday night around 6:30 p.m. The Senate Democratic caucus discussed the bill behind closed-doors Wednesday, but decided to postpone a vote on it until next week.
“We recognize there’s going to be opposition to the bill, but delaying debate will give them more time to weigh in on it,” Duff said.
He declined to say if Esty’s conversation with investors was the exact reason for postponing debate on the bill. But Esty himself admitted the “timing was poorly placed.”
Esty’s staff maintained that UBS – like many financial firms – organizes many calls with government officials and Esty’s call was no unusual.
Rep. Sean Williams, R-Watertown, said he doesn’t think there was anything “nefarious” about Esty’s conversation.
“I think it was poor timing, but I don’t think it rises to a level of anything more than that,” he said.
Duff, who also felt the investor call was blown out of proportion, said he wants to give the opposition some more time to make some constructive comments about the latest iteration of the bill, which scales back the amount of hydroelectric power that can be used to reach to 20 percent by 2020 renewable goal.
In the original draft of the legislation large-scale hydropower could account for up to 7.5 percent of the state’s Renewable Portfolio Standard. In the revised version, up to 5 percent by 2020 can be applied if it doesn’t look like other emerging energy technologies, such as wind and solar, will accomplish the 20 percent goal by 2020.
“That’s a backstop if we’re not getting enough solar and wind and other types of Class I renewables,” Duff said.
But environmentalists are still unhappy hydroelectric power could be used to offset any of the state’s renewable goal.
“It doesn’t make it less bad,” Chris Phelps of Environment Connecticut said Wednesday.
He said it still puts large-scale Canadian hydro, which doesn’t need any incentives, on same scale as other emerging technologies.
Esty admitted that there’s still a disagreement over whether there should be a protected market for these technologies to grow or if a more competitive market is the answer. Esty said he believes in creating a more competitive market with “hydro nipping at the heels of wind and solar.” Esty believes a competitive market will get the state where it wants to be faster than protecting the emerging technologies.
The direction is one that UBS investors seem to like, since it upgraded Northeast Utilities from a “neutral” to a “buy” on April 17 before speaking with Esty.
Earlier this year, Roger Smith, co-director of Clean Water Action, accused the state of drafting the hydropower portion of the bill to benefit Northeast Utilities, which could reap financial rewards if the Northern Pass transmission line from Canada down through New Hampshire and Vermont is ever built.
“This section of the bill strikes us as a narrowly tailored giveaway to Northeast Utilities to support their controversial partnership with Hydro-Quebec,” Smith said in March. “It’s an open door to let hydropower flood Connecticut.”
That was good news for UBS investors.
“We anticipate that in the near term Connecticut’s SB1138 has the potential to pass the House and Senate, revising the states’ RPS to allow a portion to be met with large-scale hydro,” the UBS investor research report reads. “This would in turn allow Hydro-Quebec (who is in turn having NU build the line on their behalf) to contract with the state and gain economic certainty around the line.”
But even without the Northern Pass transmission line Northeast Utilities continues to be viable, according to the investor research report.
“Even without the project, management remains comfortable it can achieve even the lower end of its longterm earnings growth rate of 6-9% EPS, suggesting it would remain a premium value proposition without the project (and with it appears to be trending towards the higher end—suggesting a further multiple expansion opportunity),” the report reads. ”Aside from the Northern Pass project, we continue to look for the company to make a filing in Connecticut to comply with the state’s recently updated Energy Policy goals of achieving greater oil-to-gas conversions penetrations for residential households.”