Neighboring States Ask CT Not To Extend Electricity Tax
A day after Gov. Dannel P. Malloy released his two-year budget that includes an extension of a tax on electricity generators, the attorneys general of Massachusetts and Rhode Island wrote Connecticut legislative leaders and asked them not to continue it.
Democratic Attorneys General Martha Coakley of Massachusetts and Peter Kilmartin of Rhode Island said they were “disappointed” in Malloy’s budget for extending the tax.
“As you may be aware, a 2011 ISO New England study found that because all generators reap a windfall as a result of higher prices caused by the tax on Connecticut generators, New England ratepayers were likely to pay approximately $58 million more to purchase electricity because of the tax, and that approximately 75 percent of the higher energy costs resulting from the tax were likely to be borne by ratepayers outside of Connecticut. In essence, the ratepayers of our states and others are bearing the burden of higher energy market prices that are the direct result,” they wrote Connecticut lawmakers.
The two expressed sympathy for Connecticut’s fiscal situation, but believe the tax on electricity generation, which is bought and sold on a regional basis, will raise the rates on residents in their states.
Malloy spokesman Andrew Doba countered by offering a statement that said since the tax has been implemented, electricity rates in Connecticut have gone down 12 percent.
“While we respect the opinions of our neighboring Attorneys General, we have to take the appropriate action for our state. The fact is that energy rates are down 12 percent across the board in Connecticut since the enactment of this revenue enhancement,” Doba said.
Dan Dolan, president of the New England Power Generators Association, said the reduction in electricity prices is tied to the low cost of natural gas and increased competition. Dolan argues that prices in Connecticut dropped in spite of the tax.
“Because of competition among generators and low fuel costs, consumers have seen price decreases,” Dolan said. “Yet this tax has made consumer costs higher compared to other states in the region putting Connecticut at a disadvantage when competing for jobs and investment against neighboring states.”
The drop in electricity prices also doesn’t take into consideration the fact that one of the biggest generators, Dominion, which operates the Millstone Nuclear Power Plant in Waterford, decided not to pass on its share of the tax to ratepayers during the first two years.
But it’s an expense the company will no longer shoulder if the tax is continues. Ken Holt, spokesman for the Dominion Millstone Power Station, said last week that “going forward if the tax is extended that tax is going to be passed on to consumers.”
Rep. Betsy Ritter, D-Waterford, said the letter from the attorneys general highlights the concerns they expressed at a press conference prior to the release of the governor’s budget.
“There’s a real concern the tax will be passed along to ratepayers,” Ritter said.
But she said the governor’s budget is just the opening offer. She said lawmakers will debate the issue as part of the larger budget discussion and taxes.
Rep. Sean Williams, R-Watertown, said he’s been against the tax from the very beginning, but what the letter from the two Democratic attorneys general illustrates is that it’s not good for the competitiveness of the region.
“What this letter should announce to the world is that the decisions we reach here in Connecticut can have an impact on the region and make it difficult for us to attract business,” Williams said.
If the economy truly is operating on a more global basis, then Williams argued that things that make business less competitive — like higher electric rates — need to be taken more seriously by the state.
Williams said he doesn’t blame the administration for not understanding how the purchase of electricity is done regionally, but he blames them for sticking their heads in the sand and extending the tax for two more years.