TESTIMONY REGARDING

RAISED SENATE BILL 1160 - AN ACT CONCERNING REVENUE ADJUSTMENTS BEFORE THE

FINANCE, REVENUE AND BONDING COMMITTEE

BY

JOHN MUTCHLER

THE CONNECTICUT LIGHT AND POWER COMPANY

APRIL 3, 2003

Senator Daily, Representative Stillman, and members of the Finance Committee:

Loss of Connecticut’s nationally acclaimed Energy Conservation and Load Management Fund will cost the state more than it will save.

My name is John Mutchler, and I am a Manager in the Conservation Department of the Connecticut Light and Power Company (CL&P). My written testimony is being submitted in opposition to Section 17(e) of Senate Bill 1160 – An Act Concerning Revenue Adjustments, which concerns the transfer of funds from the Energy Conservation and Load Management Fund to the General Fund.

As background, Connecticut Public Act 98-28, signed into law by Governor John G. Rowland on April 29, 1998, significantly altered the shape and nature of regulation of the electric utility industry in Connecticut. The Act provided for retail choice of electricity supply and opened the generation segment of the industry to the forces of competition beginning in the year 2000. Recognizing the important role of energy conservation in this restructured industry, the Connecticut General Assembly provided funding for conservation and load management efforts for the direct benefit of Connecticut customers. These monies, collectively know as the Energy Conservation and Load Management Fund (“Conservation Fund”), are generated by a charge assessed to electric customers.

Senate Bill 1160, in part, proposes to transfer to the General Fund, the entire Conservation Fund proceeds for two years ($178 million). This considerable sum would augment the $30 million from the Conservation Fund that was already diverted into the General Fund under Section 20 of Public Act 03-2.

CL&P is opposed to Section 17(e) for the following economic and environmental reasons:

• For each year the Conservation Fund is eliminated, the resultant loss in tax revenue could exceed $45 million, due to the loss of sales tax on the purchase of conservation hardware, income tax paid by installers, and business taxes paid by companies who remain in Connecticut or expand their business because their energy costs are reduced. In addition, its loss could mean already strapped businesses could close, jobs may be lost and municipalities and other customer classes will no longer be able to employ efficiency measures. 

• Elimination of the Conservation Fund will result in the loss of critical conservation measures needed to support the seriously constrained areas of southwest Connecticut (SWCT). Transmission congestion charges now imposed by ISO-NE could cost Connecticut rate payers an additional $50 million to $300 million this summer. Approximately 40% of the contributions to the Conservation Fund come from southwest Connecticut electric customers and 60% of the planned Conservation Program budget is expected to target that area this year. That would focus more than $53 million in the southwest Connecticut area in 2003 alone. Further, conservation efforts can reduce congestion charges.

• Loss of the Conservation Fund and its associated programs will increase pollution in Connecticut by nearly 1000 tons of SOx and NOx emissions and nearly 180,000 tons of CO₂ annually, since conservation measures reduces the amount of electricity needed from generating plants which emit these pollutants.

• Loss of the Conservation Fund for just one year will cost Connecticut residents in lost conservation opportunities of $373 million over the lifetime of the conservation measures installed, since they save customers energy for many years after they are installed.

• The report presented to the legislature in January this year shows the benefits of how the Conversation Fund has reduced energy costs throughout Connecticut. For example: in one year customers in the Stamford area received more than $2 million in assistance; in the West Hartford-Bloomfield area almost $3 million; in the Waterford and Montville area, customers received approximately $400,000; in Milford about $700,000; down along the Connecticut River in the Deep River, Essex, Colchester, Haddam, Old Saybrook area, customers in one year received more than $1 million from this fund.

• The state and municipalities also benefit directly with assistance. In, 2002, the state received approximately $13 million from the Conservation Fund for energy efficiency improvements. Municipalities received over $3 million.

• While the proposed legislation calls for elimination of the Conservation Fund for two years, there will be a major cost to stop and then restart the programs resulting in the loss of the experience base established over many years. It may not be possible to restart many of the programs to ever be as cost effective as they are now. And, we’ll lose the momentum we’ve made in motivating customers to become energy efficient.

• Redirection of the Conservation Fund will end the job creation it generates at the rate of 10 -15 jobs per million dollars invested. This year alone, that amounts to approximately 1,000 new jobs, not to mention those retained because of increased productivity and business growth. C&LM programs save energy, money, improve productivity and bolster the state economy through energy savings and market transformation. Each year nearly 5,000 commercial and industrial customers and 3,100 small businesses participate in conservation programs made possible by the Conservation Fund. These programs help these businesses increase their competitive edge in a growing global economy.

• Redirection of the Conservation Fund will result in the loss of millions of dollars of matching Federal funding from the federal agencies such as DOE, EPA and the Department of Agriculture.

• Conservation also is a means to promote economic development. The value of this fund is recognized by major business organizations such as CBIA, the Manufacturing Alliance of Connecticut (MAC) and the Metro Hartford Chamber of Commerce. Companies that take advantage of conservation and load management assistance significantly improve productivity and achieve permanent savings, which helps mitigate the high energy costs prevalent in the Northeast that might otherwise persuade businesses to relocate or expand elsewhere. Connecticut continues to pace the nation in Gross State Product per Worker ($83,388 – second in the United States, vs. the national average of $70,713). This state also ranks 11^th in Manufacturing Value Added per Production Worker ($189,750 vs. the national average of $167,456). This is no accident. It is directly associated with the adoption of Lean manufacturing techniques which are supported by the Conservation Fund and a growing energy conservation ethic among high-tech manufacturing firms located here.

• Last, I would like to point out that the state’s programs are very well run. A recent indication is the acknowledgement of several CL&P programs by the American Council for an Energy-Efficient Economy (ACEEE), a nationally recognized organization dedicated to furthering energy efficiency as a means to promote both economic prosperity and environmental protection. ACEEE recognized three established CL&P conservation programs for their “exemplary” performance and two newer programs were cited for “honorable mention.” And this was a nationwide search in which we vied with a great number of other utilities.

Given the significant positive value it provides, loss of the Conservation Fund would cost the state more than it would save. The adverse impact on the State’s environment and economic development comes at a time when we can least afford it. In addition, the energy crisis facing us in southwest Connecticut will be further exacerbated by loss of this Conservation Fund. I urge you to eliminate this provision of Senate Bill 1160.