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AG Kilmartin: Connecticut Legislature Agrees to Eliminate Tax on Electric Generation

After strongly advocating that a generation tax on electricity in Connecticut unfairly burdened Rhode Island and all New England ratepayers with increased costs, Attorney General Kilmartin commended the Connecticut Legislature's decision to let it expire on September 30, 2013.

"In New England, it is critical that we recognize regional concerns, work with our colleagues and neighbors, and identify regional solutions whenever we can. The production tax that the State of Connecticut imposed upon the generation of electricity not only raised electrical rates in that state, but it unfairly raised the rates of all ratepayers throughout New England and New York," said Kilmartin. Working with my colleague Attorney General Martha Coakley, we wrote to the Connecticut General Assembly to express our concern about this situation and urged the elimination of the tax.

We are pleased that the budget recently passed by the Connecticut Legislature eliminates the current production tax on the generation of electricity, the only broad-based tax of this kind in the country, and urge Governor Malloy to sign the legislation."

BACKGROUND: In 2011, Connecticut imposed a tax of one quarter of one cent per net kilowatt hour of electricity produced by generators within Connecticut and uploaded to the regional bulk power grid. Concerned this new tax could raise rates for all New England states that draw power from the grid, Attorneys General Kilmartin and Coakley raised serious concerns about this tax.

A study showed that New England ratepayers were likely to pay an estimated $38 million to $50 million more to purchase electricity because of the tax, and that approximately 75% of the higher energy costs resulting from the tax were likely to be borne by ratepayers outside of Connecticut.

In February 2013, Attorneys General Kilmartin and Coakley sent a letter that insisted the generator tax inappropriately raises the rates of all New England families and businesses in order to solely benefit the State of Connecticut, and urged the Legislature to not reauthorize the tax.

On Monday, June 3rd, the Connecticut Senate passed a budget which eliminates the tax on September 30, 2013.

Studies have shown that the tax impact of this generation tax to Rhode Island ratepayers has ranged between $2.8 million and $3.7 million per year due to the fact that gas fired generators located in Connecticut have had to add the production tax into their bids to recover the cost when they are called to run. Thus, when these generators are on the margin, they will set the price for all of New England and all of New England has suffered the consequence of this tax.

Once the tax is eliminated, the savings to RI ratepayers is estimated to be $3 million to $4 million per year.

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