Testimony of Julie Michals, Policy Outreach Manager

Northeast Energy Efficiency Partnerships, Inc.

Before the Connecticut Finance, Revenue and Bonding Committee

On Raised Bill 1160, An Act Concerning Revenue Adjustments

Section 17(e) – Transfer of Resources from the Energy Conservation and Load Management Fund

April 3, 2003

Thank you for the opportunity to testify on Raised Bill 1160, Section 17(e), which would transfer $72 million from the electric-ratepayer funded Energy Conservation and Load Management programs in fiscal years 2004 and 2005 to the General Fund.

Northeast Energy Efficiency Partnerships, Inc. (NEEP) is a regional non-profit organization founded in 1996 whose mission is to steadily increase energy efficiency in homes, buildings and industry throughout New England, New York and the Mid-Atlantic regions. NEEP supports government policies and coordinates regional initiatives that promote and build market adoption of quality, energy efficient products and services, such as through the ENERGY STAR™ program sponsored by the U.S. EPA and DOE. Working in partnership with environmental and consumer groups, state and federal agencies, businesses, utilities and other non-profits, NEEP serves as a strategist, planner, facilitator, information and training resource, and project manager to help develop and implement regional programs for energy efficiency.

NEEP strongly recommends that the Energy Conservation and Load Management funds (“C&LM funds”) be used for their intended purpose – to increase the efficiency of homes and businesses in Connecticut, to save residents and businesses money, and to reduce the harmful emissions of increased energy generation – and not be transferred to the General Fund to help offset the state budget deficit. Connecticut undoubtedly faces a severe budget crisis, as do many other states in the Northeast region. Yet no other state in the region is proposing to divert its conservation funds (see attached Table 1) as proposed in the Raised Bill 1160, despite the fact that some states have even more severe budget deficits than does Connecticut. This demonstrates the recognition in these states that conservation funds have served, and will continue to serve, an important role in bringing both economic and environmental benefits to residents and businesses in those states. For Connecticut, these benefits include:

ECONOMIC IMPACTS:

1. Large Consumer Bill Savings: Conservation 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 percent return on investment in 2002 alone. Overall, the programs save about $4 for every $1 invested – a highly cost-effective alternative to buying electricity, especially in the face of standard offer prices expiring and the potential for increased electricity costs for the states’ residents and businesses.

2. Economic Development and Job Creation: A number of municipalities have expressed their support for conservation programs as a means of allowing their businesses to expand or even stay in the state, while maintaining local tax bases in difficult economic times. This demonstrates that conservation funds are making a meaningful contribution to the tax bases of many municipalities. Further, the conservation funds help to create jobs at the rate of about 10-15 jobs per million dollars spent. In 2003, that means the programs will create over 1,000 jobs in Connecticut.

3. Increase in Connecticut’s Gross State Product (GSP): Improving the efficiency of buildings and homes helps to support local economies in Connecticut not only by increasing disposable income for consumers (affording them more money to spend on local goods and services), but also by increasing Connecticut’s GSP or its energy intensity (energy use per dollar of GSP). As an example, a recent study conducted by RAND Corp. showed that the Massachusetts economy would have been nearly 5 percent smaller than it actually was in 1997 as a result of energy efficiency program investments and implementation of the state’s energy building code over a 20-year period. The benefit in 1997 to the Massachusetts state economy from improvements in industrial and commercial energy intensity since 1977 ranged from $1,664 to $2,562 per capita.

4. Benefits to Low-Income Customers: Approximately 13,100 low-income Connecticut consumers received services in 2002 alone. They saved 200 million lifetime kilowatt hours (kWh), which amounts to at least $20 million in electricity bill savings. Cuts in the C&LM fund could impact these program budgets and harm the customers least able to afford the cost of electricity.

5. Lowest Cost Alternative for Addressing Transmission Congestion Problems: C&LM programs are the single most effective and lowest cost tool for remedying the state's electricity congestion problems in Southwest Connecticut. C&LM programs in 2003 are targeted to the most congested transmission and delivery areas and are expected to avoid 100 megawatts of demand – enough relief to provide the expected margin of reliability in the system. Absent this tool, Connecticut faces the future risk – and associated costs – of brown outs and black outs that can further damage the states’ economy.

ENVIRONMENTAL IMPACTS:

1. Helping Achieve State Climate Change Action Goals: The C&LM Fund is one of the state's most significant climate change action resources, aiding Connecticut and the region in achieving the goals of the landmark Climate Change Action Plan adopted by the Conference of New England Governors and Eastern Canadian Premiers in 2001 and signed by Gov. Rowland. In year 2002 alone, Connecticut’s C&LM programs are estimated to avoid 183,000 tons of CO₂ emissions, a major greenhouse gas, and 2.7 million tons over the lifetime of the measures installed in that year.

2. Reducing Acid Rain and Summer Smog: C&LM programs also play a critical role in helping Connecticut reduce emissions of sulfur dioxide (cause of acid rain) and nitrogen oxides (precursors of ozone which cause smog) that would otherwise be emitted from power plants. Both pollutants impair visibility and are linked with increased asthma and other health conditions.

In closing, NEEP strongly encourages the Finance, Revenue and Bonding Committee to carefully consider both the short- and long-term costly impacts the state would experience if C&LM funding were depleted for 2004 and 2005. In addition to losing the multiple benefits identified above, there would be the loss of existing infrastructure for C&LM program administration and program delivery that would be expensive to re-develop and re-deploy in the future, should the funds be returned to their true purpose. Further, there would be the loss of opportunities for Connecticut to leverage other resources and dollars through partnerships both regionally and nationally to advance energy efficiency efforts in the Northeast, while other states continue to reap these benefits and bring savings to their customers. NEEP encourages Connecticut not to be left behind in these key opportunities given the important role it has played to date in shaping these regional efforts.

TABLE 1. STATUS OF ENERGY EFFICIENCY FUNDING IN NORTHEAST STATES

State	EE or C&LM Annual Funding	PUC or Legislative Mandate?	Funding Timeframe	State Fiscal Outlook	Status of EE or C&LM Funds
CT	3 mills/kWh or $86 million in 2002, $89 million budgeted for 2003	Legislative mandate as part of restructuring bill PA 98-28 CGS 16-245M	no sunset	FY2004 budget deficit of $1.5 billion (12.9% of state budget)	Proposal to divert entire C&LM fund to state budget for 2004 and 2005 fiscal years
ME	Not to exceed 1.5 mills/kWh. $12 million spent in 2002, ramping up to $18 million.	Legislative mandate as part of restructuring bill	no sunset	FY2004 budget deficit of $475 million (18.4% of state budget)	Appropriations Comm. proposed to take $600k from EE fund, rejected by Energy & Utilities Comm. but ultimately approved
MA	2.5 mills/kWh or $100 million/year (electric) in 2002 plus $22 million per year (gas)	Legislative mandate as part of restructuring bill	2003-2007	FY2004 budget of $2 billion (8.8 % of state budget)	Proposed bill to create a revolving loan fund using EE funds to support municipal building projects
NH	3 mills/kWh: Total of $32.3 million budgeted June 2002 to Dec 2003	Legislative mandate as part of restructuring bill (HB 489)	no sunset on funding. Admin. model to be re-evaluated in 2003	FY2004 budget deficit of $100 million (8.6% of state budget	Bill proposed to eliminate EE fund rejected 13-0 vote. Separate bill proposed to tap 0.1 mill of EE fund to support renewables was approved in March.
NJ	$80 million (electric) budgeted for 2002 funding level to be reassessed in 2003	Legislative mandate as part of restructuring bill	2000-2008	FY2004 budget deficit of $4 billion (19 % of state budget)	No known plans to divert EE funds
NY	$150 million annually	Public Service Commission	2001-2006	FY2004 budget deficit of $10-12 billion (24.3-29.1 % of state budget)	No known plans to divert EE funds
	$132 million	Long Island Power Authority (LIPA) and New York Power Authority (NYPA)			No known plans to divert EE funds
RI	2 mills/kWh or $15 million collected for EE plus other DSM revenues for $22.7 million total budget in 2003	Legislative mandate as part of restructuring bill	initially 2003-2007 but extended to 2012	FY2004 budget deficit of $175-250 million (6.6-9.4 % of state budget)	No known plans to divert EE funds
VT	$12 million in 2002. Negotiated settlement agreed to funding up to $17.5 million/year, but PSB Order in Docket 6777 sets funding at $14 million for 2003	Public Service Board given legislative authority (S. 137 passed in June 1999) to establish SBC funding and create non-utility entity to administrator programs	2000-2005	FY2004 budget deficit of $28 million (3.2% of state budget)	Funding commitment of $14 million to Efficiency Vermont