May 27, 2003
Ms. Louise E.
Rickard
Acting Executive
Secretary
Department of
Public Utility Control
10 Franklin
Square
New Britain,
CT 06051
Docket No. 03-01-01: DPUC Review of The
Connecticut Light and Power Company’s and The United Illuminating Company’s
Budgets and Modifications for Conservation and Load Management Activities
for Year 2003 and 2004
Dear Ms.
Rickard:
Environment Northeast (ENE) submits these
recommendations with respect to the issues arising from the May 16, 2003 letter
from CL&P in which the company advises that it is suspending all future
C&LM activities. The suspension of
programs, while perhaps an understandable reaction by CL&P to the
Department's May 1, 2003 Draft Decision, will damage if not destroy C&LM
activities in the state for a long time to come. This suspension and damage to the state's C&LM
infrastructure could not come at a worse time as the state faces serious
capacity problems in Southwest Connecticut that could impact ratepayers
throughout the state. The current
course of action -- a refusal by the Department to contemplate rate recovery
for C&LM expenditures -- is creating a crisis in C&LM.
ENE makes two recommendations.
First, the Department should reconsider
its order in the Draft Decision directing the companies not to incur costs past
June 30, 2003 and should immediately direct CL&P and UI to expend the full
array of programs targeted at the congestion problems in SWCT. These include the ISO-NE demand response
programs, the remaining programs designed to find savings in SWCT.
Second, because of the benefits in
reducing price volatility and reducing LMP as well as in relieving congestion
to the entire state from decreasing demand, ENE urges the Department to order
that all programs as outlined in the 2003-2004 Plan as amended proceed.
We urge the Department to offer to make
the utilities whole in the event that C&LM funds are transferred in a
budget bill. The Department should make clear that it will allow cost recovery
for all prudently incurred expenses on cost-effective C&LM programs.
In addition, while the prospects of legislative action that will raid the C&LM fund for some amount up to two years lurks, the fact is that the ratepayer funds are still being collected according to the provisions of § 16-245m. While no one can predict the outcome of the proposals to raid the C&LM fund, planning for only one outcome -- a complete transfer of C&LM dollars -- in advance of actual action is in conflict with § 16-245m. As long as ratepayer funds are collected for C&LM purposes, 16-245m requires that the funds be spent on C&LM. CGS § 16-245m states, "On and after January 1, 2000, the Department of Public Utility Control shall assess or cause to be assessed a charge of three mills per kilowatt hour of electricity sold to each end use customer of an electric distribution company to be used to implement the program as provided in this section for conservation and load management programs…" (Emphasis added.) CGS § 16-245m does not provide the ability to withhold or escrow ratepayer funds. While we can acknowledge risks from proposed legislative action that may include retroactive provisions to remove C&LM monies, the fact is that such action has not taken place. In the meantime, the statute clearly imposes an obligation on the companies to expend these funds on C&LM activities pursuant to the plan.
1. The Department Should Direct the
Utilities to Fund All SWCT Related Programs
As the Department, the utilities and the
ECMB parties have been aware, the potential for power shortages and disruptions
in SWCT this summer is acute. ISO-New
England has stated in its May 16, 2003 letter to Chairman Downes, the situation
in SWCT is "precarious" and ISO-NE forecasts capacity shortages up to
six times this summer. (ISO-NE letter
at 1, 2.) ISO-NE states the case
clearly: "the loss of these demand response resources could not happen at
[a] worse time since peak loads tend to occur in the July/August
timeframe." (ISO-NE letter at 4.)
C&LM programs address SWCT and reliability
and cost issues in three ways. First,
some program monies support ISO-NE demand response programs. Second, additional programs reduce load in
SWCT -- as the Department had directed earlier in the year. Third, the programs' load reductions statewide
reduce the congestion charges that will occur from SMD and LMP throughout
Connecticut.
Given the "precarious" nature
of the reliability and price volatility issues facing SWCT, and given the
critical role of C&LM in addressing and mitigating the potential
detrimental impact of unmet demand, the Department is in the position of
articulating the importance and prudence of going forward with C&LM
programs in addressing the SWCT situation.
Accordingly, ENE recommends that the Department reconsider its position
in the Draft Decision, direct the utilities to field the programs as they
impact SWCT.[1]
In addition, because of the overall
program benefits to the state in reducing demand and positively impacting the
price threat of LMP, it would be prudent for the Department to order that all
programs proceed pursuant to the plan and indicate that the Department would
support cost-recovery for C&LM expenses incurred by the companies. The programs are the least-cost tool in
addressing Connecticut's volatile electricity issues this summer. C&LM programs and the infrastructure
that has developed are essential to avoiding dire circumstances, both to
reliability in SWCT and to price impacts in the Connecticut LMP zone as a
whole. For these reasons, the most
prudent action is to field the full set of programs, reap the demand reduction
benefits and maintain the infrastructure for C&LM.
2.
Ratepayer Funds Collected for C&LM
Cannot be Escrowed or Withheld from C&LM Expenditures
In the absence of legislative action, current
law requires that ratepayer funds collected for C&LM purpose be expended on
C&LM programs. The statute does not
permit funds to be withheld in account.
The prospects of a reduction in the C&LM funds by legislative action
remain nothing more than a possible outcome.
While a budget may be agreed upon by June 4, the fact of the matter is
that the state may not have an agreed upon budget until well into the fiscal
year, in this case during the summer or fall.
The statute does not provide the authority to escrow the funds based on
a potential legislative action that may or may not occur.
Despite these difficult circumstances,
the statute creating and directing the use of C&LM funds has not changed
and the funds must be expended on C&LM activities until such time as the
legislature may effect a change in the provisions of §16-245m.
Respectfully
submitted,
/s/
Daniel L.
Sosland
Senior Counsel
[1] There is no question that the Department may authorize cost recovery for conservation programs outside of the Fund. Possible mechanisms include rate amendments pursuant to Sec. 16-19oo.