April 22,
2003
Hon.
Marc Ryan
Secretary,
Office of Policy and Management
450
Capitol Avenue
Hartford,
CT 06106
Dear
Secretary Ryan:
In
your appearance before the Finance, Revenue and Bonding Committee of the
General Assembly on April 4, 2003, you made several statements about the
Conservation and Load Management Fund ("C&LM Fund"). We are taking this opportunity to present
the history of the C&LM Fund, bring to your attention the benefits of it
and inform you of the impact that loss of the Fund will have on the State
budget. We respectfully request that
you reexamine your recommendation to transfer the C&LM Fund to the general
budget.
Conservation and Load
Management Programs Have been a Vital Component of Connecticut's Electric
System for Many Years
At
the hearing, you indicated that the C&LM Fund had only existed for two
years and thus no great harm would be done if it were suspended for the next
two years. In fact, these programs were
initiated by the Department of Public Utility Control more than twenty years
ago. Initially a small program, under
DPUC review the effort was substantially expanded in 1988 and has continued as
an important component of electric system operations without interruption to
this day. Prior to 2000, the costs were
funded by ratepayer charges determined annually by the DPUC. In the Electric Restructuring Act, the
General Assembly recognized the importance of these ongoing electric efficiency
investments to the State and fixed the charge at three mills.
The
C&LM Fund substitutes energy conservation services and efficiency
incentives for fossil fuel and related electric system costs. It is implemented by an infrastructure of
energy services firms and utility staff.
A two year hiatus would destroy the infrastructure and expertise that
has been accumulated over the last fourteen years. In addition, substantial economic and electric system benefits to
Connecticut businesses, governments and residents would be lost:
·
C&LM
programs are the lowest cost tool available to address congestion in Southwest
Connecticut, in addition to necessary transmission improvements, and to
mitigate the $50 to $300 million in new charges forecast to hit Connecticut
electric consumers by ISO-New England in the form of new geographic congestion
prices.
·
Some
1000 people are employed by utility conservation departments, energy service
companies, equipment vendors and others.
Testimony by Northeast Utilities indicated that the state would directly
lose $45 million in tax revenue annually from lost income taxes, lost sales
taxes on the sale of equipment and lost business taxes.
·
Connecticut
companies have expanded manufacturing capacity, increased job hires and
productivity, and paid more in local property and state business taxes as a
result of participation in these programs.
Examples of companies that have stayed in Connecticut or expanded as a
direct result of these programs exist around the state -- from Colonial Bronze
in Torrington facing the challenges of foreign competition, to real estate developer
R.D. Scinto, Inc. in Shelton, saving nearly $14,000 a year in lower electricity
bills.
The C&LM Fund makes
Connecticut more Productive and Competitive
At
the hearing, you stated that high utility rates were a negative factor in
making Connecticut economically competitive.
In fact, the C&LM Fund is a significant tool in mitigating price
increases. While Connecticut is at the
end of the energy pipeline and can do little about the cost of fossil fuels, a
major reason for creating the C&LM Fund is that Connecticut can reduce its
utility costs by using energy more efficiently. The program has been extremely successful in leveraging energy
services and incentive payments to achieve very cost-effective savings. Conservation investments of $86 million in
2002 will provide lifetime savings of over $370 million in lower bills -- these
are dollars that get reinvested in Connecticut communities, not shipped off to
pay power generators that may be based elsewhere.
Moreover,
the impact of the programs since 1990 has reduced energy demand in the state by
over 700 MW. These reductions were
essential to reliable grid operations when the nuclear plants were down a few
years ago. Now, the 2003 programs will
reduce demand in Southwestern Connecticut, where severe transmission
constraints threaten reliability. The
demand reductions purchased by C&LM Fund programs have also reduced the
price of spot power on peak demand days.
One study by the Energy Office in Massachusetts showed that the demand
reductions from Massachusetts programs reduced energy prices on a single June
summer day by $400,000 -- another benefit to all ratepayers whether they
participate in programs or not. Continued efforts to improve Connecticut's
energy efficiency and productivity are simply vital to our economic
success.
The C&LM Programs are
Well Managed and Effective
At
the hearing, you also stated your belief that there is a lot of waste in the
C&LM Fund programs. The programs are carefully monitored by the Department
of Public Utility Control, the Energy Conservation Management Board (ECMB) and
independent experts who report to the ECMB.
The programs successfully serve nearly 5,000 commercial and industrial
customers, as well as many more municipal, state and residential customers annually. The Connecticut programs have received
national recognition for their quality and performance. If you have any specific information about
program deficiencies, we request that you provide it to the DPUC and the
ECMB. We also extend an invitation to
you or your staff to attend an ECMB meeting to address any concerns you may
have.
The
Conservation and Load Management Fund produces important economic benefits to
the electric ratepayers who provide the funding and to the State. It would be unwise and counter-productive to
our electricity system, our economic development and our environment to destroy
them. We encourage your input on the
C&LM Fund and welcome the opportunity to meet with you to discuss this
further.
Sincerely,
Jeffrey
Gaudiosi, Manufacturers Alliance of Connecticut
Kevin
Marotta, Middlesex Chamber of Commerce
Robert
Earley, Connecticut Business and Industry Association
Anthony
Marone, The United Illuminating Company
John
Mutchler, Connecticut Light & Power Company
Richard
Blumenthal, Attorney General
Richard
Steeves, Office of Consumer Counsel
Shirley
Bergert, Residential Representative, ECMB
Daniel
L. Sosland, Environment Northeast
Cc: Sen. Kevin Sullivan Rep. Moira Lyons
Sen. Martin Looney Rep. James Amann
Sen. Louis DeLuca Rep. Robert Ward
Sen. Eileen Daily Rep. Andrea Stillman
Sen. William Nickerson Rep. Richard Belden
Sen. Melodie Peters Rep.
Terry Backer
Sen. Toni Harp
Rep. William Dyson
Sen. Donald Williams Rep.
Patricia Widlitz