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Connecticut Energy Deregulation

In 1998 the state of Connecticut deregulated its entire wholesale electricity market.  Consumers have had the option of switching providers since the year 2000. As part of the deregulation process the standard rates that were available to the incumbent utility company's consumers were frozen at a lower rate, 10% below what the rates were in 1996. This price freeze made it very difficult for consumers to experience the benefit of a competitive supplier market because the standard rate was lower than what competitors could offer.

Starting in 1998 the costs of fuel have gone up and the pressure on legislators has also increased to allow an increase in the standard rate. The foundation for the argument is that the utility companies have to be able to pass the price increase that they are paying onto their customers or they will be selling energy for less than what they are actually paying for it. This would then cause what many consider to be an economic disaster for utility companies. Legislators have to consider the fact that if they allow for the rate increase it will allow for a more competitive market in Connecticut.

In June of 1999 there was a major concern over the fact that there hadn't been any suppliers that applied for licensing to serve the market once it opened in 2000. The concern then was that part of the hesitation had to do with the fact that the price freeze and that the Attorney General had yet to finalize the cost of recovery.

The deregulation act also required all consumers regardless of whether they stayed with the standard service or chose a supplier to pay four different charges effective the first of January 2000. One is called the CTA or competitive transition assessment, which is the largest of the four. This allowed for issuance of securitization bonds as well that are backed by the CTA an effort to manage certain stranded costs. The next is systems benefits charge that covers the costs associated with public policy and the restructuring of the electric industry including provisions for any workers that are dislocated as well as municipalities that have lost any revenue from their power plants. The purpose here was to make sure that there was funding available to conserve energy and promote renewable energy.  

In 2007 the rates for electricity increased anywhere from 25% to 72% which raised costs for all consumers in the Connecticut Light and Power and United illuminating service territories. The rate increase opened the door to a more competitive market. Finding a supplier means understanding the process of getting your energy. There are three main elements:

Generation - electricity is produced at a generating plant using different sources such as coal, nuclear and natural resources. In Connecticut the electricity grid is managed by the New England Independent Operating System.

Transmission - this is the movement of the electricity from the generating plant across the transmission lines. These transmissions are kept at high voltages to reach their destination point. Substations are there to "step down" the voltage so that it can reach the local distribution system. This is managed by the Federal Energy Regulatory Commission.

Distribution- is the local system which is made up of several different types of lines and delivers the power to schools, homes and businesses. This part is managed by the Connecticut Department of Public Utility Control.