Overview
Retail competition in Connecticut is just now beginning to gain traction as the transitional standard offer period is set to expire on December 31, 2006.The Connecticut Department of Utility Control (DPUC) has accepted the wholesale bids to supply Standard Offer Service and Supplier of Last Resort customers, and is in the final stages of approving the resulting retail generation service rates.Connecticut Governor Rells and Attorney General Blumenthal asked to Department to delay approval of the filed rates due to the very high percent increases, but Chairman of the DPUC felt that deferring rate increases would only harm consumers in the long run due to carrying costs (interest) that would need to be collected.The end of the transitional standard offer period marks the first time that generation rates will reflect the actual underlying price of wholesale power.

History
In 1998, the Connecticut Legislature passed a law (Public Act 98-28) opening the electric generation market to retail competition, effective Jan. 1, 2000. As part of the legislation, “Standard Offer” service was created for the period covering January 1, 2000 through December 31, 2003. The Standard Offer period applied only to residential consumers and small businesses and was the rate paid by those customers who stayed on utility service. Large businesses and industrial customers continued to be served at prices derived from earlier contracts with CL&P and UI.

Initially (January 1, 2000), utility customers were moved to a rate that reflected a 10% discount to the 1996 rates as a means to guarantee that standard offer service customers received savings while electric competition was developing. At the same time, the utilities were ordered to divest their generating assets and focus on being delivery (transmission and distribution) companies only.Generation supply for customers still with the utility was to be procured in the wholesale market.

Unfortunately, while the discounted rates were in place, wholesale costs for power were rising due to the increasing costs for fuel.This combination of discounted rates and a rising market made it nearly impossible for competitive suppliers to offer rates that would show customers savings over their utility rates.Predictably, competition did not flourish in the early years.

The Revised Electric Restructuring bill (Public Act 03-135), signed into law in June, 2003prescribed a Transitional Standard Offer (TSO) Period to cover 2004 to 2006. In an attempt to spur competition, the TSO removed the 10% rate reduction.However, as was the case during the standard offer period, wholesale electricity rates were still too high for competitive suppliers to offer customers deals that would save them money.Again, the DPUC extended the TSO through 2006 and this time increased rates another 10% to try and align rates more with the true cost of electricity.The newest increase still failed to encourage more suppliers to offer products.

Late in 2006, both utilities issued requests for proposals (RFPs) for power supply for 2007 because older power contracts were expiring and the TSO was to come to an end on December 31, 2006.Those RFPs were answered by offers from competing suppliers and new generation rates were filed at the DPUC.The filed rates compared to 2006 rates reflect an increase ranging from 7% to 66% depending on utility and customer class and size.Rates for both utilities will now be set for only six-months at a time and will rise and fall with market conditions.

Restructuring in Connecticut has been held back to this point even though the state has some of the highest electricity rates in the country.However, legislation has marked 2007 as the time when the market will decide what the price of electricity should be, and competitive suppliers have recently been flocking to the state to offer products and services that will meet customers’ needs.As the price of fuel remains volatile, customers staying with the utilities will see that movement in their six-month rates.

Strategic Energy is a registered supplier in Connecticut and offers several energy products with varying terms and pricing to non-residential customers in both utility service territories:

• Connecticut Light and Power (a subsidiary of Northeast Utilities) — By far the larger of the two state utilities.
• United Illuminating — United Illuminating serves approximately 20% of the electrical load in the state and covers the Bridgeport and Greater New Haven areas.

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