A Massachusetts lawmaker filed legislation this week that would prohibit the Bay State from participating in regional energy purchasing agreements with Connecticut if the state decides to continue the electricity generation tax.
Rep. John Keenan of Salem — the House Chair of the Massachusetts Energy Committee — said that his state has taken steps to reduce its electricity costs and does not believe it is right for Connecticut to balance its budget on the backs of the region’s ratepayers.
Since electricity is purchased on a regional basis, taxes imposed on Connecticut generators could impact the rates of regional energy prices.
“We are all struggling to balance our budgets in this sluggish recovery; however, Gov. Dannel Malloy’s reaching into Massachusetts ratepayers’ pockets is inappropriate,” Keenan said in a press release. “Connecticut has set a bad precedent by levying costs on its neighbors to pay its obligations, and Gov. Malloy should not break his promise and allow this tax to continue.”
Malloy left the tax created two years ago in his February budget proposal, but the Finance, Revenue, and Bonding Committee’s tax package approved last week would allow it to sunset at the end of the fiscal year. Instead of continuing the tax, the committee restructured its borrowing to find $76 million in revenue in later fiscal years.
“I applaud my legislative colleagues on Connecticut’s Finance, Revenue and Bonding Committee for their vote to allow the tax to expire,” Keenan said. “It is my hope that legislative leaders and the administration follow their lead and give New England ratepayers much needed relief.”
He said Massachusetts ratepayers have been negatively impacted by Connecticut’s electric production tax which was passed in 2011 to help close a massive state budget deficit.
New England has a regional wholesale electricity market and Connecticut generators include the cost of the tax in their bids into the market. That markup ultimately flows through to consumers in the retail marketplace. It’s estimated that for 2012-13 the tax will have an $80 million impact on consumers in New England, with Massachusetts bearing the heaviest burden of more than $34 million.
The Malloy administration’s response to criticism about the tax has been to point out that electricity rates in Connecticut have dropped 12 percent since the tax was implemented.
Dan Dolan, president of the New England Power Generators Association, has said the reduction in electricity prices is tied to the low cost of natural gas and increased competition. Dolan argues that prices in Connecticut dropped in spite of the tax.
Meanwhile, Keenan isn’t the first to criticize Malloy for continuing the tax. One day after his budget address in February, Attorney Generals Martha Coakley of Massachusetts and Peter Kilmartin of Rhode Island wrote Connecticut legislative leaders and asked them to allow the tax to expire.
The two cited a 2011 report by ISO New England which “found that because all generators reap a windfall as a result of higher prices caused by the tax on Connecticut generators, New England ratepayers were likely to pay approximately $58 million more to purchase electricity because of the tax, and that approximately 75 percent of the higher energy costs resulting from the tax were likely to be borne by ratepayers outside of Connecticut.”