Several Factors Will Drive Expected Electricity Rate Increases

HARTFORD — The Connecticut Business & Industry Association (CBIA) updated its members recently on several changes that will begin affecting Connecticut’s electricity marketplace in December and again in January.

The changes include:

éA new federal “interim transition” charge, effective from December 2006 through June 2010. The charge is part of a plan to redesign New England’s wholesale electricity market to encourage the development of more power generation capacity. Although the new charge is related to generation, it will be rolled into the “Federally Mandated Congestion Charge” line item on electric bills.

éExpiration of Connecticut’s standard, or default, service at the end of the year. The standard service has shielded electricity customers from the full effects of steep fuel-cost increases that have affected the wholesale marketplace in recent years.

éNew state rules beginning January 1 that govern how the utility companies secure power contracts to serve their customers and the type of service they will provide to residential and business consumers. For the first time, businesses will be offered different rates depending on whether they are a “smaller” or “larger” user of electricity. Businesses with a monthly demand of 500 kilowatts or more could see not only higher prices but prices that vary each month.

All customers’ rates will reflect the actual market cost of producing electricity, which has risen dramatically since the utility companies last contracted for power supplies. For example, United Illuminating’s business customers now pay less than five cents for each kilowatt hour (kwh) of electricity they use, even though today’s actual market prices are around ten cents per kwh. That is because the company locked into a favorable-price contract two and a half years ago. That contract expires at the end of 2006, after which the company’s customers will pay current market prices.

A special CBIA program on Tuesday, August 29, will help UI customers understand the upcoming changes. For more information on the program, business people can contact the CBIA or click on www.cbia.com.

As of January 1, both UI and Connecticut Light & Power (CL&P) will contract for power supplies to meet their customers’ needs under new rules recently announced by the state Department of Public Utility Control (DPUC).

Smaller commercial/industrial customers (using less than 500 kilowatts per month) that have not chosen an alternative supplier of electricity will be on “Standard Service,” provided by CL&P or UI. Because UI will bid annually for three-year overlapping contracts, its smaller commercial/industrial (and residential) customers will see a change in their electric bill’s line item for generation once a year. CL&P will also procure three-year overlapping contracts, but will do so every six months. Its customers will see a change in the line item for generation twice a year.

Large-use commercial/industrial customers (those using 500 kilowatts or more per month) that have not chosen a competitive supplier will be on “Supplier of Last Resort” service, paying rates that can vary each month. Every six months the DPUC will announce a new series of monthly electric generation prices for the next six-month period.

Opportunities to learn more about the latest ways to control energy costs including the “What’s the Deal?” energy program will be presented at another CBIA sponsored event on October 24 in Cromwell. And CBIA will hold a special energy forum for members on September 13 at Santa Energy in Bridgeport.

For more information on these and other CBIA programs, contact Rob Earley at 860-244-1929.