Conn., Mass. sue FERC on surcharge

HARTFORD, Conn. – Connecticut and Massachusetts are taking federal energy regulators to court over a surcharge that will cost electricity consumers in both states hundreds of millions of dollars over the next four years.

The states filed a lawsuit Dec. 28 in the U.S. Circuit Court of Appeals for the District of Columbia. They’re seeking to stop the Federal Energy Regulatory Commission from imposing the surcharge, Connecticut Attorney General Richard Blumenthal said Thursday.

The fee was designed to encourage development of new power plants to help meet growing demand, but Blumenthal said the money will go to existing power generators without requiring them to build new plants or produce more electricity.

Blumenthal and Massachusetts Attorney General Thomas Reilly claim the surcharge violates a section of the Federal Power Act that requires electricity rates to be “just and reasonable.”

Blumenthal said the surcharge “unfairly increases electricity rates, unconscionably enriching plant owners and failing in its goal of enhancing energy supplies.”

The fee, which is expected to begin showing up on consumers’ bills this month, will cost Connecticut ratepayers about $200 million a year and their counterparts in Massachusetts and Maine about $500 million and $300 million a year, respectively.

“The $200 million a year surcharge simply feeds the raging electricity price inferno that we are seeing consume our economy and break the backs of our budgets as consumers,” Blumenthal said.

Energy issues have come to a head in Connecticut, where Blumenthal said electricity rates are the highest in the continental United States and double the national average. State lawmakers are considering reforms to the energy market, and Blumenthal is calling for a windfall profits tax on power companies.

The state Department of Public Utility Control last month approved rate increases that took effect Jan. 1 of 7.7 percent for Connecticut Light & Power and 50 percent for United Illuminating. CL&P rates increased 22 percent last year, while UI’s went up 4.9 percent.

Blumenthal said a majority of the surcharge money from Connecticut consumers would go to the owners of the Millstone nuclear plants in Waterford and a coal-burning facility in Bridgeport. He said the companies already earn profits of 44 percent to 120 percent.

Pete Hyde, a spokesman for Dominion Nuclear Connecticut, which owns the Millstone plants, declined to comment on the legal action. But he did say that Millstone is considering plans to produce 70 more megawatts of power.

PSEG Power, which owns the Bridgeport coal-burning plant, said in a statement that it would get about 5 percent of the payments created by the surcharge, and that it has invested $500 million in energy infrastructure in Connecticut since 2002.

Bryan Lee, a spokesman for FERC, noted that the surcharge is part of a settlement reached last year between the six New England states that was reviewed and approved by 107 of 115 government officials and energy industry representatives. Maine was one of the eight parties to the case that refused to agree to the plan and the rate increases.

After FERC approved the settlement in June, Maine Gov. John Baldacci called the decision “unbelievable” and “unacceptable” and urged the commission to reconsider. FERC denied the request to reconsider in October.

Maine lawmakers are expected this session to consider possible alternatives to the New England-wide power supply system in an effort to lower the state’s electric rates.

Lee said Friday the settlement for the so-called Forward Capacity Market was needed to prevent an electricity supply shortage and to stop prices from increasing more than they already have.

“The parties that agreed to the settlement are comfortable that it will provide the financial incentives for the generation to be built,” Lee said.