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Legislative Hot Spots: From Texas to Ohio, New Jersey to Minnesota, Electric Restructuring Games Begin

Fortnightly Magazine - February 15 1997

in the Connecticut Legislature this year, once it reviews the Electric Industry Restructuring Task Force report.

The Connecticut Department of Public Utility Control has guided the task force and its six subcommittees through the arduous process.

For the record, the PUC has said the New England Power Pool should dispatch generation and that wholesale should precede retail competition. The agency also suggested that utilities be able to recoup stranded costs.

The task force report was expected by the LegislatureÆs Energy and Technology Committee Jan. 1.

According to an early draft, it looks like the stateÆs elected officials will receive vague legislative tips and some firm conclusions on a handful of restructuring issues.

Among the conclusions, is a call for non-bypassable charges to pay for the above-market portion of independent power producer, or IPP, contracts and for dislocated utility workers. The report also recommends creating a low-cost capital source, secured by a state pledge of electric customer revenues, to reduce IPP contract costs.

(There are 30 pacts for about 500Êmegawatts of IPP capacity in Connecticut under contract with Connecticut Light & Power Co. and The United Illuminating Co. The contracts range from 2.2Êcents per kilowatt-hour to 18.4Êcents per kWh and extend as long as 26Êyears.)

The Legislature will examine two models: the ôConnecticut Choice Plan,ö and the ôWholesale Plus Model.ö The ôChoiceö plan includes retail competition, allowing a plate of services and providers for customers. Under ôPlus,ö the retail side remains a monopoly; wholesale deals open up the market.

Based on comments from legislators and Sen. John W. Fonfara (D), co-chair of the task force, a retail program could be based on a date or event. This means that if prices were not reduced under the current structure, a retail pilot would kick in. The market would evolve from there based on preset markers.

The consensus seems to lean toward a wholesale model. Fonfara also leans toward wholesale. Utilities donÆt necessarily buy his position. ôIf they get their stranded investment taken care of, theyÆre gone,ö he says. ôTheyÆre ready to jump into retail.ö

His position, he claims, isnÆt pro-utility, but pro-economy. He wants to maintain low rates, not simply chase competition. Some in the debate took their eye off prize, he says.

ôBeing chairman of this committee, IÆm constantly trying to get people to open their eyes and see that thereÆs much more to this issue than whether or not you have retail competition,ö he adds. Fonfara also heads the Energy and Technology Committee.

United Illuminating and Northeast Utilities promote a wholesale plan, but neither have plans for retail choice at this time. Fonfara says he supports NU, but not completely. ôI want to see other things in there. The overall objective should be to lower rates, [and] be competitive with the region and the areas of the country that are competing for the businesses.ö

The task forceÆs other recommendations include:

• Phasing out or eliminating utility taxes. Including gas utilities, gross receipts generate about $229 annually. If gross-receipts taxes arenÆt eliminated, an option is to reduce the commercial tax rate from 5Êpercent to