The Commerce Committee debated a bill Tuesday that would, for the first time, add a surcharge to home heating oil and propane used by more than 50 percent of Connecticut households.
The bill, which was drafted last week, would levy a 1.5 cent per gallon surcharge starting in July. The following year it would increase 2.5 cents per gallon and 3.5 cents per gallon in 2015.
Environmental and conservation groups said that’s only an additional $15 more a year for a customer who uses 1,000 gallons. The fund created by the levy is estimated to raise about $160 million and will be used for energy efficiency and conservation measures earmarked specifically for home heating oil and propane customers.
The Energy Efficiency Fund is currently funded by a surcharge on electric and natural gas customers. State money for efficiency programs currently available to heating oil customers expire at the end of this year, which is why the creation of a new fund is necessary, Doug Cahill, vice president of marketing for Competitive Resources, told the committee. The Energy Efficiency Fund offers rebates on furnaces and insulation and low-interest financing.
But the trade association that represents heating oil dealers is skeptical of the creation of a fund.
Chris Herb, vice president of the Connecticut Energy Marketers Association, said he believes the money will go into a “black hole” and won’t be used for its intended purpose like so many other special funds created by the legislature.
“Whenever a fund is created it’s always raided for other purposes,” Herb said Tuesday.
Herb and the 20 heating oil dealers he was able to gather on short notice told the Commerce Committee that it has an obligation “not to tax necessities,” such as home heating oil.
“People need to heat their homes to live,” he said.
Herb, who represents 600 heating oil dealers, said the tax would impact low-income families who are currently struggling to pay for heating oil now without the tax.
As for conservation measures, Herb said over the years without any government intervention his members have been able to lower the average annual household usage from 1,200 gallons to 800 gallons.
A “tax” on customers who already have lowered their oil consumption would be punitive, Herb added.
But Dan Bosley of the New England Clean Energy Council said he thinks it will inspire those customers who haven’t taken part in conservation or weatherization efforts or some of the rebate programs to upgrade equipment to get motivated.
He said heating oil dealers in Massachusetts support a similar measure because it helps them keep their customers from converting to natural gas.
“Our heating oil dealers are supporting this incentive to keep oil customers who may be considering natural gas,” Bosley told the committee. “I think savings you can have from participating in those programs are an incentive.”
Rep. Gail Lavielle, R-Wilton, seemed to disagree.
“I’m a bit concerned about how we can viably do that now when they already can’t pay the price they’re being charged,” she said.
The language in the bill closely mirrors Gov. Dannel P. Malloy’s comprehensive energy strategy for the state.
“Because fuel oil and associated delivery services are not regulated by the state, there is no existing public policy to ensure that oil and propane heat customers are included in efficiency programs. Policymakers need to consider establishing a dedicated fund supported by fuel oil and propane customers to provide robust efficiency programs to fuel oil customers,” the strategy suggests. “The most logical way to achieve this result might be for the fuel oil and propane dealers to establish a voluntary efficiency fund that they would contribute to at levels commensurate with the efficiency funding provided by natural gas and electric-heated homes. In the alternative and to ensure equity across heating sources, the General Assembly might choose to levy a surcharge on fuel oil and propane to support efficiency measures for customers heating with these fuels.”