Environmentalists, efficiency businesses appeal ruling on state's $145M energy fund sweep

New Haven — Environmental groups and energy contractors on Monday appealed a court decision which found that the state did not violate contractual laws or equal protection rights of ratepayers when it swept $145 million in funds earmarked for clean energy and efficiency programs in 2017.

The groups sued the state government in May over the funding sweep, which helped address steep budget shortfalls in the state's October budget deal signed by Gov. Dannel Malloy.

Sparring with state attorneys in U.S. District Court in New Haven in September, the groups argued the sweep undercut energy efficiency programs funded in part through small surcharges on Eversource and United Illuminating customers' electricity bills. The impacted programs reduce electricity demand and help residents finance home efficiency improvements and solar installations, with many home energy auditors and solar and insulation installers saying the move forced thousands of layoffs over the last several months.

State attorneys argued the statute establishing clean energy funding created no expectation or promises that the funds couldn't be pulled for other purposes; the attorneys pointed to instances in 2003 and 2005 in which the state reassigned some clean energy funds.

In a news release Monday afternoon, attorneys for the plaintiffs announced an appeal seeking a reversal of Judge Janet C. Hall's Oct. 25 decision, which dismissed the groups' claims and ruled in the state's favor.

Hall had argued "there is no basis to conclude" that the budget deal sweep "impairs any contractual relationship between the plaintiffs" and utilities.

Hall's ruling determined that the plaintiffs "have no right to insist that the state of Connecticut spends its revenue on programs that benefit them."

But the plaintiffs maintain the state essentially stole the funding from ratepayers and also created a tax for nonprofits such as colleges and churches, which do not pay taxes but pay into the energy efficiency programs through their electricity bills.

Leticia Colon De Mejias, a plaintiff who founded Windsor-based Energy Efficiencies Solutions, said in an interview Tuesday that it "says right on electric bills ... that the money will be specifically used for demand reduction and to reduce the impacts of fossil fuels. Your bill is a contract between you and utilities."

The impacted programs include Conservation and Load Management, the Regional Greenhouse Gas Initiative and the Clean Energy Fund. Customers of municipal utilities, including Groton Utilities and Norwich Public Utilities, do not pay into those funds.

While Malloy, a defendant, signed the budget deal in October, he has said he opposed the sweeps, calling them shortsighted.

The case will now go before the Second Circuit Court of Appeals in New York City, with both sides expected to file written arguments in the coming months, followed by oral arguments before a three-judge panel, potentially in 2019 or 2020.

Stephen Humes of Holland & Knight, one of the law firms representing the plaintiffs, said in an interview Tuesday that plaintiffs were hopeful the incoming General Assembly could work with Governor-elect Ned Lamont to hammer out a deal and avoid years of litigation over the sweep.

Humes said Hall's decision sent a clear message to the state: "General Assembly, you created this mess, now you fix it."

"Reasonable minds in Hartford," he said, could come to a "more efficient solution" through an executive order, a legislative fix or a settlement "so energy efficiency contractors can get back to work and the money can be spent on what it was intended for."

b.kail@theday.com

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