Testimony Before the Finance, Revenue & Bonding Committee

Regarding Bill #1160, An Act Concerning Revenue Adjustments

April 3, 2003

Prepared by: Attorney Shirley Bergert, Connecticut Legal Services, Inc., PO Box 258, Willimantic, CT 06226, phone: 860.456.1761 x.115, fax: 860-456-7420, SBergert@connlegalservices.org

Raised Bill #1160 section 17(e) and (f) transfer non-tax conservation and renewable energy funds collected from electric customers to the general fund, functionally destroying the two key programs in electric deregulation providing benefits to consumers. Recommended Action: Reject section 17(e) and (f).

ECMB / CL&M (Conservation) Fund: I serve as the residential customer class representative on the Energy Conservation Management Board (ECMB). The ECMB advises the electric distribution companies on expenditures of the Conservation and Load Management (C&LM) funds pursuant to CGS sec. 16-245m.

The ECMB is made up of representatives of all electric company customer classes as well as other interests, all serving at no charge to the state. It meets on a year-round basis with the companies to develop an annual plan for expenditure of funds. The plan is submitted to the Department of Public Utility Control for further scrutiny and approval. Despite the divergent interests involved, the ECMB membership has found common ground allowing it to balance C&LM expenditures to benefit all customer classes and sub-classes, also addressing pressing state problems such as the electric transmission constraints in southwest Connecticut. This bill (section 17(e)) would transfer virtually of the C&LM funds to the general fund.

CEF (Renewable Energy) Fund: The Clean Energy Fund (CEF; CGS sec. 16-245n)is innovative and particularly important from an economic development perspective. For example, the fund is facilitating development of a fuel cell industry within Connecticut, making the state a national leader in this regard. Investments in development of reliable and affordable, environmentally sound energy is also critical to improving environmental problems in the state. And, it is worthy of note that development of distributed energy sources offers the state protection, as large centralized energy facilities are particularly inviting targets for terrorists. This bill (section 17(f)) would transfer virtually of the C&LM funds to the general fund.

C&LM and CEF Funds are not tax dollars: The C&LM fund and the CEF fund are the real success stories of electric deregulation, taking a long view regarding investment in the state's future. By statute, both funds are collected as a surcharge on the bills of CL&P and UI customers exclusively for (1) conservation and load management, and (2) renewable energy development purposes. Equivalent funds are not collected from customers of the numerous municipal electric companies. Thus, the funds are not "taxes" and should not be treated as taxes available for use in the general fund. As well, it is a breach of the understanding of electric customers regarding the specific purposes for which these funds are collected. For these reasons alone, this fund diversion should be rejected.

Additional reasons for rejecting diversion of C&LM funds to the General

Fund: As my efforts since electric deregulation in 1998 have been focused on the C&LM fund, I will limit the balance of my comments to that fund. Below are listed concerns relating to the diversion of this fund:

*If the C&LM funds are transferred to the general fund, every dollar so diverted represents a $4.3 future loss for the Connecticut, as well as a lost opportunity to improve environmental quality. The return on investment from the C&LM fund was 4.3 to 1 in 2002. It is an astounding success story to earn $4.3 for every dollar invested and explains why Connecticut's conservation and load management programs are considered a national model. In a state with high levels of asthma and other environmentally related illness, this is a 'penny-wise and pound foolish' decision.

*Low-income households (largely elderly, disabled and children) and

small business customers will be disproportionately negatively impacted by precipitously taking the C&LM funds.

*Programs serving these subclasses of customers have shorter-term conservation investment contract commitments because of the nature of assistance provided, resulting in the earlier shut down of these program so longer-term contracts with other customer classes can be honored.

*These customers will suffer the most from increasing electricity costs - conservation is critical to ensuring affordability and Connecticut will lose the ability to provide such assistance. Historically, low-income customers received very little conservation assistance, far less than other classes and subclasses relative to their contribution and in spite of their greater need. Precipitously taking this fund for general fund purposes will undo this move toward parity and fairness.

*Conservation program momentum will be disrupted. Small businesses that have opened, developing skills and purchasing specialized equipment to deliver services funded by these programs, will cease to be economically viable. In the current economy, the state can ill-afford to be responsible for causing loss of such businesses and related jobs. In the future, there will be skepticism regarding making the needed investments to reopen such businesses in light of the taking of funds for purposes other than those for which they were collected.

*Connecticut will lose the financial flexibility to effectively address serious problems such as the electric transmission constraints in the southwest part of the state, threatening electricity availability and reliability. Because of the structure of the electricity delivery system, Connecticut will be forced to incur higher levels of expenditure to ensure reliable electricity service in higher costs imposed on all electric customers.

I urge you to ensure these excellent programs, reflecting important investment in Connecticut's future, remain intact and strong. Thank you for your consideration of these comments. Please feel free to contact me if I can provide any clarifications or otherwise assist you in evaluating the proposed legislation.