The solar industry and its customers stand to be the big winners from this legislative session’s landmark energy reform bill, but only if Gov. M. Jodi Rell signs the controversial measure into law.
In addition to the solar industry, businesses providing or installing more energy-efficient heating and cooling systems would benefit from the legislation, as it provides significant money for financing of such projects.
The clear losers in Senate Bill 493 would be retail energy suppliers, who have been crying from the rooftops since the bill passed the General Assembly on May 4. They say the legislation undermines the slow growth of the competitive energy market created by deregulation in 1998.
Other losers could include anyone buying or selling less expensive appliances that won’t meet the state’s new energy efficiency standards.
As for the ratepayers, only time can tell if their costs will decrease.
The key component of the legislation — as stated by authors Sen. John Fonfara, D-Hartford, and Rep. Vickie Nardello, D-Prospect — seeks to erase Connecticut’s status as the state with the second highest electricity rates in the United States. Only Hawaii has higher pricing.
The bill creates a new state agency, the Connecticut Energy and Technology Authority, and charges it with reducing statewide electricity rates by 15 percent before July 1, 2012. Although the bill gives CETA some tools to reduce rates, the legislators didn’t specify how the rates would come down.
“We are not telling them how to do it, but we are telling them that we want to do it,” Fonfara said. “With this legislation, we have found the path that Connecticut will not have the highest rates in the continental U.S. We are saying it is no longer acceptable.”
The rates will drop through several methods, Fonfara said, such as developing long-term contracts with suppliers, creating new generation plants to knock expensive power plants out of business, and conserve the state’s energy use.
Still, even if the 15-percent goal is reached, Connecticut will retain its uncomfortable distinction as having the second highest electricity rates in the country, according to the April electricity rate report released by the U.S. Department of Energy.
Opponents say the bill will have the opposite effect, resulting in a cost increase for ratepayers.
Although Fonfara describes the creation of the CETA as the simple reorganization of the existing Department of Public Utilities and consolidation of other government personnel, the cost of capitalizing this agency will fall on the ratepayers, the taxpayers or both, said Kevin Hennessy, staff attorney for Connecticut Business & Industry Association.
The competitive energy retail market created by deregulation was working, and the bill adds bureaucracy to the market, said Jay Kooper, director of regulatory affairs for the Hess Corp., one of the 52 companies competing in the Connecticut energy market.
Since deregulation, 23 percent of Connecticut ratepayers, mostly businesses, switched away from the default choices — Connecticut Light & Power and United Illuminating — to lower rates offered by competitive suppliers, according to CTEnergyInfo.
With the new legislation enabling a state procurement officer to negotiate directly with power generators for a lower default rate, retail power suppliers must now compete against that new rate instead of against each other, Kooper said.
“It undermines and dampens the competitive rate industry in Connecticut,” Kooper said. “You are telling Connecticut ratepayers that they are going to have to pay more now to save in the future.”
The cost of the solar incentive program will drive up rates, too, Hennessy said. Estimates for the program range from $40 million to $260 million, even though the legislation caps the per ratepayer fee near $1.50 per bill.
“It is a broad range, but the devil is in the details,” Hennessy said. “All these little tack-ons to each bill really add up.”
The solar energy incentive contained in the legislation provides a sustainable funding source for the Connecticut Clean Energy Fund, which provides subsidies for ratepayers who install solar systems on their property.
Whole Foods installed a solar system on the roof of its West Hartford store in 2009. The project would have been fiscally impossible without the incentives to cover the high upfront costs, said Kathy Loftus, global leader in sustainable engineering for Whole Foods.
But the commercial side of the solar installation industry has been dormant for a year, and the Connecticut Clean Energy Fund doesn’t offer incentives for commercial projects anymore, said Michael Trahan, executive director of Solar Connecticut, Inc.
That would change if Rell approves the bill.
“Without this bill, it is hard to imagine a commercial project getting started in Connecticut any time in the near future,” Trahan said. “This is the biggest clean energy bill to happen in Connecticut, ever.”
If the bill successfully jumpstarts commercial solar projects, that will be a boom to the industry and lead to a larger workforce in Connecticut for installations, Trahan said. Potentially, nearly 6,000 jobs in the solar industry could come out of this legislation, business that would have gone to neighboring states friendlier to renewable energy.
The bill’s passage already spurred New York-based MSGI Security Solutions to partner with Connecticut-based C Solar, LLC on May 10 to provide the infrastructure for planned solar farms in the Northeast.
Citing a 2009 report on Connecticut solar power by the Massachusetts-based KEMA energy consultants, Fonfara said by investing in the industry for the next 10 years, the high cost of capturing solar power will go down as the industry grows. Eventually, the solar industry could grow in Connecticut to the point where its costs are on par with other forms of energy generation.
“We want to build in-state, and we want to put people to work,” Nardello said.
The push in the legislation toward more efficient energy systems will create more business, too. The bill allows for municipalities to offer low-cost, long-term financing to any property owner to replace outdated boilers and furnaces.
“The bill really does move Connecticut toward a cleaner, more efficient and more affordable future,” said Christopher Phelps, director of Environment Connecticut.
Retailers might suffer from the section that requires all TVs and other appliances sold in the state to meet the Energy Star standard for energy efficiency by 2013.
“It is a bad idea,” said Sen. Kevin Witkos, R-Canton. “People shop at the discount stores to save money because they have a wide variety. This bill leaves only the most expensive items on the shelves.”
Energy Star approved appliances such as TVs and washers tend to be $100 or $200 higher than those without the approval, said Bruce MacMillian, general manager of S.K. Lavery Appliance Co. in West Hartford.
But a new requirement limiting stores to Energy Star appliances might have only a small impact, MacMillian said. More people are seeking out energy efficient appliances and are willing to spend more upfront to realize energy savings in the future.
“Plus, there’s the state rebate for the Energy Star items and the manufacturers rebate, so you can almost get your money back just through the rebates,” MacMillian said.
Senate Bill 493 won’t arrive on the governor’s desk until this week at the earliest, and then Rell has 15 days to veto the legislation.
“She has said several times that there are many areas of concern within the bill, but she doesn’t know exactly what is in there,” Rell spokesman Rich Harris said. “She is waiting to see the final version of the bill.”
State Sen. John Fonfara, D-Hartford, speaks in support of the energy bill he co-authored at the Capitol May 12.
