Electro-Shock Therapy for Rate Payers

Legislators in the State House passed a bill last month that included a key change to how some consumers buy their electricity in Connecticut – eliminating the ability for customers to choose between Connecticut Light & Power and United Illuminating or a different provider.

A gaggle of consumers, producers, and state legislators gathered today at the State Capitol to drum up opposition to the bill in the State Senate.  The group, including Democrat State Senator John Fonfara and GOP State Rep. Sean Williams, pointed to the growing number of Connecticut residents – nearly 150k – that have chosen providers other that CL&P or UI as evidence of the demand for choices.

After the Legislature did deregulation in 1998, Connecticut’s ratepayers have seen steep hikes in their utility bills, to the point that we now pay the second highest rates in the nation behind only Hawaii.

Proponents of the bill, like Democratic State Rep. Vickie Orsini Nardello, cite this reality as a prime reason for re-regulating the market.  Rep. Nardello was at it again today, with a bill creating a quasi-public Connecticut Energy Authority on the Legislative Session’s ‘Go List’ for the day.

But the reality is that we got deregulation – one half of the free marketeers’ rallying cry – without getting the other half: real competition among providers.  It is difficult to blame free markets for being the problem when there hasn’t been much of a market until recently – and now Rep. Nardello and others seek to kill it before it really gets going.

Instead, the Legislative Leaders seem eager to take the same path on electricity that they hope to take on health care: creation of a government program that will “compete” with the private sector, even though the public plan will have competitive advantages for which the private sector could only hope.

That disadvantage with then make possible the second step of the plan – complete state takeover.  And then, just like that, your electricity and health care will now be brought to you by the same people who bring you the DMV.

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15 responses to “Electro-Shock Therapy for Rate Payers

  1. Bruce Rubenstein

    thank you Heath…i only hope that the government energy agency is created

  2. BohemianBill

    Heath, I don’t know how anyone can get so disingenuous. We’ve had electricity deregulation in CT for ten years and have nothing to show for it beyond another charge for the utilities to collect for themselves due to “stranded” costs. The lie about deregulation which free marketers (or freebooters depending on your point of view) is that their arguments speak out of both sides of their mouths. On the one side, we’ve got freebooters arguing that increased competition will lead to lower rates. At the exact same time, we’ve seen the exact same people arguing that additional competitors will enter the state only when the price of electricity increases. Well, which is it, because it can’t be both?

    Essentially, we’ve seen a group of brain-dead ideologues arguing that their program will work because it must work. It might have worked if we had had excess generating capacity located in CT or even New England. That wasn’t the case and it wasn’t likely to be the case unless the price of electricity jumped sharply higher. That of course gives lie to the argument that consumers would see lower prices, which of course was never in the cards given the utility-dominated program which was pushed through.

    After ten years, we’ve only begun to see some additional people enter the state and they’re not selling electricity particularly cheaply. What took them so long, beyond the fact that lower consumer prices was never the intent of the deregulation regime the utilities pushed through. Instead, it offered them a way to recover invested capital without doing anything to earn. But that seems to be the conservative doctrine these days.

  3. Heath, I don’t know how anyone can get so disingenuous. We’ve had electricity deregulation in CT for ten years and have nothing to show for it beyond another charge for the utilities to collect for themselves due to “stranded” costs.

    Bill, you’re missing Heath’s point. Having deregulation without free competition is like having a car without wheels. Do you really have a car if it can’t go anywhere? Free markets have never had the chance to work, which is a shame because they always work.

  4. I only hope that the government energy agency is created

    They’ll just make a mess; because that’s what they do best.

    We need a lot less regulating and a lot more competition; take a look at what we don’t pay anymore for our cell phones for example.

    We could use a few more players in the cable TV / high speed internet field too – I can’t wait for an excuse to (as rudely as possible) fire Cox.

  5. Did anyone bother to take the link?
    http://www.neo.ne.gov/statshtml/115.htm

    We pay MORE than the people in 26 other states!

    Why don’t we just buy our electricity from whoever generates it in Wyoming?

    Heck – you could even afford to heat with the stuff at the price they’re paying (less than one-third of what we do.)

    We need to figure out how to bottle or can the stuff.

  6. We need to figure out how to bottle or can the stuff.

    Wouldn’t the five-cent deposit eat up a chunk of the savings?

    That link you pointed out also says this: “Nebraska is the only state that generates electricity entirely by publicly-owned power systems. As of January, 2009, the statewide average price for all sectors from all electric utilities is the sixth-lowest rate in the country”

    So, Mr. free market… how do you like them electrons?

    😉

  7. So, Mr. free market… how do you like them electrons?

    Wallingford has a better deal than the rest of us too, and Hoover Dam (where electricy generation was added to the plans as an after thought) does well too.
    But it proves nothing seeing as we’re still getting royally screwed and I suspect we’ll continue to get fiscally raped every month until we put up some sort of new plant(s).

    Giant tidal wheels in LI Sound, or a monster nuke facility hopefully in Toni Boucher’s district (her backyard might be nice) – whatever it takes.

  8. ACR, You ask:

    “Why don’t we just buy our electricity from whoever generates it in Wyoming?”

    “Heck – you could even afford to heat with the stuff at the price they’re paying (less than one-third of what we do.)”

    As it turns out that is exactly how I heat my home in Wyoming, (Lower Valley Power) and for exactly the reason you point out, it’s affordable. Not cheap, but at least affordable.

  9. Why don’t we just buy our electricity from whoever generates it in Wyoming?

    That’s a good idea. I’m sure you’ll be glad to know that Nardello’s bill, that Heath linked to in his post, takes a step in that direction. You see, Wyoming gets its electricity from a combination of regulated electric utilities and public power authorities.

    Check out this site for info about Wyoming’s public power authorities. Here’s a taste of what they have to say in Wyoming:

    ” When you think of democracy, what images come to mind? Maybe it’s the American flag blowing gently in the wind or the bald eagle soaring high in the clouds, or perhaps it’s a scene from an old Norman Rockwell painting. Whatever the image, democracy – representative government by the people – is a basic right each one of us holds sacred.

    In public power communities, there is another image of democracy: the publicly owned electric utility. You may not think of a utility office as a common symbol of democracy, but indeed it is in a public power community. “

  10. Connecticut has higher prices than other states for electricity because of what we use to make electricity, and because it’s damned hard for new entrants.

    Connecticut is much more reliant on natural gas to generate electricity. Most of the midwest relies heavily on coal, and the rocky mountain states use a lot of hydro electric power. Realistically, we can’t do either. With coal, not only would the NIMBY environmental types have a field day, but even if we got past that, we don’t have the freight rail infrastructure to bring in large volumes of coal. For hydroelectric, we need big mountains with big rushing rivers. Connecticut also has nuclear power generation.

    Power gets cheaper when the supply exceeds the demand. We’ve got a lot of demand for power, but there’s not a great way to increase the supply of it. It’s difficult to build new plants here, we’ve got the congestion fees because our infrastructure is sub-par, and the deregulation didn’t make it any easier for companies to build new plants here. The deregulation wasn’t really deregulation, it was just different regulation: CL&P and UI couldn’t own generation plants anymore, and if there was truly deregulation, we wouldn’t be telling those companies they couldn’t own the power plants.

    I do think that if the state were to get into the business of generating power, there would be one efficiency created. Right now, there’s huge NIMBY pressure to stop most any type of power infrastructure project. Stuff happens, but it’s difficult. The Norwalk-Bethel high voltage link, the substation in Trumbull, etc. faced fairly fierce opposition, not to mention Mayor DeStefano’s rather incoherent attacks on UI the other day about parking or old plants or relocation or whatever he was talking about.

    If the state took over power generation and distribution, it could probably more easily strong arm its way into developing infrastructure. Special interest groups probably wouldn’t have as much influence on stopping the division of the state as they would stopping a big evil corporation that by the way happens to keep our lights on. I’m not entirely convinced if this is true or not, but it seems to make sense on the outset. After all, the biggest polluters in the world tend to be government owned companies…

  11. gmr,

    Good post. You point out exactly why Connecticut is at a competitive disadvantage when it comes to power generation.

    Of course common sense would tell most of us that if we are concerned about job generation we would be closely examining areas where we are at a competitive disadvantage, and look for ways to deal with those disadvantages.

    It would seem that Chris Donovan, Don Williams, and the Democratically controlled General Assembly must think higher taxes, and wasteful spending, give us the same competitive advantages that higher power costs do.

  12. We need a more competative environment in the consumer space. This legislation will block that attempt. Regulating the price only means government subsidies and raising taxes to cover the costs. In most cases, and you can check your bill, fuel adjustment charges are passed on above the DPUC approved rates. In addition, the utility purchases electricity based on forecasted demand on the grid, price does not matter to them, only meeting demand does. When you have a choice to lock in lower rates with the most competative supplier, you will find the lowest price. Further, customer service is going to be improved. Connecticut followed California’s dereg model, and it’s not the best model. Competative suppliers will round and many of those mistakes and provide better prices for consumers.

  13. BohemianBill

    Bill, you’re missing Heath’s point. Having deregulation without free competition is like having a car without wheels. Do you really have a car if it can’t go anywhere? Free markets have never had the chance to work, which is a shame because they always work.

    Jack, no free markets don’t always work, and our experience with electricity deregulation in CT over the last ten years demonstrates that amply. For ten years we’ve had a deregulated electricity market and prices have move only upward, rather sharply I might add, during that period. Lots of suppliers have had the opportunity to offer electricity within the state and haven’t. Why is that? Is it because they needed higher prices to decide to enter the state to supply consumers? If it is, then the whole purpose of deregulation becomes suspect. You didn’t get the irony of my original comment — new suppliers only come into the market if promised higher prices yet consumers were promised lower prices. Which is it? Who gets catered to? Right now, the only people being heard are the suppliers as they gouge the consumer, because the system in place is inherently broken and corrupt.

    We can also look at the entire way in which CL&P were allowed to sell off their generating assets to controlled entities while the consumer was getting slammed with fees to compensate the utilities for stranded costs. What a deal? Worse, CL&P has no incentive to negotiate the lowest rates possible, as it did in the old days. It just passes along whatever rate it gets charged. Just as in CA, we know this system is corrupt (Enron anyone) and inefficient and incompetent. It doesn’t deliver what it promised to deliver and never could.

  14. BohemianBill

    Power gets cheaper when the supply exceeds the demand. We’ve got a lot of demand for power, but there’s not a great way to increase the supply of it. It’s difficult to build new plants here, we’ve got the congestion fees because our infrastructure is sub-par, and the deregulation didn’t make it any easier for companies to build new plants here. The deregulation wasn’t really deregulation, it was just different regulation: CL&P and UI couldn’t own generation plants anymore, and if there was truly deregulation, we wouldn’t be telling those companies they couldn’t own the power plants.

    gmr, CL&P and UI never actually sold those generation plants. They just moved them over to a different column in their corporate structure. Worse, the consumer got the tab for “stranded costs” with the sale, from one entity within the utility conglomerate to another in a sham arms length arrangement. The consumer got shafted and the utility bafflegab was designed to hide that fact. BTW, you have to split the generation and distribution or otherwise you’d have a monopoly shifting costs internally to hide their own inefficiencies with no way to extract the bloat if they could do both willy-nilly.

    We knew when this great experiment started that we had no excess capacity and challenges for siting plants. Just how were we to get lower electricity prices when the whole process was going to require lots more investment and more expensive investment? Just riddle me that one. Of course, the logical, intelligent answer is that the consumer was never going to get lower electricity prices, ever, under deregulation. Studies have shown that to be the case across every state which deregulated electricity. The concept is inherently flawed.

    Incidentally, that infrastructure you decry was what the utilities decided was adequate for their purposes. In other words, they chintzed on their investment for their own reasons. Now, everyone else in CT is forced to make up for their lack of foresight. That’s a real free market – using the government to compel others to compensate incompetent private industry. That’s typical conservative freebooter economics, which is what the US and CT are saddled with these days.

  15. BohemianBill

    mpapa, no additional suppliers will not be entering the market with lower prices. We’ve had ten years for additional suppliers to enter the market and they seem to be few and far between. Why is that? They seem only to be willing to enter the market when they can come in under an umbrella which sets CT electricity prices far in excess of the rest of the nation. What a deal? I thought we were promised lower electricity prices, not the highest prices in the nation under deregulation. How do we square the circle with statements that no additional suppliers will enter without higher prices while being promised lower prices, as you’ve just done? How do we do it? The freebooters will demand higher prices to enter as the attraction. Without that inducement, they dont’ come. So, when do we get the lower prices, after we’re all dead?

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