(Updated) The legislature’s Finance, Revenue, and Bonding Committee approved a bill Tuesday that sells future revenue from charges on consumers’ electric bills.
The charges, known as stranded costs, were set to expire in December this year for Connecticut Light and Power customers and in 2013 for United Illuminating customers. The revenue from those charges goes to the utility companies. The charges were implemented by the Department of Public Utility Control to cover costs incurred by the utilities when the state deregulated the electricity market.
Rep. Cameron Staples, co-chairman of the Finance Committee, said to sum up the view of the majority party “this is not an option we embrace lightly.” He said last year’s budget forces the legislature to adopt a plan to securitize $1.3 billion, which amortized over 10 years will amount to $1.8 billion.
“It is the law,” Staples said.
Whether it’s the law or not, Republican lawmakers didn’t like the idea.
“This is $1.8 billion in additional charges to Connecticut ratepayers,” Sen. Andrew Roraback, R-Goshen, said. “So instead of raising taxes, we’re raising taxes.”
He said just because something isn’t called a tax doesn’t mean it’s not a tax.
Jeff Butler, president of Connecticut Light and Power, agreed.
“With this bill, the legislature is effectively imposing a hidden tax on only a portion of Connecticut taxpayers – our Connecticut Light and Power customers,” Butler said. “It is a blatant gimmick; it slips additional taxes into electric bills to temporarily plug a massive budget hole. “
“This is not simply bad budgeting, it is bad public policy that singles out our customers to bear an unfair burden,” Butler said.
Since the stranded costs expire for CL&P customers first, they will be the ones who have to bear the brunt of the payments until United Illuminating costs expire in 2013.
Staples, who doesn’t like the idea of securitization either, said 44 percent of the charge will continue to expire and the $180 million annual payment on the $1.3 billion in borrowing will be generated based on the remaining 56 percent. He said consumers will still see their bills go down slightly.
“We feel this is the most responsible way to do it,” Staples said.
The committee decided not to put forward Keno – a lottery-type game played in bars, restaurants, and convenience stores – or the state’s two energy funds as revenue streams.
Republican Gov. M. Jodi Rell, who first put the idea of securitization on the table last February, released a statement Tuesday evening criticizing the Finance Committee’s decision.
“Ratepayers, who have paid these charges for the last 10 years, have rightfully been expecting the charges to soon be expiring,” Rell said. “Some sort of securitization is necessary. This option, however, is the least desirable for Connecticut’s beleaguered families.”
The Finance Committee also adopted a revised plan to increase taxes on wealthy estates and add a 5.5 percent tax on hospital profits.
The modified estate tax increase will boost revenue by $76.2 million in fiscal year 2012, and $64.4 million in fiscal year 2013. The changes to the hospital tax will bring in $207 million in fiscal year 2011.
Rell vetoed a bill to increase estate taxes in December.
Sen. Eileen Daily, co-chairwoman of the Finance Committee, said the hospital tax is set to expire in 2014 and the estate tax increase is expected to sunset in two years.
Republicans worried that temporary taxes often become more permanent with time.
Sen. Andrea Stillman, D-Waterford, pointed out that there’s nothing in the bill that “puts a smile on anybody’s face.”
“Until the economy, in general, improves we are going to have to make these very difficult decisions,” she added.
Rell offered some parting thoughts on the all the bills the Finance Committee passed before its deadline Tuesday.
“As to the Committee’s tax proposal, I will simply say this: Last week the Appropriations Committee proposed a budget that increased spending by $345 million. Today the Finance, Revenue & Bonding Committee is proposing $405 million in new taxes. It has not been a very good legislative session, so far, for Connecticut’s taxpayers.”
House Speaker Chris Donovan couldn’t let Rell’s statement go unanswered.
“The Governor is being less than truthful in her criticism of the Finance Committee’s securitization plan,” Donovan said in an emailed statement. “On February 3rd, Governor Rell’s OPM Secretary sent us a securitization financing plan. This proposal was the first option listed in that plan. The description of this financing option in that letter says that ‘it is possible that electric customers could still enjoy a rate decrease of some magnitude.’ This proposal was a recommendation from her office. Not only did this specific securitization proposal come from the Governor, but she was the original proponent of securitization as a budget item more than a year ago.”