Date: Fri 28-Feb-1997

Publication: Bee

Author: KAAREN

Quick Words:

CL&P-NU-electricity-Stax

Full Text:

CL&P General Manager Sees A Future Of Deregulation

B Y K AAREN V ALENTA

Deregulation of electric power, with the allure of consumer choice and lower

rates, appears increasingly likely to win legislative approval soon, according

to William J. Stax, general manager, Connecticut Light & Power Company.

Mr Stax, whose office is on Barnabas Road in Newtown, spoke to members of the

Housatonic Valley Council of Elected Officials (HVCEO) at a luncheon meeting

in Brookfield February 21. He discussed the future of Connecticut's electric

utility industry and how changes could impact town budgets.

A wholly owned subsidiary of Northeast Utilities, CL&P currently is engaged in

talks with state legislators and members of the Rowland administration to

hammer out complicated agreements on how to go from a regulated monopoly to an

open market.

With deregulation, consumers will be able to choose the electric company that

will supply their power, just as they currently choose the companies that

provide long-distance telephone service. CL&P would continue to maintain the

local lines and equipment, even if the consumer decides to pick a different

company to supply the electricity.

"The industry will become competitive, like the telephone industry, and the

impact will be an estimated 10 to 20 percent drop in rates," Mr Stax said.

He said CL&P is proposing a five percent discount in rates as of January 1998,

a rate freeze for the following two years, then full open competition phased

in from the year 2000 to 2003.

CL&P is the largest electric utility in Connecticut, serving 1.1 million

customers and employing 6,000 persons.

The problem facing NU, Mr Stax said, is that the company has about $3 billion

invested in nuclear power plants and other facilities in the state that hasn't

been recouped from rate-payers. These are called "stranded costs" because the

investments were made under a regulatory framework in which utilities were

assured eventual repayment. But under competition, those costs could become

losses.

About $2.1 billion of the total $3 billion in stranded costs is from four

nuclear plants - the three Millstone facilities in Waterford and Connecticut

Yankee in Haddam - that have been shut down because of safety concerns. The

Millstone plants are expected to resume power production eventually, but NU

officials have decided to close Connecticut Yankee permanently.

"We want to be able to put the stranded costs in a trust, then sell rate

reduction bonds to refinance the cost of these plants," Mr Stax said. "This

will reduce the eight, ten and twelve percent interest rates to a more

competitive six percent."

Surrounding states like Massachusetts, Rhode Island, and New Hampshire already

have taken steps toward deregulation.

"In Rhode Island, California, Pennsylvania and New Hampshire legislative has

passed for restructuring, but each state is different regarding timing, rates,

local ownership and investment recovery," Mr Stax said.

He said that once deregulation is in place, municipalities can expect a

consolidation of their accounts and the chance to negotiate rates.

"Electrical utilities are probably the last bastion of industry that doesn't

have deregulation," he said. "We are in favor of it, but we want to move

cautiously and carefully. The legislature is trying to hammer out the details,

and I am pretty confident that we will see a plan in place by the end of this

legislative session in May."