Not a Light Matter: Possible Electric Rate Increase Ahead

A bill pending senate action could, if passed, increase electricity rates for consumers across the state. That’s a tough sell even in an environment of “shared sacrifice” – a rallying term coined by Gov. Dannel Malloy to brace up for increased taxes.

The state budget, a includes personal income tax set at a whopping 6.7 percent, an increase in sales tax from six to 6.35 percent, an increase in gasoline tax by three cents per gallon, and a reduction in property tax credit to $300, from a previous high of $500.

SB 1176, which was introduced by the Energy and Technology Committee and is under consideration by the state senate, is taking a lot of flak from bipartisan groups on the additional burden it could impose on beleaguered residents and businesses.

The proposal calls for a $340 million tax on electricity generators, 90 percent of which would be paid by Millstone Power Station in Waterford.

However, given that Millstone is a key supplier and lights up businesses and residences in more than half of the state, the tax burden is expected to be transferred to electricity consumers.

“It’s a no-win situation for Connecticut, its residents and businesses. It’s a dangerous precedent for the state to adopt the only production tax in the country," said Kevin Hennessy, assistant counsel at the Connecticut Business & Industry Association (CBIA). "If passed, SB 1176 will negatively impact everyone who pays an electric bill in Connecticut—business and residential customers—because the new tax would likely be passed on to consumers through higher electric rates.”

“It would also serve as a disincentive for companies to invest, grow and create jobs in the state and ultimately hurt Connecticut’s energy infrastructure by decreasing electric reliability in the state. Connecticut already has among the highest electricity rates in the country and the state legislature should be working to reduce those costs, not increase them,” Hennessy added.

Several CBIA member-companies, including Highland Manufacturing in Manchester, are opposed to the proposal. Business owners said they were concerned about their profit margin, which is already tight. 

“In my business, I cannot pass on a possible tax increase to customers. We are already competing internationally and with other low-cost states in the U.S. such as Kansas and Indiana. Anything that increases our costs will make us less competitive,” said Christian Queen, Founder and CEO of  Highland Manufacturing. “While it’s never a good time to raise taxes, the worst time is during a down economy.”

Rep. David Baram, D-Windsor and Bloomfield, said he is listening to both sides of the argument and is evaluating the implications of an increased electricity production tax on consumers.

Rep. Christopher Davis, R-East Windsor and Ellington, said he is opposed to any tax increase that targets a specific industry.

“By increasing taxes on electricity generators, those taxes will be passed on to consumers. Already people are concerned about high electricity costs in Connecticut. This is not something people are happy with,” Davis said. 

House Republican Caucus Chairman Rep. Penny Bacchiochi, who represents Somers, Stratford and Union, said the proposal was clearly wrong-footed.

“As a member of the Energy and Technology committee, I was shocked to see a bill like this,” she said. “The bill singles out one industry, it will jeopardize good jobs and will could very well result in the closing of one of our major employers.”