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Power Outrage
Electric deregulation bill has something awful for everyone
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Business New Haven
3/23/1998
By: Laurence D. Cohen
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The electric utility deregulation legislation stumbling around at the General Assembly has something awful in it for everyone - a bill so abused and confused that the various special interests are paralyzed.
If you oppose the deformed creature, if you puncture too many holes in its flawed body, it just might keel over and die - which isn't what most folks want to happen. But if you let it slink through in its present form, deregulation in Connecticut will be a sorry mess: dumb, expensive and overly complex.
We could have seen it coming. For several years there has been a philosophical disagreement among advocates of electricity deregulation about whether the mandate to change should come from Washington, or whether it should be fought out state by state. Even some “conservatives” favored the Washington solution, assuming that local folks would be too taken aback by the complexity of the task to do it right.
It is a complex project, complicated in Connecticut by a core of legislators so hostile to competition, so hostile to the marketplace, that they would rather run from the progress that deregulation would bring than to risk someone - anyone - making a buck selling electricity without the politicians getting a piece of the action.
Utility deregulation is sort of like nuclear disarmament: You're either fur it or agin it, whether or not you understand how many nuclear warheads can dance on the head of a missile, or how many nuclear power plant fuel rods it takes to cause lobsters to glow in the dark of Long Island Sound.
The issues of science and finance and regulation and common sense are so intertwined in the matter of utility deregulation that the various sides (there are many, many, many different “sides”) tend to crawl into bed together- and leap out the next morning, screaming rape.
Even for normal folks with an above-average patience for complexity, this is an issue that tends to drive one screaming from the room. And you won't find much snappy news coverage on the front pages or on the evening news. Washington Post editors used to call stories like this “four bowlers”: The average family of four, sitting around in the morning eating cereal, reading a boring but “important” story, would collectively fall asleep and plop their little heads into the bowls.
Connecticut's legislators aren't immune to the brain-numbing nature of this stuff. While other states move ahead toward the glory days of deregulated electricity, the General Assembly continues to stall and postpone - costing state businesses and individual consumers hundreds of millions of dollars.
Assuming that something, anything, will eventually pass, the General Assembly should fix at least a few of the more serious defects that lurk in the legislation as it stands.
The mandated reduction in rates of at least ten percent by Northeast Utilities and United Illuminating shouldn't be mandated - and the amount of the reduction shouldn't be set by the General Assembly. Put the matter out to bid. Let the market (that is, the new competitors that want to come in and sell us electricity) decide how much the rates will drop initially. If the ten-percent reduction is too severe, it will discourage competitors. If the reduction is not generous enough, we will find out soon enough when new players undercut it.
Slipped into the deregulation bill is a massive increase in the so-called conservation fund - a slush fund for bunny-lovers and tree-huggers and well-connected consultants who fondle salmon. The proposed increase would add about $100 million of extra cost to consumers - in a piece of legislation that is supposed to be about saving them money. Dump the increase - and pay for conservation projects the old-fashioned way: with tax dollars that aren't hidden in utility bills.
The phase-in element of the bill is a dumb, clumsy regulatory burden that will determine which communities (and, in fact, which companies and consumers) get immediate relief - and which must wait. An industrial plant in New Haven is no more and no less worthy than a plant in Pomfret: Save the urban assistance programs for another day and another piece of legislation.
There is much more to the good, the bad and the ugly of this legislation. Whacking these three provisions would be a good start to what will be, over time, a strong economic-development asset for high-rate states such as Connecticut.
Laurence D. Cohen is a senior fellow of the Yankee Institute for Public Policy.
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