June 9, 2011 - Connecticut restructures its regulation of energy

Thursday, June 9, 2011

In an attempt to lower electricity rates and promote clean energy, Connecticut's state legislature has passed legislation reforming key regulatory agency structure.  Governor Dannel Malloy is expected to sign the bill later this month.

Connecticut has high electricity prices.  According to the Energy Information Administration, Connecticut had the second-highest prices in the nation in 2009 -- an average retail price of 18.06 cents per kilowatt-hour.  Only Hawaii has more expensive electricity.  (EIA's most recent monthly data, for February 2011, keeps Connecticut in second place.)

To address this concern, the bill, S.B. 1243, shuffles energy regulatory responsibilities into a new agency, the Department of Energy and Environmental Protection.  (DEEP -- quite a catchy acronym.)  DEEP would be formed by merging the existing state Department of Environmental Protection with the Department of Public Utility Control, and the energy staff from the Office of Policy and Management. Proponents argued that giving one agency comprehensive responsibility for energy policy would ensure consistent regulation.  Connecticut has not had such a one-stop shop for energy policy in over 30 years.

As an example of how DEEP can provide one-stop shopping, S.B. 1243 also creates an Office of Energy Efficient Business within DEEP.  This office is designed to help businesses connect with opportunities, technology and funding for energy efficiency and renewable energy projects.

The bill also creates the Clean Energy Finance and Investment Authority (CEIFA).  CEIFA's stated purpose is to facilitate private capital investment in clean energy projects by pursuing maximal leveraging of public dollars.  In this role, CEIFA succeeds the Renewable Energy Investment Board, the statutorily-created entity that has been managing the Connecticut Clean Energy Fund.  

In recognition of the role that long-term contracts can play in hedging volatility and reducing electricity costs, S.B. 1243 would require DEEP to develop an annual plan for competitive solicitations and procurement of energy and wholesale electricity market products "that will enable each electric distribution company to manage a portfolio of contracts to reduce the average cost of standard service while maintaining standard service cost volatility within reasonable levels."

Will the agency shuffling lead to a tangible improvement in Connecticut's development and implementation of energy policy?  Will Connecticut's embracing of state-sponsored energy procurement reduce ratepayer costs?  With strong legislative support and the Governor's signature expected shortly, time will tell whether S.B. 1243 represents a step forward for Connecticut's energy policy.

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