March 27, 2003

Senator John A. Kissel

Rm. 2500 Legislative Office Building

Hartford CT 06106

Dear Senator Kissel:

I am writing to you in regard to a proposal in the State Legislature to take the entire Energy Conservation Fund to help balance the state budget deficit. Additionally today, Raised bill 1160 was introduced not taking the full $86 million but $72 million of it.

I am writing to you as a Connecticut resident, a ratepayer and a business concern performing services under the Energy Conservation Fund.

As a ratepayer, I gladly pay into the conservation fund. I know that the current structure overseeing the expenditure of those dollars is heavily scrutinized. I know that the use of those dollars will reduce the depletion of our resources, eliminate billions of pounds of carbon emissions from being produced, eliminate billions of gallons of water from being used and make us less dependant on foreign resources. I pay into the fund with a clear understanding of how the dollars will be utilized.

I also question the legality of taking a conservation fee paid by ratepayers and placing it into the general fund – it then is actually a tax.

As a business concern, I am aware that the C&LM Fund was established to enable the state to capture, in an organized and deliberate process, the economic and environmental benefits of energy conservation and load management. It was built on the experience of Connecticut and other states in designing effective approaches to this goal. The Energy Conservation Management Board, the electric utilities and the DPUC have worked diligently to implement programs which are cost-effective, provide benefits to all classes of ratepayers including the state and the towns, and make lasting improvements in the productivity of Connecticut. These benefits would be lost if the funds were simply allocated to particular recipients without the planning, coordination and safeguards that make the program successful.

1. The Current Program is Highly Effective.

In 2002, the C&LM Fund used the $86 million collected from ratepayers for this purpose to fund a broad array of programs for all customer classes. These funds, reinvested in homes and businesses throughout the state, will provide a lifetime savings of over $370 million in lower bills and other benefits -- a 400% return on investment.

In 2003, the Connecticut Conservation and Load Management Fund, as planned, would:

· Meet Reliability Needs in Southwest Connecticut -- The C&LM Fund would have a particular focus on the electric grid congestion problems in Southwest Connecticut. It would reduce the loads on the overburdened transmission and distribution lines by approximately 100 MW statewide and by over 60 MW in SWCT alone. If these funds were not available for SWCT, the energy crisis there will clearly be even more acute.

· Spur Economic Development and Job Creation -- The Conservation Fund creates jobs at the rate of 10-15 jobs per million dollars spent. In 2003, that means the programs will create or maintain over 1000 jobs in the state. By helping businesses expand, improve productivity and stay in Connecticut, the C&LM Fund is making a meaningful contribution to the tax bases of the State and its municipalities.

Additionally, not only will these jobs not be created or maintained, a very large number of them will be eliminated. Companies working for the utilities under these programs are selected through a competitive bidding process. They hire employees specifically to meet the needs of the contracts awarded. With out the contracts these positions will be eliminated and so will the tax base.

· Provide Large Environmental Benefits -- The Fund is a major contributor to cleaner air by avoiding the emissions of pollutants such as NOx, SOx and global warming gases. The air pollution in 2014 will be caused by technologies installed in 2004. By moving the dollars into the general fund, billions of pounds of carbon emissions will not be eliminated.

2. The Bill Would Eliminate the Safeguards of the Process.

Energy conservation programs in Connecticut are developed with the input of the Energy Conservation Management Board (ECMB), an 11 member board carefully established in law to include representative stakeholders from business, state agencies like OCC, DEP and the Attorney General and environmental and consumer interests. This Board retains a small number of highly qualified independent consultants to advise it on program design, budget impacts and examples of good programs from around the country.

A fundamental element of the statute and the planning process is that programs and technologies must be cost-effective. A careful screening procedure is in place to assure that there is a clear economic benefit to the individual customers who participate in the programs and to the state as a whole. Another major element is an emphasis on market transformation programs which coordinate efforts at wholesale, retail and customer levels to increase acceptance and usage of more efficient products so that they become the standard and no longer require incentives or promotion by the program. The usefulness of program monies is maximized by the fact that they are not set aside while the customer decides what he plans to do, but are only spent on efficiency projects and activities that are ongoing or completed.

These benefits would be lost if the monies were simply allocated to the State and municipalities. This process should be left intact. The development of sound conservation programs carefully balances competing interests, budget priorities and different program types. The process in place since 2000 is working to produce a high quality balanced portfolio of programs with a great deal of public input

These programs also leverage hundreds of thousands of dollars by partnering with other regional efforts and industry. There is considerable momentum in transforming markets toward energy efficient technologies that will be lost or completely curtailed – momentum that cannot be regained. Commitments for these funds have been made and need to be met. Industry cannot be left “holding the bag.” If they are they will not trust the commitment in the future and they will not participate at the degree they are now.

3. The State and Towns Have Received a Proportional Share of the Fund as Required by the ECMB's Equity Principle

The ECMB acts under certain criteria, including an equity principle that calls on program budgets for each customer sector -- commercial, industrial, residential, low-income, state and towns -- to be as close as possible to revenues received from that sector. For 2003 programs, in the CL&P service territory, 2.5% of program revenues are from municipalities and towns receive 3.4% of the program budget. For United Illuminating's service territory, 5.6% of projected revenues are from municipalities and 5.2% of proposed program budgets go to towns; state buildings contribute 1.4% of revenues and receive 1.4% of program budgets. Current programs include specific state and municipal building projects. For 2003, prior to the impacts of the state budget transfer of $12 million, over $1 million is slated for state buildings and $2.8 million for municipal buildings.

Historically, the State and municipalities have received special emphasis in the disbursement of conservation funds and the program has been sensitive to their needs.

A direct statutory transfer would undermine this effort to be fair to all ratepayers and to only fund cost-effective projects that are ready to be implemented.

4. The Bill will Not Advance the Commercialization of Clean Energy Technologies

By ordering a set aside for state and towns in the Clean Energy Fund budget, the bill does not advance the commercialization of clean energy technologies and instead focuses on the political subdivisions of the state. I fail to understand how this amendment to the law will further a need to invest in technologies.

5. Not All Municipalities’ Ratepayers Pay Into the Fund

Only ratepayers from the Investor Owned Utilities (IOU) pay a conservation fee. There are three Municipal Utility Companies that are not required to collect the conservation fee from their customers. This is highly inequitable.

I strongly urge your support in restoring the fund to its original level and purpose, and to stop the raiding of this fund.

Sincerely

David J. Leishman