For $2.4 billion, this bill aims to lower CT electric bills. Why are both parties split?

Following months of public angst over Connecticut’s high energy prices, both Republicans and Democrats this week rallied behind what many saw as an audacious proposal: Have the state borrow $2.4 billion over the next three years to pay off a chunk of its residents’ electric bills.

The proposal, Senate Bill 1560, is the work of state Sen. John Fonfara, D-Hartford, a veteran lawmaker who serves as co-chair of the legislature’s Finance, Revenue and Bonding Committee.

During a press conference Wednesday, where he was flanked by leaders from both parties, Fonfara said his bill would immediately cut electric costs up to 20% by removing the controversial public benefits charge from customers’ bills and paying for it through state-issued bonds. The public benefits charge covers the cost of state-mandated energy-efficiency programs, clean energy investments and support for low-income ratepayers.

Additional provisions of the bill would save ratepayers even more in the long run, Fonfara said. Those include revamping the process through which the utilities purchase power for their customers, mandating variable time-of-use electric rates, eliminating certain solar credits and the sales tax on electricity bought by commercial and industrial users, along with other changes. The combined savings could be as much as 40% of customers’ current bills, the senator said.

“There are certain fundamental truths that we must acknowledge and act on if we want to reverse the path we are on,” Fonfara said. “If we choose to do nothing, electricity costs will continue to increase.”

Almost immediately, however, members of both parties began to question Fonfara’s promises of savings and the wisdom of borrowing what would amount to nearly one-third of the state’s annual bond cap — which is currently $2.5 billion — exclusively for this purpose.

Others pointed out that Fonfara is at the center of controversy surrounding a deal with Gov. Ned Lamont’s office to place him on a vacant seat at the Public Utilities Regulatory Authority, which is in charge of approving electric rates. After that deal was announced last month, press reports revealed that Fonfara owned a company which racked up more than $1 million in fines and late fees from PURA.

In a statement released Tuesday, a spokesman for Lamont said the governor was open to considering some aspects of the bill such as improving the energy procurement process and addressing variable demand for electricity at different times of day.

But the spokesman, Rob Blanchard, made it clear that the governor does not view the creation of a new government entity or more borrowing as viable solutions to the state’s energy affordability issues.

“Rather than putting annual expenses on our ‘credit card’ or crowding out bonding for municipal parks, roads, and school construction with items in the public benefits charge, as proposed, the Governor would prefer we explore ways to reduce [public benefits] charges that may be outdated or unnecessary,” Blanchard said in his statement.

House Speaker Matt Ritter, D-Hartford, was similarly skeptical of the amount of new debt proposed in the bill and whether it would be paid back with taxpayer funds or revenues drawn from utility bills.

“If there’s state general fund contributions, we can’t afford it,” Ritter said. “If it’s something about the ratepayers paying it back over 30 years as opposed to three, I mean, I’d look at that.”

Despite those concerns, the bill gained traction this week with the backing of a bipartisan slate of key lawmakers including Senate President Pro Tem Martin M. Looney, D-New Haven, Senate Majority Leader Bob Duff, D-Norwalk, and House Republican Leader Vincent Candelora, R-North Branford.

Candelora said that his caucus had been discussing the bill with Fonfara over the last six or eight weeks. In March, Republicans were angered when Democrats on the legislature’s Energy and Technology Committee opted not to go forward with any of the Republicans’ proposals to reduce residents’ electricity bills.

“This piece of legislation does that, and we look forward to that bipartisan conversation that is so needed to try to address the concerns of our business community and our residents and the impacts that high electric costs have had on the state of Connecticut,” Candelora said.

Fonfara has until April 24 to schedule a vote to advance his bill out of the committee he chairs.

Utilities weigh in

In his comments to the press Wednesday, Fonfara outlined two key pillars of his legislation that he said would work to reduce electricity costs.

First, it would remove portions of public benefits charge from customers’ bills and shift those costs onto the state through new bonds issued over the next three years. Those bonds would be capped at $800 million a year, for a total of $2.4 billion.

Secondly, the legislation would create a new quasi-public agency known as the Connecticut Energy Procurement Authority that would be work with electric utilities, the Department of Energy and Environmental Protection and local electric cooperatives to create a new method of purchasing electric power supply at lower rates for customers.

The switch, Fonfara said, would in essence take the utilities’ job of buying power and turn it over to public officials who could work year-round to find the best deals on wholesale electric market, rather than than the competitive auctions the utilities currently participate in twice a year.

“The utilities are being taken out of the procurement business,” Fonfara said. “They’re going to say ‘thank you,’ because it’s a thankless job for them. They make no money on it. They get criticized when rates go up and they don’t get any recognition when rates go down. I’m no apologist for them, but that’s the reality.”

Under Connecticut’s deregulated energy system, customers’ bills are split into four parts: the cost to procure power supply, the transmission and distribution of that power and a public benefits charge.

The utilities must pass on their supply and public benefit program costs to their customers without any markup. The companies earn profits only on the transmission and distribution of the that electricity.

During a public hearing on the bill Wednesday, representatives from United Illuminating and Eversource did, in fact, praise Fonfara’s legislation, which they said offered solutions to reduce customers’ bills while focusing on those areas where they don’t earn a profit.

“We are hopeful that the concepts in this bill would turn into a reality where we would end up seeing some significant reductions in perhaps the supply charges and other areas that are meant for grid modernization,” said Christie Prescott, the director of wholesale power contracts at United Illuminating.

Both of the utilities also supported another provision in the bill that would limit the amount of credits that customers with solar panels could earn on their bill by sending excess power back into the grid.

As more customers install solar panels and purchase less electricity from the grid, utility officials said the cost to maintain transmission wires, utility poles and other infrastructure has shifted onto customers without solar panels. The amount of electricity Eversource sold to its customers last year — about 20,000 gigawatt hours — was roughly the same as in 1993, according to data presented to lawmakers from the utility.

“We have this predicament and it’s not specific to Eversource,” said Doug Horton, the utility’s vice president for distribution rates & regulatory requirements. “The fact of the matter is that we have a declining sales base and a need to continue to invest in the system.”

That same proposal, however, drew a sharp response from environmental advocates and the solar industry. Both groups said it would dismantle solar incentives while placing further strain on the grid.

“Energy efficiency and solar have been essential for keeping costs down for customers, because you have to think about the investments in distribution and transmission systems that otherwise would of had to be made over the those 20 years,” said Charles Rothenberger, a climate and energy attorney for Save the Sound, a local environmental group.

Other critics raised concerns that the cap of $800 million a year on the bonds would not be enough to cover the full cost of public benefit programs — which is currently more than $1 billion a year — leaving the future of those programs in doubt.

Claire Coleman, the head of the Office of Consumer Counsel that advocates on behalf of ratepayers, submitted written testimony to Fonfara’s committee stating that those costs can also shift largely from year to year, making it difficult for officials to know how much money they would have to borrow ahead of time to pay for the programs.

“Even if it were permissible and the proposed bill was amended to increase the bonding limits to reflect the necessary expenditures, it is not clear that state bond process is best suited to fund the programs indicated in the proposed bill,” Coleman said.

Fonfara said the intent of the bill was to give ratepayers a three-year window of relief. Meanwhile, lawmakers, in conjunction with the new Connecticut Energy Procurement Authority, would determine whether the programs under the public benefits charge are necessary and whether the costs to run those programs should be borne by the state or by ratepayers through their electric bills. If they’re determined not to be necessary, he said lawmakers could opt to discontinue them.

“That’s for the legislature to decide,” he said. “But it will be a prudent decision, with a lot more information.”

Party infighting

The top two Democrats in the Senate, Looney and Duff, had previously pledged their support for another bill addressing electric prices — Senate Bill 4 — that is still being drafted by members of the legislature’s Energy and Technology Committee. When asked during Wednesday’s press conference whether the Fonfara legislation had supplanted that effort, Looney said there was no competition between the two bills.

“Eventually, they will all go into the hopper and provide something that I think the people of Connecticut will recognize as a legitimate response to the crisis that we face,” Looney said.

Within a matter of hours, however, tensions between the two committees and their leaders flared into the open.

About midway through Wednesday’s hearing, Sen. Norm Needleman, D-Essex, the leader of the Energy and Technology Committee, began questioning Horton, the Eversource executive, about a section of the bill dealing with the securitization of storm costs that he said closely resembled a proposal pitched by the utility following Tropical Storm Isaias in 2020. “I just want to be clear where a lot of this comes from,” Needleman asked, when Fonfara interjected.

“Senator, where it comes from is this person right here, it’s my bill,” Fonfara said.

After more back-and-forth with Horton, Fonfara eventually cut off Needleman’s line of questioning saying that he had surpassed the committee’s five-minute time limit.

“I hope this bill comes to our committee where it belongs and we have a robust conversation about this,” Needleman responded. “This is not the way to solve these problems.”

When asked later about the spat, Looney issued a statement through a spokesman saying that such disagreements are part of the normal legislative process.

“Forging consensus is a difficult process, but one that is necessary for any bill to become law,” Looney said. “Sometimes we do not know how issues will be framed and resolved until late in the session, whether they are merged into one bill, run separately, or have elements combined into a different vehicle altogether. Unlike the Republicans, we are not free to merely complain and offer unworkable pie-in-the-sky proposals.”

Candelora, the House Republican leader, blamed Needleman’s committee for blocking a number of proposals put forward by Republicans, including a plan that would have made the public benefits charge an annual expense, paid for out of the state’s budget.

Speaking to a reporter later, Candelora clarified his support of Fonfara’s bill as “a work in progress,” and said he believes some public benefits programs, such as funding for electric vehicle charging stations, are appropriate bonding expenses while others should be budgeted for.

“What has been frustrating about this entire process is that you have a completely dysfunctional energy committee that has made all of these issues highly partisan and highly toxic,” Candelora said.

No Senate Republicans were present at Wednesday’s press conference with Fonfara. The day before, members of that caucus publicly accused Fonfara, their fellow senator, of being complicit in a scheme to provide political support for Lamont’s reappointment of PURA Chair Marissa Gillett in exchange for a job as one of five commissioners at the authority.

Senate Minority Leader Stephen Harding, R-Brookfield, told reporters he believed that deal likely violated the state’s bribery statutes. But in the same press conference, Harding did not discount the idea of working with Fonfara on energy policy.

“We will do anything possible to reduce people’s electric bills in the state of Connecticut,” Harding said. “We don’t care who we have to work with.”

Later in the week, Harding and a top Republican on the Energy and Technology Committee, Sen. Ryan Fazio, R-Greenwich, said there are “several concerning aspects” of S.B. 1560 and that they would not support the bill in its current form.

Specifically, Fazio said that Fonfara’s proposed Connecticut Energy Procurement Authority would have overlapping duties with existing state agencies. He also said a proposed fund administered by that authority to adopt smart metering technology and other infrastructure upgrades would result in the creation of what he called a “mini public benefits charge” that would still appear on electric bills.

Still, Harding and Fazio said they welcomed Fonfara’s efforts to address the issue.

Harding said he, too, was concerned with the creation of the new quasi-public authority, which he said he sees as a potential landing ground for Fonfara amid the scrutiny into the senator’s bid to obtain a seat on PURA. “It is quite suspect,” he said.

Tom Swan, the executive director of Connecticut Citizen Action Group, called Fonfara’s promises to save residents money “horribly dishonest,” and he said he thinks the legislation raises several “ethical red flags,” given the senator’s business ventures in the energy industry.

“There is absolutely no trust for Sen. Fonfara to be playing a role in this,” Swan said.

Fonfara told reporters on Wednesday that he has no interest in serving on the new authority. He did not respond to additional requests for comment about the legislation this week.

A third bill addressing electric prices, drafted by members of the Government Administration and Elections Committee last month, would have prohibited Eversource and United Illuminating from owning both electric and gas utilities, and it imposed new qualification requirements for members of PURA’s board. Ritter, the House speaker, said this week he does not expect that legislation to move forward.

“That was not rightfully raised, and it will crumble,” Ritter said.

But with respect to the other two bills, Ritter said both have the potential to produce worthwhile ideas. “I think you have two major pieces of energy legislation: S.B. 4 and Sen. Fonfara’s bill,” he said. “My thing would be, let’s put them all together and get a great bill.”