Connecticut Considering Utility Auction to Reach Customers

Officials from the Connecticut Department of Energy and Environmental Protection and Governor Dannel Malloy have expressed an interest in creating a new auction program for utilities to bid on the right of providing power to more than 800,000 residential customers who have not signed up with an independent electricity provider. According to a story in the CT Post, the auction could provide the state upwards of $80 million.

Like many states across the country, Connecticut passed legislation in 1998 to deregulate its electric utility market which required large utilities to sell their power plants and generation assets in order to help create a competitive market. Before that decision, electric utilities across the state had guaranteed service territories and customers but the utility was obligated to operate and maintain electric infrastructure to ensure reliability with closely regulated rates overseen by the state. Now utilities in Connecticut simply transfer the power generated by other independent companies that can also act as brokers to buy electricity and sell it customers. The move to deregulate the electric utility industry was designed by its proponents to give consumers more choices over their power purchases with notion that competition between different companies would ultimately drive down rates. When consumers sign up with an independent power provider, their monthly bill from the utility provides the independent company's name as well as rate and pricing information to the customer. Since the switch to deregulation was finalized in 2000, over 800,000 residential customers still have not selected a power provider. Thus, utilities in Connecticut are required to provide customers with power at a standard rate determined by the state Public Utilities Regulatory Authority, or PURA.

In order to move forward with a plan to reach uncommitted residential customers, authorizing legislation must be passed to allow state officials to carry out the utility auction. Under the proposed plan, blocs of customers who now get their power from the state's two largest utilities (Connecticut Power & Light, and United Illuminating) would be opened up to an auction process for the power providers. The highest bids would receive the right to sell customers power and agency personnel believe the auction process would also potentially drive down overall rates by getting more consumers involved in the energy market place rather than just paying standard rates through PURA. 

The plan does have detractors who bristle at the notion of the state forcing customers into an auction process. The state's consumer counsel, Elin Swanson Katz, also noted that any potential plan that could be authorized by the legislature should also include opt-out provisions for customers in any agreements that are reached, as well the continued ability to choose any energy company they see fit in order to protect consumer choice.

 

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