Federal Lawsuit Seeks To Block 'Hidden Tax' On Energy Customers
Tens of millions of dollars paid by utility customers in Connecticut for energy efficiency measures have been diverted into the state’s general fund. It’s a move that’s been criticized as a “hidden tax” on ratepayers. But now, the cuts are being challenged in federal court.
Utility customers pay small fees on their electric and gas bills. It’s money that’s supposed to be set aside to directly benefit consumers -- funding home energy audits, weatherstripping, and providing rebates for insulation.
The program also supports energy audits for low-income customers and those heating their home with oil.
Last year, lawmakers took some of the money, via last-minute budget acrobatics and swept about $175 million into the state’s general fund over the next two fiscal years.
“These sweeps are wrong and unconstitutional,” said Stephen Humes, an attorney representing environmental groups and energy efficiency contractors, who are suing the state over the cut.
“What they’ve done here is try to impose a tax on what was paid for these other purposes,” Humes said.
Speaking outside federal court in Hartford, Humes said the cut breaks contract with consumers and functions as an illegal tax on tax-exempt organizations.
The lawsuit seeks to block the sweep.
Jonathan Casiano is the owner of Bright Solutions, LLC, an efficiency business and one of the plaintiffs named in the lawsuit.
“With the budget cut, I had to lay off all my crews in order to keep float with the business,” Casiano said.
That equated to six employees. Other efficiency contractors said Tuesday they have had to make similar layoffs.
The cut, which also impacted both the Regional Greenhouse Gas Initiative (RGGI) and the Connecticut Green Bank, means efficiency services to oil customers, who do not pay a surcharge on their heating bill, have also been dramatically reduced.
Meanwhile, consumers continue to pay the same fee on electric and gas bills.
Governor Dannel Malloy, one of the defendants named in the lawsuit, said he opposes the cuts and he isn’t surprised advocates and business owners are challenging its legality.
“I have long maintained that these shortsighted sweeps would increase energy costs for consumers and businesses and cause untold harm to our green energy economy,” Malloy said in a statement.
“I knew this lawsuit was coming,” said Representative Lonnie Reed, co-chair of the state’s energy and technology committee. “And my first reaction was, today, what took them so long?”
Reed voted for the budget that included the efficiency cuts, but said she’s now supportive of the lawsuit and hopes the plaintiffs are successful.
During the most recent legislative session, lawmakers moved to restore $10 million of the cuts back to efficiency programs, which is “a bit of a slap in the face,” said Leticia Colon de Mejias, an efficiency contractor, and plaintiff in the lawsuit.
“Our electric bills are not a taxable source of income for the state coffers,” said Colon de Mejias.