ETC Economic Transfer Charge or ‘Extra Taxes Connecticut?’

January 31, 2011

For many people across our state, mailboxes seemed a little heavier on January 1st. Rather than start the New Year out with a resolution and commitment to change, our state government pushed off its fiscal problems for another time and someone else to deal with.

In August of 2009 the legislature voted to pass our state’s $19 billion two-year budget which includes $956 million in new borrowing. The state will now need to find $141 million annually for the next eight years to pay down this borrowed sum.

To do this, the legislature adopted Public Act 10–179 in May of 2010. The act, which received mixed support, institutes the Economic Transfer Charge (ETC) and the Economic Revenue Recovery Bond Charge (ERRB), additional eight year surcharges on all Connecticut residents using Connecticut Light and Power (CL&P) or the United Illuminating Company (UI).

For CL&P’s 1.2 million customers the new charge started January 1st, and for UI’s 324,000 customers the charge begins in 2013. The staggered start accounts for prior deregulation fees these utility customers are already paying. The new surcharge goes into effect upon the completion of payment on existing fees.

The Department of Public Utility Control says the charge to CL&P customers will be 0.379 cents per kilowatt hour through June 30th, and beginning July 1st CL&P will replace the ETC with the ERRB, a fee yet to be determined. The first round of charges will generate $40 million for the state’s General Fund, and the next is reported to raise $112.9 million annually through 2018.

To pay down the remaining $28 million needed to cover the $141 million annual borrowed debt, the state will raid funds designated to help individuals reduce their heating bills.

The total cost to ratepayers works out to $2 and $4 per month for the next eight years. While that may not seem like a huge sum up front, the additional surcharges place increased state spending on our already struggling taxpayers – $1 billion in spending to be exact.

These surcharges have sparked a great deal of controversy among the legislature, utility companies and the state’s ratepayers. Not only is this a ‘hidden tax’ to cope with the states $7 billion budget deficit, but it singles out utility companies and unfairly targets ratepayers. CL&P officials have made statements against the ETC fearing that it will cause customers to seek out utility service with smaller providers who are not mandated to include the surcharge.

Members of the legislature who oppose this measure have even tried to file a lawsuit claiming that the fee is a tax and that utility can not impose taxes.

At a time when our state’s indebtedness per capita is among the highest in the nation and unemployment hangs at 9%, the legislature should be seeking policy that reduces spending and the burdensome fees on our state’s citizens. The implementation of this Economic Transfer Charge, or any fee, opens the door to a dangerous precedent of borrowing money at taxpayer expense. This hidden tax is exactly what’s wrong with our state government. Connecticut has a spending problem, not a revenue problem.