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Seniors Question Revenue Proposal, Fear Electric Rates Will Increase

by | Apr 8, 2013 5:30am () Comments | Commenting has expired | Share
Posted to: Energy, Taxes

When he unveiled his budget in February, Gov. Dannel P. Malloy offered a few new ideas to generate revenue, and at least one of those has been called “radical” by the senior citizen lobby.

In order to collect $80 million in new revenue, Malloy wants to auction off the power supplied by Connecticut Light & Power or United Illuminating to one of the state’s 40 or so “competitive” electricity suppliers that were allowed into the market after deregulation 13 years ago.

Deregulaton was supposed to create more competition among suppliers and drive down prices for customers. But so far the results have been mixed.

Even though CL&P and UI no longer generate power, they continue offering customers a regulated rate that is used by more than half of the state’s residents. The other half have switched to competitive suppliers.

Under Malloy’s proposal, blocks of 100,000 customers would be auctioned off to the competitive supplier willing to pay the most. Competitive suppliers would pay the state for the block of customers because it would allow them to save money on marketing to try and get consumers to switch from CL&P and UI.

“I like the stability of the standard plan and knowing that the state regulates its costs,” Nora Duncan, AARP’s Connecticut director, said last week during a conference call. “Other individuals like to be in the market for electric supply to see if they can get an offer that does beat the standard plan. The good thing is today we have that choice.”

Duncan argues that Malloy’s proposal eliminates the standard plan and forces those currently in that plan to another competitive supplier. That supplier will have to keep their rates low in the first year of the contract, but could increase their prices in the second and third year. As the bill is written, suppliers may also impose penalties if the customer wants to switch from its assigned supplier to another, according to Consumer Counsel Elin Katz and Attorney General George Jepsen.

“A customer today may rationally desire to stay with standard service to avoid the risks and hassles of closely monitoring their electric bill and analyzing dueling sales pitches in order to achieve at best small savings in the short run,” Katz and Jepsen said in their written testimony to the Finance Committee last month. “The state should not be forcing customers to contract for electric generation service with any particular entity.”

Competitive suppliers argue that the market isn’t working properly because CL&P and UI are still allowed to offer a standard plan. Chris Kallaher, senior director of government and regulatory affairs for Direct Energy, said last month that other markets don’t operate this way. For example, there is no “standard” offer or regulated price for food. The market operates without state regulation of price, he said.

The standard offer is the “last regulatory tool the state has to keep electric rates affordable,” Duncan said.

But proponents of the proposal say that’s just a “fear” tactic the organization is using to mobilize its membership.

Dennis Schain, a spokesman with the Department of Energy and Environmental Protection, said the administration is working with the legislature on the proposal. He said nothing in the bill has changed since the public hearing, but the idea is to give the consumer the “maximum amount of choice and flexibility.”

He said the proposal will benefit consumers by lowering electricity rates and increasing competition in the marketplace. He said the administration is continuing to work with lawmakers on “ways to set a meaningful benchmark.”

“Let’s not forget that for many years it was a substandard offer,” Schain said of the rate offered by the legacy utility companies.

One of the more than 9,000 AARP members on a conference called last week described the auction as a “hidden tax.” The description was apt, Janee Breismeister of AARP’s national office, said.

“We’re very, very concerned that the governor’s plan to auction off those consumers and change the standard plan service will result in higher and more volatile rates down the line,” Breismeister said.

But not everyone on the call was concerned about standard offer. At least one woman said she used a competitive supplier because she was able to choose renewable, green energy. She wondered if she would be able to keep them as her supplier.

Breismeister said she would. She just wouldn’t have the standard rate to compare it with, so she may never know for certain she’s getting a lower rate.

The Finance Committee has until April 24 to vote of the measure.

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Comments

(3) Archived Comments

posted by: Noteworthy | April 8, 2013  8:20am

There is something wrong with auctioning our accounts, accounts the state doesn’t own. We pay the bills. We should be able to choose what supplier we have. If a supplier(s) pay $80 million, do you really think that cost will simply be absorbed at no cost to the consumer? If so, you must believe the state’s budget is balanced, and Malloy isn’t the ringmaster in the biggest political circus in the country. Like gun control, like the budget this will end up solving nothing. It is a back door tax on electric consumers, and a dishonest one too.

posted by: Erlingheuser | April 8, 2013  10:08am

The little secret that DEEP does not want anyone to know is that Standard offer Rates will go down by at least 5% in August.  The procurement manager at PURA can confirm this.  That is why this auction times the 5% rate reduction to Standard offer Rates on April 1st and not when the auction happens.  So this great rate reduction they are promising everyone will happen with our being slammed by the state into the private supply market.  I think I would rather keep the stable regulated standard offer.  This is how I know if these private suppliers like direct energy are really doing me a favor.  Today’s standard offer rate is $7.615 cents a Kilowatt hour and Direct Energy is only $7.230 a kilowatt hour.  Based on 750 kilowatt hours a month you would save only $2.89 a month.  They are willing to pay 80 million dollars to control the market because they fear not being able to beat the regulated rate come August when the new lower standard offer rates are released by the procurement manager.  Please don’t do us any more favors with deregulation.

posted by: SocialButterfly | April 8, 2013  12:06pm

The Malloy administration continues to be dishonest with the state consumers, and could care less about the seniors.

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