OP-ED: Raising Electric Rates in Hopes of Lowering Electric Rates in the Future
by Jay Kooper | May 7, 2010 1:31pm
(8) Comments | Commenting has expired
Posted to: Opinion
Early Wednesday morning, the Connecticut legislature passed a sweeping energy bill with the laudable goal of lowering electricity prices in Connecticut. The measures adopted in the bill, however, are much more likely to push prices up than to drive them down.
These measures include the creation of a new state energy and technology authority (which could require billions of dollars to properly capitalize), allowing utilities to take greater risks in the procurement of power, and spending billions of dollars on sources of electricity that produce power that is many times more expensive than even today’s high utility prices.
The purported benefits of the bill – most prominently the goal of reducing electricity rates by 15 percent by July 1, 2012 – exist only in theory; the costs will be paid by Connecticut residents and businesses in cold, hard cash.
The current energy debate occurs against the backdrop of the emergence of a thriving competitive market where hundreds of thousands of customers have chosen to obtain a variety of products and services from competitive suppliers, saving millions of dollars in the process.
In addition, the growing competitive industry today employs thousands of Connecticut residents, even in a time where there is little economic growth in the state.
However, the energy legislation now sitting before Gov. M. Jodi Rell increases electricity prices for Connecticut’s residents and businesses by requiring them to assume the costs and risks of new electric generation development and supply procurement, plus the costs for investing in new solar infrastructure, making Connecticut more reliant on solar energy at a time when it is one of the most expensive sources of energy.
Indeed, according to Department of Public Utility Control and Office of Policy and Management estimates, ratepayers could see increased costs of $80 million annually rising to $207 million annually if the residential solar programs are implemented without cost containment.
In addressing the state’s high electricity prices we encourage the government to emulate the medical profession: first do no harm. The energy bill takes the opposite approach, spending money the state doesn’t have now in the vain hope of future savings.
This would be a dangerous gamble even in the absence of the state’s already high prices and challenging budget situation. With those fiscal realities, the energy bill is a serious threat to the state’s economic health and we urge Governor Rell to veto it.
Jay L. Kooper is the President of the Retail Energy Supply Association, a national trade association of 13 competitive energy marketers with operations nationwide.
(8) Comments
posted by: City Hall Watch | May 7, 2010 4:39pm
Totally agree. Legislative members always think they are the smartest guys in the room. Every time they say they’re fixing something I cringe because I know it will cost me more. If they employed the KISS principle, (keep it simple stupid) they’d be better off. I know I would be.
posted by: AARP-CT | May 10, 2010 12:29pm
We applaud the members of the House and Senate who stood up to the industry lobbyists like Mr. Kooper and voted to finally put Connecticut on a clear path to fix our broken electricity market and provide real rate relief to consumers. We’ve heard all of Mr. Kooper’s excuses for why CT has the highest electric rates in the nation, and why CT should just except this as our fate and leave them alone to continue raking in huge profits year after year. The time for excuses is over.
The bill contains important provisions aimed at reforming the way Connecticut procures energy and sets a goal of reducing electricity rates by 15%. Streamlining the procurement process will lower rates for all consumers, including those who buy electricity from a competitive retail supplier. For low-income households, the bill establishes a discount electric rate funded largely through existing low-income programs. The legislation also protects consumers who buy electricity from a retail electric supplier from unscrupulous, aggressive marketing practices.
In addition to directly tackling high electric rates, the legislation also includes provisions expanding use of solar power, fuel cells and other clean and renewable energy systems, as well as extending clean energy financing help to consumers. The bill authorizes the creation of a consumer loan program to assist homeowners in replacing inefficient oil and natural gas burners in order to reduce heating bills.
Connecticut ratepayers, including senior on fixed incomes, are tired of paying the highest rates in the continental U.S. while the gap between Connecticut’s rates and the next highest rates continues to grow. This legislation preserves consumer choice while ensuring that the State take concrete steps to lower electricity costs across the board for all Connecticut ratepayers. We urge the Governor to stop buying into the industry excuses and immediately sign this bill into law.
posted by: AARP-CT | May 10, 2010 1:00pm
The real reason the retail suppliers are afraid of this bill is because they know that the current “discount” they offer CT residents is only possible because of the inflated rate we already pay for electricity. If the DPUC is able to buy power more cheaply and lower rates for everyone across the board, their “discount” might have to come out of their profits. The changes proposed by this bill can be accomplished with neglible costs, and existing DPUC staff, not the billions of dollars the industry cites. It provides the best hope CT has of lowering rates long-term for all ratepayers, while expanding the use of green energy and creating green jobs right here in CT. Don’t believe the scare tactics. Governor Rell should sign the bill immediately.
posted by: Brian Parker | May 10, 2010 3:30pm
Interesting. To me it looked like smoke and mirrors - reduce the rates but charge a flat fee…
I’ll look more into it.
posted by: countryliving | May 11, 2010 8:16am
I encourage everyone to read the bill, and then determine how the state can invest all this money into renewable programs and try to reduce rates at the same time.
It just doesn’t make sense. I am all for renewable energy, but lets not lie to ourselves, it is expensive. If the state wants to make renewables a priority lets not pretend it won’t cost the state anything.
posted by: lothar | May 11, 2010 9:30am
As I understand it, before this bill was passed cl&p had already applied to the DPUC for another rate increase to keep that same revenue coming in either way. So maybe it is time to invest in our future to try to find a better way to do things. It may cost a few dollars in the short run, but if it turns on a light at the end of the tunnel then I’m all for it.
posted by: Lou | May 11, 2010 10:12am
How wonderful of AARP to just repeat the same half-truths they have been feeding legislators for years on this board. They will never address, of course, how millions in government subsidies for their beloved solar, the most expensive generation source, will actually contribute to lowering prices. Further, they take a shot at Mr. Kooper, whose company and many others like it actually employ thousands of people in CT and pay taxes. AARP is so far out in left field with their statements that lower rates can be achived with minimal costs. Signing energy contracts and constructing generation plants requires billions of dollars of capital, credit requirements, and a huge amount of risk. AARP thinks that all they needs is to re-organzie state government, appoint 2-3 political hacks, and low and behold, rates will go down. Also, how exactly will 15% reductions be achieved by the utlities? Electricity is a commodity, just like anything else. It would be nice if all homes, cars, and televisions were instantaneously lowered 15% for five years but it’s just not possible without companies simply pushing the costs foward. That’s exactly what will happen with this bill - prices will go down for 5 years with this artificial cap and then in five years, rates will soar up ten-fold. Then AARP will be blaming some other corporation and making up outlandish stories of how much profits they make. One final questions, if energy companies are making such great profits, why is CT ranked dead last in being business friendly? If it’s so easy to turn a huge profit, as AARP claims, wouldn’t companies be rushing to CT?
posted by: LevelHeadedandObjective | May 7, 2010 4:30pm
WELL SAID!