Shocked By Your Electric Bill?

Those looking for promising signs for a prosperous 2006 this month should probably avoid looking at their electric bill. On New Year’s Day, Connecticut Light & Power (CL&P) implemented a 17.5 percent rate hike with another 4.9 percent increase slated for April, inflating the electricity costs of its 1.2 million customers 22.4 percent in the next four months.

The impact on the monthly bill of the average residential customer will be significant: $23.40 for those using 700 kilowatt hours per month. The drag on the state’s businesses and industries, which are already reeling from the spike in fossil fuel prices that precipitated the rate increase for electricity, could be even worse. Consequently, the state legislature is feeling pressure from all quarters to do something — anything — about it.

State lawmakers deregulated the state’s electric utility industry seven years ago, limiting CL&P and the smaller United Illuminating to the transmission and distribution of electricity. At the time, lawmakers told consumers that competition for power generation contracts would lower rates for everyone. Unfortunately, there still is not any competition among power producers to provide electricity for Connecticut, and the state’s electric utilities, facing increased demand, are forced to purchase power on the open market at premium prices.

The reasons for the spike in electricity costs are varied, interdependent, and complex, including regulatory controls or lack thereof, consumer demand or conservation, the state of the transmission and distribution infrastructure, and even the ability of utilities to negotiate long-term power supply contracts at fixed rates. Given its track record on the issue, we worry that the legislature will lunge toward a quick fix that will further complicate a difficult issue.

The most potent weapon in our electric rate-slaying arsenal is what is so conspicuously absent from the state’s initial deregulation gambit: competition. As we have seen, however, competition cannot be legislated. Competition is driven by consumer decisions, and we are happy to report this week that the Town of Newtown, a big consumer of electricity, is joining with other towns to shop around for alternative sources of energy, hoping to negotiate contracts that yield better rates than CL&P is offering. Other consumers, from large industries to individual consumers, should take the time to research all the options available to them when purchasing power, including so-called “clean energy” options. For a complete list of energy suppliers in Connecticut, visit www.wattsnewct.com on the web.

Once power suppliers see that demand is not monolithic but discriminating, it will be in their best interest to offer more competitive rates.