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December 24th, 2013:

CT Gas Plan is Corporate Welfare

American Energy Coalition - December 24th, 2013

In an editorial that appeared in the November 30th issue of the Journal Inquirer (JI), a local north central Connecticut tabloid newspaper, JI managing editor Chris Powell tried to make an economic argument in favor of CT Governor Malloy’s Comprehensive Energy Plan.  That Plan rejected by the Connecticut Legislature is now gaining new traction thru the State’s energy regulatory bureaucracy.  The initiative attempts to advantage natural gas utilities by expanding gas pipelines in the state by approximately 900 miles and converting approximately 280,000 Oilheat customers to natural gas.  The plan rejected by the state legislature called for taxpayer funding and tax incentives to support some of the cost of the pipeline expansions and conversions; while the latest iteration calls for ratepayers and new gas customers to support the cost.  The state’s three utilities do not want to pay the cost using their own or investor resources.

Editor’s note: this initiative first proposed in Connecticut in 2012 has spread to New York, Pennsylvania, Maine and Massachusetts with similar promised benefits and similar unwillingness on the part of the utilities to underwrite any financial risk.

In a departure from AEC’s normal E-Alert format Mr. Powell’s editorial entitled “Stop corporate welfare, just extend gas mains” is reprinted here below in its entirety, followed by a studied reply from Chris Herb.  Mr. Herb is the President of the Connecticut Energy Marketers Association (CEMA) a trade association representing the state’s local Oilheat Retailers.  Both pieces speak for themselves with Mr. Powell supporting the political position on the subject; and Mr. Herb exposing the flawed arguments and potential financial risks to homeowners that buy in.

Stop corporate welfare, just extend gas mains

Posted: Saturday, November 30, 2013 12:15 am (Chris Powell)

All the bluster about restoring economic growth in Connecticut won’t accomplish a fraction of what the Malloy administration accomplished the other day. The Public Utilities Regulatory Authority approved the administration’s plan to extend natural gas pipelines throughout the state so that as many as 280,000 homes and businesses might gain access to the cheaper and cleaner fuel over the next 10 years.

The cost of building the pipelines will be recovered by natural gas companies mostly through surcharges on new business and residential customers. They’re not likely to complain, since gaining access to gas and converting from oil or electric power should save them far more money starting almost immediately.

Of course heating oil dealers are furious about state government’s facilitating gas, a competitor. But Connecticut is more reliant on home heating oil than any state, much of that oil comes from abroad and thus is a drain on the national and state economies and a risk to national security, domestically produced gas is increasingly available, and the public interest in competitive energy sources is overwhelming.

Besides, state government facilitated the heating oil industry and the electricity industry when it built the roads used by oil trucks and utility poles. Insofar as the roads preceded the gas mains, the heating oil industry got its state subsidy first.

The less money it spends on foreign oil, the more prosperous Connecticut will become -- especially since businesses here complain that their biggest burden is not supposedly high taxes or excessive regulation but the cost of energy.

Indeed, Connecticut might be far better off if the state government did nothing for economic development except to build gas mains. Construction jobs would be created right away and financed from energy savings, those savings would keep many millions of dollars in the state, and businesses and households would be more prosperous.

By contrast, it’s hard to see how Connecticut will benefit from the Malloy administration’s distributing hundreds of millions of dollars in cash and discounted loans to companies for doing no more than promising to stay in Connecticut a while longer.

Even as the administration finalized its natural gas plan the other day, Governor Malloy was awarding $15 million to Pitney Bowes for staying in Stamford and planning to increase its employment by 200 over five years, or $75,000 per job, employment the company surely was planning anyway. Of course every company in Connecticut isn’t getting $75,000 from state government for every new hire, so this policy is grossly unfair and turns economic development into mere political patronage. It’s being called corporate welfare.

The administration seems cynically sensitive to such complaints, since, as the Connecticut Mirror recently reported, even as administration agents working for the Democratic Party are extorting political donations from state government contractors and employees of state-regulated companies all over the place, no donations of any size have been recorded from companies receiving those economic development grants.

While state law forbids state contractors from donating directly to the campaigns of candidates for state office, contractors can donate to a political party’s general committee and the committee can use the money to advance its candidates. This money laundering is what Connecticut Democrats call campaign finance reform. It is public campaign financing for just one party, the party in power. The Mirror found that Connecticut’s Democratic Party is leading the Republican Party in such fundraising by 10 to 1.

Are the Democrats targeting state government contractors and companies that are particularly vulnerable to regulation? A spokesman for the party replies, "We don’t discuss our fundraising strategy" -- which is what Connecticut Democrats may call transparency.

Chris Powell is managing editor of the Journal Inquirer.

Gas plan is corporate welfare too

Published: Wednesday, December 18, 2013 (Chris Herb)

I find it ironic that Chris Powell opines on extending gas mains in conjunction with stopping corporate welfare ("Stop corporate welfare, just extend gas mains," Nov. 30-Dec. 1), since nothing epitomizes corporate welfare more than Connecticut's public utility system.

In that system multibillion-dollar corporation s are guaranteed a profit and are insulated from direct competition, and even though there is competition from small businesses selling heating fuels, the state ruthlessly seeks to squash such competition with a comprehensive energy scheme.

Considering that Gov. Dannel Malloy is handling the utilities a $5.5 billion gift through this scheme, it's little wonder the executives at Northeast Utilities are so generous in filling the campaign coffers of the governor and his allies.

This isn't just about corporate welfare or patronage; the public welfare is at stake. This issue is about a government playing fast and loose with the facts, perhaps because it is in bed with the utilities, or perhaps it is just indifferent to facts that don't serve its political agenda. Unfortunately, that does a disservice to consumers.

We find that state government's nonfactual statements are disseminated throughout some news media, including Powell.  For instance, Powell wrote that use of heating oil somehow is a risk to national security. Well, heating oil is a distilled product, and none of it, not one drop, comes from the Middle East.

Powell goes on to make the non-sequitur statement that the heating oil industry got its state subsidy first when the roads were paved in Connect cut.  Well, heating oil was not a commercially viable product until the 1940s, and the road system in Connecticut existed far before then.

Powell also writes that conversions to natural gas would keep millions of dollars in the state.  Businesses and people aren't exiting the state because of lack of access to gas: they're doing so because Connecticut has a terrible business environment.

Powell's most egregious statement is one harped on by the governor and his team – that people will save money by converting to gas.

First, the cost to convert will run from $7,500 to $13,000. Getting a retrun on this cost is possible only if gas prices remain where they are.  But the energy plan already will raise rates by as much as 30 percent and additional conversion surcharges may apply. The commodity cost of gas already has more than doubled from when the plan was conceived and, according to government sources, will increase more. By the time payback is achieved, it will be time to buy a new expensive gas boiler, since these devices have a lifetime of about 10 to 15 years.
We urge people to check all the facts before buying to governor's "pig in a poke." If something sounds too good to be true, It is.


Chris Herb is the President of the Connecticut Energy Marketers Association (CEMA)

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