DEREGULATION UPDATE

CONNECTICUT

Overview
After a four-year legislative battle, Gov. John Rowland (R) signed Connecticut's deregulation legislation into law on April 29, 1998. The legislation will give 35 percent of the customers in the most populated areas direct access on Jan. 1, 2000. The remaining customers will be allowed to choose six months later. The bill promises a rate cut of 10 percent off 1996 levels and allows utilities to recover their stranded costs.tting Started

Getting Started
Once direct access begins, Connecticut's investor-owned utilities (IOUs) will remain regulated because they will continue to handle the regulated businesses of transmission and distribution. They will maintain and repair the network of power lines. Utilities also will read and maintain meters and bill customers.

The state’s biggest IOUs, Connecticut Light & Power (CL&P) and United Illuminating Co. (UI) will no longer be in the business of generating power. They will be required to sell their generating plants at a closed-bid auction. The utilities will have to auction off their hydroelectric dams and oil, coal and natural gas-fired power plants by Jan. 1, 2000, and their nuclear power plants by Jan. 1, 2004. Connecticut is the only state requiring nuclear plants to be sold when retail choice is implemented. The law allows unregulated affiliates of the utilities to bid for any or all of the power plants.Recovering Stranded Costs

Recovering Stranded Costs
In exchange for selling all of their nuclear and non-nuclear power plants, utilities will be able to collect stranded costs during the transition to an open market through a "competitive transition assessment" in customers’ electricity bills. Stranded costs for CL&P are estimated to be $3 billion. UI’s stranded costs are estimated to be $900 million. Power plant sales and other measures are expected to reduce those costs before state regulators decide how much can be passed onto customers. Securitization has been approved as a means of recovering stranded costs, however, utilities will only be allowed to use securitization for non-nuclear generating facilities.RTT

Retail Choice Chronology
The following is a timetable for implementation of retail choice in Connecticut:

Oct. 1, 1998: Utilities must submit plans to state regulators to separate power production operations from their transmission and distribution businesses.

End of 1998: Creation of ISO New England.

Oct. 1, 1999: Deadline for utilities to separate their power production from transmission and distribution business.

Jan. 1, 2000:

• 35 percent of all electric customers in the state’s largest cities can choose their electricity supplier.

• Deadline for utilities to sell off their non-nuclear generating plants.

• State regulators can assess a charge of .03 cents per kWh to fund conservation programs.

• State regulators can assess a charge of .05 cents per kWh to go to Renewable Energy Investment Fund to finance power generation from wind, sun and water

• Systems benefit charge takes effect.

July 1, 2000: All customers can choose their electricity supplier.

Jan. 1, 2004: Deadline for utilities to auction their nuclear power plants or legally transfer them to separate affiliates.

The Future for IOUs
According to UI's general manager of marketing and sales, John Conroy, "We won't be a major generation player. We may invest in plants as a passive investor, but we don't want to be a generator like NU." Instead, the company wants to concentrate on the energy services business. They will work with companies to reduce the amount of electricity they use, install electrical equipment, including substations and energy efficient lighting, and help large buyers secure the best price for their electricity dollar. Northeast Utilities, CL&P's parent company, has not yet announced how its business will be organized when direct access starts.