Malloy sticking with energy-tax plan

Hartford - Gov. Dannel P. Malloy stood firm Wednesday on his plan for a new flat tax on all major forms of electricity generation, despite claims by fellow Democrats that his approach would hurt ratepayers and fail to generate the money expected.

The temporary, two-year energy-generation tax in Malloy's budget is projected to collect $72 million annually by applying a flat tax - 0.0025 cents a kilowatt hour - on energy from nuclear, coal, natural gas and oil sources. About $40 million would come from just the Millstone Power Station in Waterford, the sole operational nuclear facility in Connecticut. Millstone says it is willing to absorb the cost.

However, the co-chairs of the legislature's energy committee say they know a better way to tax the generators.

State Rep. Vickie Nardello,

D-Cheshire, and Sen. John Fonfara, D-Hartford, presented their alternative plan at a news conference Wednesday morning and urged the governor and General Assembly leaders to support it.

They said their proposal, which offers a choice of three tiered levels of taxation, would raise more revenue for the state than the tax in Malloy's budget and, most crucially, wouldn't pass the higher costs along to ratepayers.

The co-chairs claimed that if Malloy doesn't change how his tax is structured, $50 million of the $72 million tax would get passed on to ratepayers, costing the average household $1.50 more per month.

Malloy's tax would also raise nearly $25 million less than projected for state coffers because "the generators will not run as often, and therefore that revenue will be lost," Fonfara said.

Malloy thanked the co-chairs for their efforts but said through his spokeswoman that he prefers the plan that's already in his budget proposal.

"The governor has asked and been very forthright about the shared sacrifice he is asking of everyone," Colleen Flanagan, Malloy's spokeswoman, said of the potential rate increase. "He needs to make the tough decisions to get our state back on track."

Nardello was not happy with the governor's stance.

"I would ask the governor to reconsider his position, since their proposal would require electricity rates to rise," she said.

While laying out the details of their alternative proposal earlier in the day, Nardello and Fonfara suggested that one must momentarily ignore the principles of Econ 101 to grasp how energy markets work in Connecticut.

"Energy markets are unlike any other markets. ... They do not follow the normal rules of supply and demand," Nardello said, continuing later, "This is an artificial market and therefore is subject to rules that you and I and John and everyone standing here never dreamed of."

That said, the two legislators argued that the problem with Malloy's flat-tax approach is that it's too costly for energy generated from natural gas. Because the price of natural-gas energy determines the rate set for all energy generators in Connecticut, too high a rate on natural gas could lift all prices to a higher threshold.

"If you tax the generator that sets the price, then the tax will be passed on to the ratepayer," Nardello said.

Yet if one goes easy on natural gas - as their proposal does - hundreds of millions of dollars can then be extracted from competing generators, such as from Millstone, without prompting an increase in rates.

There are three options in Nardello and Fonfara's alternative scheme. One raises $72 million in annual revenue, the second $100 million and the third $150 million. Nuclear generation would be taxed at the highest rate in each of the three options, followed by coal and then oil-generated electricity. Natural gas would be taxed at the lowest rate.

State Sen. Andrea Stillman, D-Waterford, said in a statement that the co-chairs' plan was "an anti-business initiative that unduly targets the Dominion Millstone Power Station."

Fonfara said he considers dead the energy committee's earlier tax proposal that would have raised about $340 million a year from generators, of which $332 million would come from Millstone. That proposal prompted Millstone's owner, Dominion, to say that it might shut down one or both of the running reactors for economic reasons.

A Dominion spokesman said the lowest tier in the co-chairs' new proposal would increase the firm's annual tax payment to $68 million, or $18 million more than what is in the governor's budget.

"Dominion has invested more than $600 million into Millstone since purchasing the station in 2001, improving the reliability and overall margin of safety. This is a strange way for these legislators to treat a company that has grown its business," the spokesman, Jim Norvelle, said.

State Rep. Betsy Ritter, D-Waterford, said the co-chairs' latest proposal is as unfair to Dominion as their first.

"This is really a slap on the head to what is for us a mainstay of the economy, and it's really sad to go after (Dominion) like that," Ritter said.

Shares of Dominion, the parent company of Dominion Nuclear Connecticut, which owns Millstone, was up 31 cents Wednesday, closing at 46.06.

j.reindl@theday.com

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