ENE Statement on Connecticut DPUC’s Decision on CL&P’s Rate Case Regarding “Decoupling,” Jan '08 Press

For Immediate Release
January 28, 2008

Contact: Dan Sosland, 860-836-7188
Meg Wilcox, 617-319-6457
 

ENE Statement on Connecticut DPUC’s Decision on CL&P’s Rate Case Regarding “Decoupling”

DPUC Decision Proposes Quadrupling of Fixed Customer Charges to $42 per Month and Blocks Efforts to Build a Clean Energy Future for the State

Environment Northeast (ENE), a research and policy organization, and leading advocate for energy reform in Connecticut, issued this statement in response to the Department of Public Utility Control's (DPUC) final decision on Connecticut Light and Power's (CL&P) Rate Case.  This statement focuses on the proposed rulings to "decouple" distribution revenues from sales volumes as required by Section 107 of Public Act No. 07-242, An Act Concerning Electricity and Energy Efficiency.

"At a time when energy prices are spiraling out of control, Connecticut needs to do everything possible to increase investments in energy efficiency, the lowest cost way to meet our electricity needs," said Dan Sosland, executive director of Environment Northeast. "No energy option is more powerful in helping the state's economic development, improving the business climate, assisting consumers with rising energy costs, or addressing global warming pollution."

"The DPUC decision does not order CL&P to decouple its electricity sales from its revenues as required by law, and that means more of the status quo for energy conservation efforts," said Sosland.

"As long as electric utilities are paid to sell more and more electricity, they will never become full partners in promoting energy efficiency and other energy supplies that reduce the total amount of power consumed by customers.  Connecticut needs less expensive and cleaner energy, and we need to invest in all of the cost-effective energy efficiency resources available-as mandated by the legislature. To achieve that goal we need to get the incentives aligned correctly for our major utilities, and decoupling accomplishes that.  This decision by the DPUC, despite a clear legislative mandate to change the outdated approaches of the past, does not take the necessary steps to build a better clean energy future for the state."

Background on DPUC Legislative Mandate for Decoupling and All Cost Effective Efficiency
 
Last June when the Connecticut General Assembly passed PA 07-242, it called for a paradigm shift in the regulation of Connecticut's electric and gas utilities. Seeking to bolster the state economy and cut global warming pollution, the legislature mandated utilities-for-profit entities accustomed to supplying their customers with the cheapest energy source available-to supply their customers' energy needs with the most efficient energy source available.

PA 07-242 requires electric and gas utilities to use all energy efficiency resources that are less expensive than conventional power generation.  This means utilities must invest in energy conservation, such as insulation or appliance rebate programs for homeowners, or lighting upgrades for businesses, before signing new power plant contracts. 

Recognizing that utilities currently lose money when their customers conserve energy, the legislature further mandated that the DPUC implement a so-called "decoupling" mechanism to remove this barrier. Decouplingbreaks the link between utilities' profits and their sales, ending the long standing system that encourages them to sell ever more energy in order to increase their profits.
 
It's a strategy that's gaining in popularity across the country as an effective means for maximizing energy efficiency. California credits decoupling as the major reason that efficiency gains there far exceed those in all other states. Presidential candidate Barak Obama, President Bill Clinton, and the American Council for an Energy Efficient Economy have all thrown their weight behind it. 

Decoupling and the mandate to pursue all cost-effective efficiency are complementary -- and essential -- pieces of the same puzzle; one without the other cannot achieve the efficiency gains the state needs in order to lower its energy costs, increase our system's reliability, and cut global warming pollution. 
 
DPUC Decision on CL&P Rate Case Regarding Decoupling
Connecticut Light and Power filed a Rate Case, docket

07-07-01, which includes a proposal for a "revenue per customer" decoupling mechanism satisfying the requirements of the new law. CL&P's data presented in the docket indicate that their proposed mechanism would produce "very small adjustments" up to .07 cents/kWh.  Under CL&P's proposal, an average residential bill of 700 kWh would result in a charge or credit of about 7 to 50 cents per month, with a total change in annual residential charges ranging from $3 to $15 million.  
 
The DPUC rejected CL&P's proposal and instead directed the company to make a small rate design change, increasing the customer charge from $10 to $15 per month. For the DPUC's approach to truly decouple residential revenues from sales charges, the fixed distribution charge would have to cover all distribution costs, by increasing it to an average of $42 per month, and it would have to be implemented at once. The final decision does not fully implement this but it appears to be where the DPUC intends to go.

For more information on decoupling visit ENE decoupling
 
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