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Reaction of Independent Connecticut Petroleum Association

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On behalf of Connecticut’s 600 heating oil and propane retailers and their Connecticut-based 13,000 employees, we are pleased to offer our initial reaction to Governor Malloy’s announcement today regarding the beginning of the state’s energy policy plan. We welcome the coming debate concerning energy issues and will be an active participant in the evolution of what should be market-based, consumer driven decisions without the influence of government.

Connecticut Needs an Energy Policy That Is Balanced and Responsible, Not One Focused only on Natural Gas

* No one knows what the price of energy will be into the future. In 17 of the past 20 years heating oil has been less expensive than natural gas. Even Yankee Gas states in their disclaimer at the end of their commercials that current prices are not a guarantee of future pricing that consumer will pay. Since Yankee Gas cannot guarantee sustained lower prices to potential customers they are trying to persuade to switch from oil to natural gas, then why should the state pursue a policy that makes that very assumption?

* The Expansion of Natural Gas use in Connecticut worsens the already overly-reliant position of the State with respect to Natural Gas. Connecticut should avoid a “One-Fuel Fits All” energy strategy. Both ISO-New England and the Federal Energy Regulatory Commission have warned this year about New England’s over-reliance on natural gas and Connecticut should heed these warnings. No one four years ago believed that the economics of natural gas would be where they are today. Hence, no one today can tell you where the economics of natural gas will be four years from now. Connecticut needs to avoid the potential pitfalls of over-reliance on one fuel;

* The state needs to strengthen its requirements on the utilities to replace old, outdated and leaking existing natural gas infrastructure before agreeing to expansion of that infrastructure. Yankee Gas, in a filing with the state Department of Public Utility Control in January, 2011, estimated it would take 67 years to replace its remaining inventory of cast iron gas mains and nearly 15 years to replace its bare steel gas mains. Yankee’s own data shows that the rate of leaks in its system — a key indicator of the structural stability of the pipeline — have more than doubled in a 20-year period and that the company has failed to keep up with government requirements that leaks be swiftly corrected;

*All utility expansions should be strictly financed by utility ratepayers and shareholders — never on the backs of taxpayers. Any economic risk the utilities refuse to bear on their own should not be borne by the taxpayers;

* Natural gas is not clean. The principle component of natural gas is methane. Methane (CH4) is a greenhouse gas that remains in the atmosphere for approximately 9-15 years. Methane is over 20 times more powerful in trapping heat in the atmosphere than carbon dioxide (CO2) over a 100-year period. This leaking methane contributes more to climate change than does the emission of carbon dioxide, contributes global warming and to the killing of trees and other vegetation and is posing a health and safety hazard to human beings in the areas where the leaks occur;

* The utility monopoly should end. Connecticut’s utilities are guaranteed a rate of return that guarantees their profitability. Connecticut’s utilities are given preferential access to capacity for the provision of natural gas in the state. Now Connecticut’s utilities want a guarantee of a growing customer base through a state policy tilted toward them for no reason other than a temporary advantage of price — even though Northeast Utilities is the second most disliked corporation in America. None of this makes any sense in the world of competitive economics. Connecticut should divide up the utilities into two functions; [a] transmission and distribution of energy, and [b] the sale of the energy itself. The transmission and distribution of energy should remain under the control of PURA, while the sale of the energy itself should be left to an open, transparent, truly competitive marketplace where a number of companies can compete for consumer’s business. Connecticut’s state government should avoid the pitfalls of the type of crony capitalism energy policy being recommended by utilities.

* State government should stay out of the business of picking winners and losers in the energy markets because [a] it has a poor track record of success and [b] consumers in a free market make decisions about what they want to buy and from whom and it is not government’s role to take the place of consumers. We hear the calls for “choice,” and “fairness.” Utilities know where the customers are just as we do;  they don’t need government to lead them down the path of success or certainly not have a state government handing utilities customers that they can’t get on their own.

* To the extent that the state believes it necessary and appropriate to develop a role for natural gas as a motor fuel, we strongly encourage such development of the delivery of natural gas to the driving public to be done though a collaborative effort between the natural gas utilities and the existing motor fuels infrastructure of the state. State policy should be directed toward enhancing existing motor fuels businesses with more than $6 billion invested in the state, not creating alternatives to those businesses. These existing motor fuels businesses currently remit some $1.3 billion in state taxes and fees – 6% of the total state budget – and employ approximately 4,600 Connecticut citizens.

* Connecticut has among the top 5 most expensive electricity rates in the nation, despite the fact that most of our electricity is generated with natural gas and nuclear with very little oil. Our state’s high cost of living is exacerbated by the fact that fees and charges on the transmission and distribution of electricity outweigh the cost of the electricity itself and this problem needs to be solved in order to lower the overall cost of electricity;

* Connecticut has among the top 5 most expensive gasoline costs in the nation and this is entirely attributable to the fact that Connecticut levies the highest gasoline taxes in the nation. Lowering our cost of living can be achieved by lowering our gas taxes;

* Connecticut has the highest diesel fuel excise taxes in the nation, resulting in Connecticut having the nearly highest cost diesel fuel in the nation as well. This imbalance results in higher transportation costs for all goods and services and contributes to our state’s high cost of living. Reducing the diesel excise tax, therefore, reduces our cost of living.

* We strongly support energy conservation efforts everyday, with all of our customers. Long before Connecticut decided on this deeply flawed energy policy; Connecticut’s oil heat retailers had reduced per-consumer consumption of oil by 40% and continue to support energy conservation through state programs. State energy conservation programs, including but not limited to on-bill financing and other measures should be applied on a fuel-neutral basis without preference or emphasis of one fuel over another. Funding state energy conservation programs is most efficiently done off of electric bills, not a multiplicity of fees and charges across different fuels where consumers pay the fees multiple times.

* This temporarily “cheap” natural gas has done little for the economic development of the center cities of Hartford, Bridgeport or Waterbury, among others. Connecticut has had an extensive natural gas infrastructure for decades and yet Connecticut has had zero net job growth over the past twenty years. The availability of natural gas and plentiful vacant space and buildings in our major cities add up to natural gas being a net-zero job creator. In light of the state’s economic record over last twenty years, the trend is not shocking. Connecticut is one of just three states to experience a net job loss since 1990, including the loss of 77,712 jobs between 2000 and 2010. Connecticut perennially ranks among the worst in the United States for business climate, tax burden, and cost of living. Elected officials exacerbated these problems in 2011 by enacting the largest tax hike in state history, increasing 77 taxes and fees by $1.9 billion annually. Our economy’s problem is not that enough of us don’t have access to natural gas – our economy’s problem is with our state and national economic policies.

Every action has unintended consequences. Let’s avoid another energy boondoggle handed to us by government and utilities like the all-electric home, based on the assumption of “too cheap to meter” electricity prices from the 1950′s  that turned out to be false.

Energy markets change and this one is changing too. Consumers decide who wins and who loses; government should stay out of those decisions. Government should never assume present circumstances will last for long periods of time, as they never do. Government should never pick winners and losers because when Government does – Government fails and consumers lose.

Consumers Recognize the Advantages of Clean, Reliable, High Efficient Oil Heat

* Over the past 10 years heating oil has been 6% lower in price than natural gas. Over the past 15 years heating oil has been 15% lower in price than natural gas. Over the past 20 years heating oil has been 16% lower in price than natural gas. Heating oil consumers have saved an average of $1,059 by using heating oil rather than natural gas over the last 10 years; over the last 20 years, those same consumers saved an average of $2,946. In 17 of the past 20 years oil heat has been less expensive than natural gas and consumers have saved money by being oil heat consumers;

* The Connecticut oil heat industry has more than 600 intensely competitive companies and their 13,000 Connecticut-based employees working for the privilege of serving 650,000 consumers every single day. We do not seek the hand of government to aid us in gaining more customers, nor do we believe multi-billion dollar utilities with their guaranteed profits deserve any assistance from the
state;

* Connecticut’s oil industry has a multi-billion dollar investment in Connecticut through our shoreline and inland terminals that contribute millions of dollars in property taxes to virtually every city and town in the state,  in addition to supporting 13,000 good paying, high technology jobs. Trading a job in one industry for another industry is not an economic development strategy;

* BioHeat, when a blend of low sulfur heating oil with renewable fuel, is cleaner burning, domestically produced fuel that is as clean as natural gas. BioHeat has the advantage of being renewable while natural gas is not. BioHeat reduces our carbon footprint by 30% and is available in Connecticut right now;

* Connecticut oil heat consumers have reduced their per-consumer consumption of heating oil from 1,200 gallons thirty years ago to 700 gallons today. This reduction has come from the oil heat industry’s high technology energy solutions that reach efficiencies of 90% or higher and dramatically reduce consumption, emissions and save energy dollars. No other energy source has reduced per-consumer consumption of energy as successfully as oil heat. The oil heat industry has brought new, improved technologies to the marketplace that enable today’s consumer to be just as warm and comfortable as ever while using 41% less fuel;

* Utilities don’t perform their own service. You call the natural gas utility for help and if gas isn’t leaking – they tell you to call a plumber. The Connecticut oil industry’s 4,500 professional, licensed energy conservation technicians serve consumers and underscore how your full service oil heat retailer’s trusted professionals evaluate your heating system and make recommendations for how to become as efficient as possible, while reducing emissions and saving money;

* With natural gas and electric utilities, consumers are stuck with one company and have no choice between energy providers. With heating oil, the consumer may choose between dozens of companies who all compete for the right to serve the consumer. This competitive marketplace has created choices for consumers in price, payment plans, and service. If the consumer doesn’t like one oil heat company, he or she can switch to another company;

* Your heating system is a 20-year investment. If you’re an oil heat customer, you’ve saved money over the last 20 years. Since future energy costs are impossible to predict with certainty, the wisest strategy is to focus on conserving energy and reducing consumption. Conservation is clearly less expensive. And it has the fastest “pay-back” or return on investment of any option you have to control your energy costs. Investing $8,000 or more to convert to another fuel makes no economic or energy sense at all.

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