| 1999ET-00304-R001300-CHR |
2278 of document(s) retrieved
March 4, 1999
pat ENERGY AND TECHNOLOGY 1:00 p.m.
PRESIDING CHAIRMEN: Senator Peters
COMMITTEE MEMBERS PRESENT:
REPRESENTATIVES: Sayers, DelGobbo, Miller Horton, Nardello, Scipio
DON DOWNES: Thank you, Mr. Chairman, thank you, Sir. Always a pleasure to be here. Chairman Giannaros, Chairman Peters, ranking members Herlihy and DelGobbo, distinguished members of the Committee. It's always nice to be here with you.
In a departure from my usual style, I will comment briefly but brilliantly (Laughter) on raised bill, all right the brilliantly part, maybe, we'll decide later, raised SB1240 AN ACT CREATING A TASK FORCE TO STUDY WATER COMPANIES.
I have submitted some written testimony to the Committee which may offer a few more specifics, but very briefly, I'd just like to say that we welcome the bill. We think that it's very important to look at these water issues. This is going to be an area that's going to come on us very, very quickly and we're going to need to be prepared to take some fairly serious actions once we get a little further down the road, here.
The situation, particularly with respect to small water companies is beginning to approach a critical point and we think it's very important that the key players and stakeholders in this area get an opportunity to sit down and try and develop some specific strategies here.
We would like to offer you one suggestion if we might, and that is that perhaps we might want to develop this a little bit further in order to nail down some of the representation a little more closely and related to that point is that I'm sure you are well aware that in 1993 the General Assembly authorized a fairly exhaustive study of water issues and I think that we would like to build on those results as opposed to replicating that very large and extensive process.
So, in short, it is a truly wonderful thing you're doing here and thank you so much. And I think I've met the Chairman's prerequisites here so with that, and I think I even made it under three minutes, too.
REP. GIANNAROS: Chairman Peters.
SEN. PETERS: Thank you, Don. I just want to reassure you that the bill that's in the file copy now really contains boiler plate language that has to go through, as you know, the hoops in this building that it's our intention that the Department play a leading role in that task force and quite frankly, we're so committed to this even if the omnibus task force bill dies as it has the last year or so, that three Committees, at least, from preliminary discussions I've had with the leaderships of those Committees really do identify this as an issue that we need to take forward. So there will be internal task forces formed.
DON DOWNES: That's great. And just for the record, my agency will be happy to be helpful in this regardless of the structure which you develop and the methodology. We think this is a critical issue and we'd like to (mike went off)
REP. TERCYAK: Commissioner Downes, this is just some informational material that I'm asking for. Since, I mean, as you would know, we have a wonderful, wonderful water supply in the City of New Britain, perhaps one of the best in the state.
What I'm asking of you is, where do the small water companies get their water?
DON DOWNES: Small water companies for t he most part get their water from wells. In fact, one of the most common configurations of these are so-called community water companies where a single well or perhaps two wells are sunk and then serve a small number of adjoining properties, say 20 or 30 or 40 properties.
There are an enormous number of these companies. In fact, just to give you a sense, the General Statutes require that the Department of Public Health license the water companies with respect to quality and purity and those kinds of things and there are some 600 water companies that have a license from DPH.
Of those, we regulate approximately 45, and that's because the others are rightly too small for us to regulate on a full economic regulatory basis, so this problem of the small water companies is enormous. And in fact, if I'm not mistaken I think that Public Health only deals with those that have 50 or more customers, or 25 or more customers. Twenty-five or more customers and there are a host of water companies out there that don't even serve that many.
So the short answer to your question is, mostly wells and there are a lot of them.
REP. TERCYAK: Thank you, Mr. Chairman.
REP. GIANNAROS: Any other questions? Yes. Senator Herlihy.
SEN. HERLIHY: Thank you, Mr. Chairman. Hello Chairman.
Don, the study of 93, could you tell me, who conducted that study?
DON DOWNES: I believe that study was offered by an act of the Legislature and I believe that that was conducted by a fairly large group. I'm sorry I don't have --
SEN. HERLIHY: You don't know if it came out of this Committee or Public Health by chance?
DON DOWNES: One of my experts is here. Sharon, would you by any chance happen to know whether it was Public Health or Energy that authorized that study in 1993?
SEN. HERLIHY: It's not a critical issue.
DON DOWNES: I'm sorry, I'm not sure.
SEN. HERLIHY: That's fine. The point I want to make is, it wasn't a study regarding to economic viability of smaller companies. It was on a different issue, I'm assuming. I'm assuming this is not a redundant study or task force to the one that was done in 93 but that your comments were simply that whatever work was done in 93 might be able to complement what we do this year.
DON DOWNES: Yes. And my legislative aide is telling me that the original one was offered by Program Review after an initial investigation by that Committee.
SEN. HERLIHY: So it was PI.
DON DOWNES: Yes. And the point is, we should build on what (inaudible-mike not on.)
SEN. HERLIHY: Thanks, Don.
REP. GIANNAROS: I was told by OLR that it did go through our Committee back then and I assume that the quality of water has improved and prices have dropped since. Thank you so much. Any other questions? Thank you, Chairman Downes.
DON DOWNES: Thank you very much.
REP. GIANNAROS: Nice to have you here again.
SEN. PETERS: Thank you, Don.
REP. GIANNAROS: Commissioner Mazza.
COMM. GUY MAZZA: Good afternoon, Senator Peters, Representative Giannaros and esteemed members of the Committee. (Mike is not on) It is also my intention to be brief and I will be testifying on the same legislation that Chairman Downes just testified on.
We share the Chairman's view of the importance of addressing these water issues and we (inaudible-mike not on) representation on the board is critical to its success.
I think you (inaudible-mike not on) consumer interest. If the Committee deems it appropriate to go forward with this legislation and in view of the (inaudible) of Consumer Counsel's statutory responsibility to represent the (inaudible-mike not on)
We also participated with the DPUC and the other stakeholders in the study (inaudible-mike not on)
Thank you very much.
REP. GIANNAROS: Thank you. Thanks for your support.
SEN. PETERS: I just heard my name.
REP. GIANNAROS: Any questions or comments relating to the Commission (inaudible). Thank you. Now we move to the public segment of our public hearing, and if you could try to constrain your presentation to no more than five minutes, we'd appreciate that. John Guman. Thank you.
JOHN GUMAN: Good afternoon, Senator Peters, Representative Giannaros and distinguished members of the Committee. My name is John Guman and I'm the lead tax accountant for the United Illuminating Company. I'd like to thank the Committee for the opportunity to speak on two bills today, HB6742 AN ACT CONCERNING TAXES RELATING TO PUBLIC SERVICE COMPANIES and raised HB6851 AN ACT CONCERNING SALES TAXES RELATING TO GAS COMPANIES.
I'd like to address HB6742 first. This bill would eliminate the $150 per month sales tax exemption applicable to the sales of electricity to commercial businesses. UI opposes elimination of this exemption. We believe that the sales and use tax on electricity is discriminatory toward commercial customers and any reduction in this exemption would only serve to widen the disparity between classes of electric customers.
Residential and industrial customers are for the most part, exempt from paying this tax. It is primarily the commercial customer that carries the burden of an additional tax for the use of this essential energy source.
Secondly, the exemption would benefit the smaller commercial customer to a greater extent than the large commercial user. By eliminating this exemption the small business owner would be put at an even larger disadvantage than he or she currently faces.
We're certain that the Legislature does not have as its intent to increase the taxes of the small entrepreneur and the local mom and pop store, but unfortunately, that is exactly what this legislation will accomplish.
For these reasons, UI believes it would be proper to leave the $150 exemption available to those users who do not qualify for any other exemption. For the same reasons UI supports raised HB6851, which would extend the $150 exemption to gas customers. This change would not only bring parity to the gas customer but would also benefit small business as a whole.
We'd also like to point out at this time that the Commerce Committee voted last week to raise a bill to eliminate the sales tax on electric service in its entirety. Obviously, this would impact the two bills I'm speaking on today.
UI will wholeheartedly support their bill. We'd like to make it clear, however, that this support is not made with the company's bottom line in mind. Unlike other taxes, the sales and use tax is not built into UI's rate structure. The sales tax is a flow through tax meaning that the bottom line is not influenced by the imposition of this tax to our customers. We simply act as the tax collector for the state.
We do, however, receive quite a bit of feedback from our customers on the price of electricity we charge. It's no secret that taxes make up a significant portion of what we charge for electricity. In this day of deregulation and competition, it would be in everyone's best interest to reduce the cost of electricity wherever possible.
Electricity is a necessity we believe should be made available to each class of user on the same set of rules. We feel that the discrimination against the commercial user is unfair and unwarranted. By eliminating the tax in its entirety all users will be placed on a level playing field and will be able to make business decisions based on economic factor rather than governmental policy.
I would again like to thank the Committee for this opportunity to speak and would be happy to entertain any questions at this time.
REP. GIANNAROS: Welcome. Did you go beyond the bill, I guess, your comments. I think you're talking about eliminating all taxation.
JOHN GUMAN: The end of my comments were addressed, based on their impact on these two bills, of the Commerce Committee bill that will be --
REP. GIANNAROS: So you're against the consumption taxes?
JOHN GUMAN: I don't think I would say all consumption taxes. I think UI would be, as a general rule, against any kind of (indistinguishable)
REP. GIANNAROS: How would you suggest we recover the revenue, what kind of tax would you like to be increased if we eliminate this?
JOHN GUMAN: I don't think I'm at liberty to say, to speak for the company.
REP. GIANNAROS: Okay. Any other questions? Senator Herlihy.
SEN. HERLIHY: Mr. Guman, I generally am more sensitive to the needs of small business a mid-size business than I am to large business. Just kind of a predisposition. Wouldn't every commercial establishment benefit from this, or, I know you mention the mom and pops which is what got my special attention, so how are they delineated from all commercial and manufacturing industry?
JOHN GUMAN: All commercial users would benefit. The difference is that the exemption is only on the first $150. So what we're talking about is $9 on a $150 bill. A small user, their bill would increase 6% while a large user would not hardly feel this at all.
SEN. HERLIHY: What percentage, I know that the commercial sector is subsidizing for the residential sector. What percentage of their rate do they pay because of this subsidy? What percentage of the rate makes up this subsidy, versus, is it do they pay another 5%, do they pay another 25%?
JOHN GUMAN: I'm not prepared to answer that. I don't have that information. I may have a subject matter expert.
SEN. PETERS: Could you come forward and identify yourself for the record, please.
DAVE RICCIARDI: Yes, Representative Giannaros and Senator Peters, my name is Dave Ricciardi. I'm the director of corporate tax for United Illuminating. To answer your question, the sales tax is not built into our rates as John indicated in his prepared statements. The sales tax simply acts as a flow through tax. We simply are your collector. We collect that tax from our customers as we pass it along to the Department of Revenue Services.
So to answer your question, there is no percentage of the rate that's built into the commercial customers' rates based on this sales tax.
REP. GIANNAROS: Thank you. Any other questions? Senator Peters.
SEN. PETERS: Thank you. I guess the question is, would the consumer, or how would the consumer realize the benefit?
DAVE RICCIARDI: The consumer would realize the benefit, well actually, I need to clarify which question you're referring to. Are you referring to, if all electricity was to be exempt from sales tax, or are you referring specifically to John's comments whereby we're looking to preserve the $150 monthly exemption for our commercial customers?
REP. GIANNAROS: The latter.
DAVE RICCIARDI: The latter. Well, as John pointed out, the $150 monthly exemption equates to a savings of $9 on a commercial customer's monthly electric bill. Obviously for our smaller commercial customers, the mom and pop type stores that John referred to, it's pretty significant. Nine dollars a month multiplied over the course of a year. It's a fairly significant increase in their electric bill that they'd be seeing if we were to take this monthly exemption away from them.
REP. GIANNAROS: Would you be in favor of applying the same exemption for residential customers?
DAVE RICCIARDI: Currently, residential customers are completely exempt from sales tax on their electric bills. If you look at your electric bill when you go home, you won't see any sales tax on there.
As John mentioned, the way the law is right now, really the only classes of customers that are subject to sales tax are primarily commercial customers and certain industrial customers. For industrial customers it's based on whether or not at least 75% of their metered electricity is used in a manufacturing process. If it is, then they're entitled to an exemption. If it's not, they're subject to sales tax but they're also given that $150 monthly exemption.
But primarily, it's our commercial customers that are subject to sales tax and that's the type of discrimination that John was referring to that we'd like to see permanently eliminated.
Just to refresh your memories, you probably are aware of the fact that we've only had sales tax on electricity since July 1, 1989. So we really haven't even had it all that long, not quite ten years.
REP. GIANNAROS: So if I understand you correctly, and I'm glad you mentioned that, there is all kinds of discrimination within the rate, I guess. You're saying that certain industrial or commercial customers that are exempted.
DAVE RICCIARDI: With regard to sales tax, yes.
REP. GIANNAROS: The sales tax I meant.
DAVE RICCIARDI: Yes, with regard to sales tax there is quite a bit of discrimination built into the electric rates in my humble opinion.
REP. GIANNAROS: Okay. Are there any other questions? all set.
JOHN GUMAN: Thank you very much.
REP. GIANNAROS: The next person on the list is Mike Morrissey. Is that Mike? It looks like an "o" on the end. Sorry.
MIKE MORRISSEY: You may call me Mico. (Laughter)
REP. GIANNAROS: That's why I paused, Mico and Morrissey, well. Thank you.
MIKE MORRISSEY: You're welcome, Representative. Senator Peters and Representative Giannaros and other distinguished members of your Committee. My name is Mike Morrissey and I'm vice-president with Beamer Petroleum over in Glastonbury, Connecticut. Aside from my corporate duties at Beamer's I also serve as state director to the National Propane Gas Association.
Today I represent our local members of our trade association here in Connecticut and I'm here to ask for your support for Raised SB1239 AN ACT CONCERNING UTILIZATION OF ALTERNATE FUEL VEHICLES.
For those of you who might not be aware, propane is the world's number one alternate transportation fuel with over 3.5 million vehicles operating worldwide. Here in the United States we've got just a little over 350,000 vehicles that utilize propane as a primary transportation fuel.
Aside from these over the road vehicles there are millions of internal combustion engines in the form
of lift trucks that utilize propane as a clean air fuel.
Raised SB1239 from our perspective, simply extends already establish tax relief for those private fleet owners who are utilizing a plan to utilize propane as a clean air alternate transportation fuel. Not extending these benefits would be counterproductive to Connecticut's achieving its clean air and reduction on foreign oil goals.
We must continue to provide the private sector with tax incentives that encourage the use of propane gas as an alternate transportation fuel. If we take away the incentive, the private sector will not spend the additional money to convert or order new vehicles featuring propane gas as a primary transportation fuel.
Right now the private sector has some incentives to implement the use of propane gas as an important transportation fuel prior to the mandates the Clean Air Act of 1990 and the Energies Policy Act of 1992. Let's maintain these incentives and avoid shooting ourselves in the foot.
We urge you to support raised SB1239. And that concludes my testimony. If there are any questions, I'd be happy to answer them.
REP. GIANNAROS: Thank you. Are there any questions? Senator Peters.
SEN. PETERS: Thank you, Mr. Chairman. I was trying to recollect when we initially instituted this.
MIKE MORRISSEY: I think it was back in 1996.
SEN. PETERS: I knew it wasn't too long ago.
MIKE MORRISSEY: No, it was not.
SEN. PETERS: Do you have any, do your records indicate, or your research indicate how many people have taken advantage, people or corporations, businesses, entities, have taken advantage of this tax break?
MIKE MORRISSEY: I don't have any figures with me right now, Senator. I do know that the benefits have been used with some of the various cleaner fuels. I know that the natural gas industry has been quite successful over the last couple of years in getting a number of fleet owners to convert to that clean air fuel.
I know that as an industry we order vehicles from the factory with this equipment and we can take advantage of that, some of those tax benefits. I know that the clean air fuels have had a bit of a setback with the EPA memorandum 1A ruling that came out about a year ago that limited the converting of almost all engines unless they complied with the EPA ruling where it encouraged in that we're seeing the OEMs, the Ford Motor for examples, who is beginning to offer a lot more vehicles that we can use as an industry.
These offerings were limited over the last couple of years but there have been a number of changes and these incentives are very important to this industry as well as others.
SEN. PETERS: Thank you.
MIKE MORRISSEY: You're welcome, Senator.
REP. GIANNAROS: Any other questions? I have perhaps a question or a comment. This particular credit was to be terminated effective July 1, 1999 as part of a package so simplification reform and restructuring of the corporate tax credits back in 1996, 1997.
And when I looked at the data along with my colleagues and I was the co-sponsor of that particular bill, we found out that there were only two companies participating in taking advantage of this credit and that the use was not sufficient to justify even the administrative costs, DRS's administrative costs and that's why we decided to incorporate that to allow for this particular credit to terminate on July 1st.
Has anything happened over the last year and a half that indicates that this tax incentive is a sufficient incentive for alternative fuels use?
MIKE MORRISSEY: I think that one development is the offerings, as I mentioned just a little earlier in response to the Senator, is the offerings from some of the OAM manufacturers. The problem has been that the development of vehicles that feature propane have been limited.
Although we as an industry have needs with our fleets for many different types of vehicles, they haven't been available from the manufacturers. We need some incentives. If we don't have the incentives in the private sector to spend the extra $3,000 to $5,000 per vehicle, to be honest with you, Representative, I don't think we're going to spend it.
The vehicles come through at a premium and unless we're mandated to buy these vehicles in the private sector, I don't think we're going to do that. We can't justify that additional premium.
REP. GIANNAROS: But again, the question that should be asked, why has not there been sufficient activity in taking advantage? Is the credit not high enough to attract, is the incentive not large enough, I guess, to attract the private sector to implement alternative fuels policies? Related to the vehicles, of course.
MIKE MORRISSEY: It's a Catch 22. If a manufacturer isn't producing a vehicle that you can use in your fleet, then it's awfully hard to go ahead and order that vehicle and take advantage of the incentive. And that's why we're taking the position and speaking in support of this bill that these tax incentives be allowed to be extended to the private sector here in the State of Connecticut because as these vehicles become available, we now have choices where we didn't have choices a year ago.
REP. GIANNAROS: Some of us back then had the problem that if it's only two companies that are subsidized by this bill, does it make sense from a public policy point of view. In other words, if it's not used broadly, and that is something I'm still struggling with. If that is the case and continues to be, are we in the business as a Legislature to provide only benefits to certain corporations and therefore limit implicitly the availability of other credits to others?
MIKE MORRISSEY: I, that's a good question. And yes, even though a few may be benefitting today, more will be benefitting later on. We've gone some mandates with the Clean Air Act of 1990 and the Energy Policy Act of 1992 and if Connecticut does not conform to some of the requirements of those two acts, there are consequences, primarily financial.
And this is in its infancy, the use of propane and natural gas and electricity as an alternate transportation fuel and we encourage your Committee to take that into consideration. It's taking some time. But to take away what little incentives right now are available, in our opinion is shooting ourselves in the foot.
REP. GIANNAROS: Okay, I don't think anyone would disagree that cleaner fuels should be used for vehicle consumption, I guess. What we all would like to see is a lot more activity, I guess and then we can all justify to the taxpayers that we're giving this credit with some considerable positive result and I'm looking forward to a further date on that. Any other questions? Representative Sayers.
REP. SAYERS: Is this used primarily in fleets? I mean, for instance, could I go out and purchase a vehicle that would use propane?
MIKE MORRISSEY: Yes, you could. Right now, Ford Motor is building vehicles that operate on propane gas, on natural gas, and they are available only in certain models, however.
REP. SAYERS: Are they much more expensive than the standard?
MIKE MORRISSEY: Yeah, the premium associated in somewhere in the neighborhood of $3,000 to $5,000 additional cost to the vehicle to have it set up to run on either one of those fuels. So there's quite a premium at the moment.
REP. SAYERS: The other thing is, would I be able to find enough gas stations that would provide me with the propane? I mean, I live in a town that just so happens does have a fueling station in my town. And I have a son who had a van that used propane, so I've had some experience with it. But I do know, he converted it back to regular gas because at that time we didn't even have a fueling station and to travel any distance you had to check ahead of time to make sure that you could find fuel wherever you went. So why would there be any incentive to someone to use that source of fuel if it became a major project just to take a trip.
MIKE MORRISSEY: Well, there is a well established infrastructure nationwide where propane is available as a transportation fuel. Just here in the State of Connecticut we've got somewhere in the neighborhood of about 40 members of the National Propane Gas Association, all of which are equipped to dispense propane and that does not include the dealers that are supported by the members of this Association.
We, for example, have 65 dealers throughout the State of Connecticut that have dispensing equipment and that in theory can fuel a vehicle. And of course, aside from propane, there are natural gas refueling facilities here in the state that have been built over the last couple of years to make it available to both private and general public.
REP. SAYERS: But they're mainly on main thoroughfares. Major highways are, not just any place.
MIKE MORRISSEY: There's no question that propane nor its counterpart, natural gas, aren't available like gasoline is available. But certainly when it comes to propane, there are well over 100 locations here in the state. Some on major thoroughfares and some in remote locations that do make it available.
REP. GIANNAROS: Senator Peters.
SEN. PETERS: Thank you. Representative Sayers, one of the things that (indistinguishable) as we looked at this issue since the mid nineties, to encourage the state and anyone that's on Transportation Committee, we would love the assistance to encourage the state when they're negotiating these contracts with, the fuel contracts, that they also encourage the propane and electric stations as well if they want to contract with the State of Connecticut on our main infrastructure.
REP. GIANNAROS: Representative DelGobbo.
REP. DELGOBBO: Thank you. Sort of just a comment I ask you to respond to, both in the underlying question on the credit but also this discussion we've had. It seems it's almost like a chicken and egg debate. In part, what I would assume you would advocate as public policy is ways of encouraging the use of these vehicles and one of the reasons why you don't see a broader availability, places to get to have propane gas to fill it up is, there isn't a market for it. How do you help to create the market for it and that may be in part through the purposes of this legislation.
Could you comment, given your, I'm sure that you attend different kinds of conferences and different market studies on where you see the potential future on this kind of market, assuming that this Legislature as an example, were to continue this kind of (inaudible)
MIKE MORRISSEY: Okay. You've got some requirements, as I understand it, with the Clean Air Act of 1990 and the Energy Policy Act in 1992. Some of the requirements of those acts from what I understand, have been delayed a bit. But as these requirements kick in, the private sector is going to have to operate vehicles on a clean air fuel. Right now they're not required, okay? However, they will be required.
The purpose of this initial legislation was to help jump start the use of clean air fuels here in the State of Connecticut. That's why, back in 1996 the legislation was drafted and passed to kick start things here in the State of Connecticut. Everybody thought it was a good idea and we still think it's a good idea, clean air and reduction on foreign oil.
Where it goes depends on a few different things. We as an industry had a big setback with EPA's memorandum 1A which basically took everybody out of a conversion business. In the past you could convert an internal combustion engine to run on a clean air fuel. On memorandum 1A, there was significant testing with certain engine family groups that had to be accomplished which once the testing was done then would allow for a certain engine group to be converted. It basically put everybody out of the conversion business which left us with simply what was being offered from Detroit in terms of vehicles that are equipped to run on natural gas or propane gas.
So we see now Ford, for example, is beginning to offer more vehicles of the type that we as a private sector can use, and we're just waiting, as these vehicles become available from the factory and as we need to replace our fleets and update our fleets, these then become options for us, okay? But we're kind of waiting to see what's being made available.
And I know the focus in Detroit has been primarily with natural gas vehicles. There's been a lot more attention with that field versus propane for some significant reasons. But propane has been used for years throughout the United States and throughout the world, especially over in the Netherlands where you've got upwards to 40% of all the vehicles that run on propane as an alternate fuel.
REP. DELGOBBO: Thank you.
REP. GIANNAROS: Thank you. Yes, Representative Miller.
REP. MILLER: Thank you, Sir. Regarding the propane, what kind of growth has there been in the last three to five years and secondly, how has that affected the price of the product?
MIKE MORRISSEY: Growth in traditional markets or growth as an auto fuel? You asked what kind of growth has there been in our industry. The growth in our industry as an industry in general has been significant especially throughout New England.
In terms of the price of propane, propane is regulated by market conditions. A couple of years ago we had a bona fide shortage of propane in the United States and I know here in New England we saw propane go up as much as 35 cents a gallon for a period of about a month to a month and a half in late December and early January. Since then, there has become an abundance of propane as there have been all other fuels and we're now seeing propane at record lows, lows that we haven't seen over the last five years. And that pricing is expected to continue, at least for the next year because we still have inventory levels nationwide that are well above what we consider to be normal.
REP. MILLER: Thank you.
MIKE MORRISSEY: You're welcome.
REP. GIANNAROS: Any other questions? Thank you, Mico, or Mike.
MIKE MORRISSEY: You're welcome. Thank you very much.
REP. GIANNAROS: The next person on the list is Peter Casarella. Well, here come the visuals.
PETER CASARELLA: Good afternoon, Chairpersons Peters and Giannaros. Members of the Energy and Technology Committee. My name is Peter Casarella and I work for Connecticut Natural Gas Corporation. We're here today to speak in favor of raised SB1239 AN ACT CONCERNING UTILIZATION OF ALTERNATE FUEL VEHICLES.
Over the last decade, this Committee and this Legislature have established an alternate fuel vehicle policy which has been environmentally driven and fueled by tax policy, including a list of credits and exemptions enumerated in SB1239.
Now, sunset provisions of these statutes threaten the policy. While our industry and our multiple partners including the State of Connecticut, the towns of Rocky Hill, Berlin, Greenwich, Newington, United Parcel Service, the U. S. Postal Service and others, have embraced this environmentally friendly technology. It is clear that we need more time to nurture this environmentally beneficial industry.
The map I have brought for you today which is also attached to my profile testimony is a report card on our progress which your legislation has brought forward. In CNG's territory, that is the territory shown on this map in purple, there are 10 natural gas fill sites which support some 425 resident vehicles.
These 425 resident vehicles represent about 1/10th of 1% of the estimated 355,000 vehicles housed in our service territory. These vehicles comprise fleets such as United Parcel Service, the U. S. Postal Service, the State of Connecticut, specifically the Department of Environmental Protection, Department of Motor Vehicles, the Capital Police right here have two natural gas powered Crown Victorias, Lyme Police cars and the Department of Administrative Services, of course Connecticut Natural's fleet, American Limo, the Yellow Cab Company and Town and Country Livery, to give some examples.
For our company, natural gas vehicles fosters an awareness of a clean energy source. For us, and the other fleet operators NGV's aid environmental compliance. For the twelve months ending January, 1999, the gas vehicles consumed some 310,000 gallons of natural gas which equates to less air pollution amounting to two tons of VOCs, volatile organic compounds and eight tons of NOX. Nitrous oxide. We life in an environmental attainment area and have been fortunate to have had progressive legislation in effect to help us significantly reduce environmental impacts through the use of alternate fuel vehicles.
Today, we respectfully seek your favorable action to extend our policy, your policy, for the alternative fuel vehicles industry which has had some success but is still a fledgling industry worthy of your continued support. We hope that you will not turn your back on your vision.
Additionally, CNG would like to go on the record today as saying that we are in favor of raised HB6851 AN ACT CONCERNING SALES TAXES RELATING TO GAS COMPANIES. And again, thank you very much for your consideration.
REP. GIANNAROS: Thank you. Any questions? Let me ask again, what percentage of the vehicles that are used currently in the State of Connecticut are utilizing natural gas as an alternative fuel?
PETER CASARELLA: In the State of Connecticut there are approximately 1000 natural gas powered vehicles.
REP. GIANNAROS: What's the total number?
PETER CASARELLA: I do not know the relationship because I don't know the total number of vehicles in the state. I'm sorry, Sir. Again, in our service territory it's about 1/10th of 1% of the vehicles.
As you know, Connecticut is made up of four gas companies. There's Connecticut Natural Gas, Yankee Gas Service Company, the Southern Connecticut Gas Company and the Municipality of Norwich.
REP. GIANNAROS: Do we have any hard core data, evidence, or forecasts indicating significant upward trend?
PETER CASARELLA: I do not have that data with me but again, if I did, Sir, it would be only concentrated on Connecticut Natural's service territory. It wouldn't be for the entire state.
REP. GIANNAROS: Beside Connecticut Natural Gas and UPS, do we have any other major users of this state tax credit?
PETER CASARELLA: We certainly do. We have the United States Postal Service. We have the State of Connecticut's fleet under the arm of the Department of Administrative Services. The state now has 82 vehicles. Again, this is the Department of Administrative Services, these are the smaller vehicles under 8500 gvw. There are limousine companies in the state that have natural gas powered vehicles. Four municipalities in this area run some of their police force off of them. They would be the towns of Rocky Hill, Berlin, New Britain, Newington, that run vehicles. So there are a lot of vehicles out there, Sir.
REP. GIANNAROS: And how would these other alternative fuels, including natural gas or propane, how would they compete relative to the electric cars, I guess, one of the major companies is about to bring
out. Any sense yet as to how --
PETER CASARELLA: In fuel efficiency, in economy?
REP. GIANNAROS? Fuel efficiency.
PETER CASARELLA: Its my understanding that the electric vehicles, there will certainly be a niche market for them, as I believe there's a niche market for natural gas vehicles and propane vehicles.
I think there's an opportunity for all alternative fuel vehicles to play on a level playing field in their respective niche markets, whatever those niche markets end up being.
REP. GIANNAROS: Okay. Thank you. Any other questions or comments? Thank you again.
PETER CASARELLA: Thank you.
REP. GIANNAROS: Next, Doug Kirk.
DOUG KIRK: Good afternoon members of the Energy Technology Committee. My name is Doug Kirk. I'm a key accounts manager at Connecticut Natural Gas but today I come before you as the president of the Capital Clean Cities of Connecticut.
I have some prepared remarks, but your earlier question about where future projections, we do have some future projections from existing users I'll share with you when I'm finished.
We are a statewide alternative fuels and clean air coalition, committed to reducing emissions from mobile sources and our dependency on foreign oil by increased use of AFVs in Connecticut. I am here today to speak in favor of raised SB1239 AN ACT CONCERNING UTILIZATION OF ALTERNATIVE FUEL VEHICLES.
The statewide activity has been generated by four different natural gas utilities, the Connecticut Natural Gas Company you'll note it is in purple, Yankee Gas Service noted in blue, Southern Connecticut Gas noted in peach and the Municipality of Norwich which is noted in grey.
Together with their work and your progressive legislation, we have placed over 1000 natural gas powered vehicles. The activity has been complemented with some 15 electric vehicles, 14 in Northeast Utilities Service area and one in Norwalk and 50 propane powered vehicles located throughout the state.
These vehicles are located in such fleets as utilities, the State of Connecticut, ride share companies, municipalities, cooperative electrics. As noted earlier, UPS, United States Post Office, taxi and limo companies, American Airlines baggage loading vehicles, ice resurfacers, forklifts and many propane company vehicles.
Together for the 12 months ending December, 1998, I estimate that these vehicles have consumed approximately 500,000 gallons of alternative fuels, displacing the same amount of gasoline. This resulted in reduced emissions of four and a half tons of volatile organic compounds and eight and a quarter tons of the noxious oxide.
Your legislative foresight has enabled this fledgling alternative vehicle market to begin to have a positive impact on our region's air quality. Educate our fellow citizens that there is an different way to fuel the vehicles and begin to sever our state's reliance on foreign imported fuels. Is there any questions I could answer?
I do have that information. What we're looking at from existing users today they're projecting by the year 2002, to be using approximately 1900 vehicles. Today there are just under 1100.
REP. GIANNAROS: 2002?
DOUG KIRK: 2002, correct.
REP. GIANNAROS: If you can help me out a little on this. What is the cost of converting a car from gas induced type of energy to alternative fuels such as natural gas.
DOUG KIRK: The conversion market is much smaller than it once was. It's now, you purchase vehicles from the factory and you buy an alternate fuel option. It varies from about $4,000 say for a Honda Civic to upwards to maybe $10,000 or $12,000 for an electric pickup truck. And it varies, depending upon the competitiveness of the bids and all, but that's basically the range today.
REP. GIANNAROS: And what percentage of that additional cost is recovered?
DOUG KIRK: Today, when you buy an OEM are you referring to the tax credit?
REP. GIANNAROS: Yes.
DOUG KIRK: Today, when you buy at an original equipment manufacturer from Detroit, you get a 10% credit. Conversions are 50.
REP. GIANNAROS: Okay, thank you. Any other questions or comments? Thank you again.
DOUG KIRK: Thank you.
REP. GIANNAROS: Next, Heather Hunt.
HEATHER HUNT: Good afternoon, Representative Giannaros, members of the Committee. I'm Heather Hunt and I represent the Southern Connecticut Gas Company, here today just to speak briefly, in support of the adoption of HB6851 AN ACT CONCERNING SALES TAX RELATING TO GAS COMPANIES.
Under current law, commercial and certain manufacturing customers pay sales tax on the use of natural gas and electricity. Electric commercial customers are exempt, however, from paying sales tax on the first $150 of their monthly bill.
Natural gas customers due to a peculiarity in the law, are not exempt from paying sales tax on the first $150 of their monthly bill. Natural gas companies compete directly with providers of electricity. There's no reason why state tax policy should disadvantage natural gas as compared to electricity.
The bill as proposed would restore balance to the tax treatment of gas and electric service. Now the bill limits the tax exemption only to the first $150 of natural gas service. The primary beneficiary of that would be Connecticut small businesses.
If you take for example a neighborhood or corner store, the proposed exemption could provide tax relief for that small business' entire monthly gas bill. Currently, residential customers don't pay any sales tax on their gas usage, nor do other classes of customers such as industrial manufacturing plants or agricultural producers.
Extending a sales tax exemption to only the first $150 of gas usage represents a modest benefit as compared to that full sales tax exemption extended to others. Southern believes that the dual tax treatment depicted in tax policy deserves to be corrected. The benefits that have been accorded to electric customers should be extended to natural gas customers. Thank you.
REP. GIANNAROS; Thank you. Any questions? Would you be in favor of exempting sales taxes on converted vehicles?
HEATHER HUNT: We have submitted testimony in support of the testimony of the previous speaker and that's about as far as I go on vehicles.
REP. GIANNAROS: Thank you.
HEATHER HUNT: Thank you.
REP. GIANNAROS: The next person is Fred Knous.
FRED KNOUS: Good afternoon, Representative Giannaros and members of the Energy Committee. My name is Fred Knous and today I'm here representing the Connecticut Water Works Association. The Connecticut Water Works Association is an association of public water supply utility serving a population of about 2.5 million people.
We would like to provide comments regarding raised SB1240 AN ACT CREATING A TASK FORCE TO STUDY WATER COMPANIES. Given the complexity of water utility issues and the critical nature of providing adequate water supplies for residents of the state, it seems appropriate to convene a task force to examine these issues.
There have been a number of initiatives in this area in the past that would provide some basis for further study and some of those were mentioned by the Chairman of the PUC earlier. The study conducted by the Department of Public Utility Control pursuant to PA95-174 which is all the small water systems, Legislative Program Review and Investigation Committee did a study of water companies in 1993, aquifer protection task force, PA87-63 and the water resources task force during the early 1980s. It was this task force that the major water supply planning legislation still in effect evolved.
We certainly support the concept of a task force outlined in raised SB1240 but would like to offer some recommendations that we believe would make the task force more effective and produce a better result.
There are currently over 600 regulated water companies in the state, most of which are small companies serving less than 1000 customers. Additionally there are over 3000 water systems associated with mobile home parks, condominiums, home owners associations or other entities that operate the water system ancillary to their primary functions.
As these small water systems are faced with increasingly stringent water quality standards and testing requirements to comply with both state and federal law, the state needs to provide policies that will provide alternatives to these small operators.
The issues raised in SB1240 are but a few of the many complex issues facing the state's water utilities and the regulators. As the state and federal water regulations continue to grow more stringent, water companies will be faced with increasing technical, financial and managerial challenges. Some of these include the increased regulatory and financial obligations which make it difficult for water companies to remain viable and continue to meet the water quality and service obligations for their customers.
The pressures to alleviate inequities between water companies and the disparity in rates that may necessitate changes in public policies. Consolidation of water companies may be necessary. Particularly in areas what the existing systems are no longer viable.
As communities are faced with contamination or other losses of private wells, it will be essential that viable water utilities with adequate supplies are available to serve these residents. Growing environmental pressures will create greater challenges for allocation of water resources.
Public water suppliers are now under the jurisdiction of three state agencies, each with their own statutory obligations. As a result of this, this of course can result in delays and in some cases can increase costs which ultimately would be passed on to customers.
The water supply planning process required pursuant to Section 25-32d that considers water supply planning on a regional basis needs to be completed throughout the state. To date, three of these WUCCs or water utility coordinating committees have been convened. A fourth one in the southeastern area has recently been convened and is currently being studied.
We have some specific recommendations regarding the makeup and objectives of the task force for your consideration. We feel the topics for the study might include other issues that should be addressed. It's important, however, to note that the activities of the task force not duplicate studies and evaluations currently being done an example of which would be the study and inventory of water resources by DEP and the water allocation task force of the rivers advisory committee required by PA98-225.
Since the recommendations may necessitate action by various legislative committees having cognizance over water companies, it would seem appropriate to expand the task force to include members of the Energy and Technology, Environment and Public Health Committees. Additionally, the task force could then possibly be chaired by two of the legislators.
Membership of the task force should be defined to include a diverse representation of water utility professionals from all types of water utilities as well as members of the Connecticut Water Works Association. Public water suppliers vary greatly in size from the smallest single development well based systems to large utilities serving hundreds of thousands of people.
Additionally, they have different forms of governing. Some are municipal, some are regional, some are investor owned and they all have their own unique governing boards.
In order to accomplish the goals of the task force we believe it would be necessary that high ranking officials in the three state agencies, the DEP, DPH and DPUC be appointed to participate. And because of the impact public water suppliers have on the public health of their customers and consumers, CWWA also recommends that a representative of the Connecticut Environmental Health Association or other local and regional public health officials be appointed to the task force.
As the Committee knows, the state's public water supply is extremely complicated. For a task force to be effective in its mission it is important that the right players be at the table to discuss the issues. It is important that sufficient time be allocated to allow the task force to do its job.
CWWA therefore recommends that the Committee consider a later date than January 1, 2000 to allow for the development of a comprehensive report. We would like to assure the Committee the members will participate and work effectively on any task force they are assigned or appointed to. CWWA is available to recommend knowledgeable and dedicated individuals for appointment to the task force.
Finally, we would note that there already exists the need for consolidation of water companies and acquisition incentives. CWWA testified last week before P&D Committee to recommend measures to provide greater flexibility in the rate setting process to address the issue of rate treatment for acquisition costs.
Since this Committee may more appropriately address these issues, we will forward a copy of this testimony for your consideration. Thank you for the opportunity to provide our comments.
REP. GIANNAROS: You're most welcome. Let me ask you a couple of questions for my own benefit, here, so that I understand. We have 168, towns I believe. 169 towns. Thank you. And some people from other states that probably say we have too many towns given the size of the state. We are about equal to one neighborhood of New York City in terms of population.
The reason I'm bringing that in, we have 169 towns and 600 water companies plus others that are pumping water. When I think of this as an economies, looking at what we call economies of scale in order to be efficient in other words, you have to be a certain size. How do you explain this? I mean, this is mind boggling to me that we would have so many water companies. Does that explain why one side of the state you pay let's say $1 per whatever and on the other side you pay twice as much?
FRED KNOUS: There might be a variety. I just point out certainly, historically in Connecticut, Connecticut has evolved in its own unique way. We, for example, do not have much of a county government system other than the few remnants and that's, I think when you look at other parts of the country and other places, as different types of government entities evolved there was an opportunity for perhaps more consolidation of resources. But it's correct, in Connecticut it's unique. Obviously, you're looking at a small water company in terms of the economy of scale of trying to provide quality drinking water, they're going to run into problems. If you have 50 or 75 or 100 customers and you start to have problems, just regulatory problems that they face are difficult financial hurdles.
But I don't know if it answered your question, Representative.
REP. GIANNAROS: Yeah, again, I'm trying to understand what is going on in this industry. There are small water companies serving less than 1000 customers.
FRED KNOUS: Right.
REP. GIANNAROS: I am thinking of the administrative costs of having a president and having a couple others. How does one do that?
FRED KNOUS: I think with a great deal of difficulty. I think when there wasn't as much oversight if you went back again 20, 30, 40 years ago. They were able to do it and I don't know what the quality of the water was, but I think they were able to do it. Today with the various regulatory issues that have come up, and I think they're finding it extremely difficult. That's why the state has been involved in trying to solve a lot of these problems where people have contaminated water and --
REP. GIANNAROS: But is it true that our pricing policy, DPUC's pricing policies are based on cost plus profit rate for the investor.
FRED KNOUS: Well, if you're talking, again, if you're talking about investor owned companies --
REP. GIANNAROS: Investor owned companies -- (inaudible-two speaking at once) to distinguish what is going on there.
FRED KNOUS: Yeah, that's my understanding. I'll double check and I'll provide you with --
REP. GIANNAROS: So in other words, the customer of water is at the mercy of the small investor company and how efficient or inefficient they are, or, because if the price is based on cost plus a margin of profit. Anyway, think about that and perhaps you can give us an answer later.
FRED KNOUS: I think when you look at the smaller companies versus the larger companies there are a lot of issues that obviously the larger the company the more financial resources and more ability they have to deal with some of these problems.
REP. GIANNAROS: The reason I ask this question is, this bill that you testified on came about as a result of hearing another bill that was asking us to solve a problem in one of the particular towns that half of the town or more than half is serviced by MDC one price and the other half is serviced by another company paying twice as much, the customers of that second company paying twice as much as that of MDC.
I'm exaggerating on the numbers now, but that was the main point and that's when we decided to review the whole state's policy on water companies and what needs to be done to address the problems that exist.
Any further questions? Senator Peters.
SEN. PETERS: Thank you, Mr. Chairman. Thanks for these recommendations. Just to add what Demetrious was saying. There is a recognition that there are three entities out there, or committees of cognizance, or departments or agencies that have overlapping purviews in this and that is another area we thing at last from a process and public policy question, can be cleaned up so that some of these issues that going forward can be addressed a little bit more straightforward as well.
But you've made some recommendations that we'll really take into serious consideration. Thank you for that.
FRED KNOUS: Thank you, Senator.
REP. GIANNAROS: Thank you. Any other questions or comments? Thank you, Mr. Knous. Next on the list we have Tom McCormick.
TOM MCCORMICK: Good afternoon. I've got a quick comment on this issue of the gas vehicles. If the Committee or the Legislature wants to see an increase in these clean vehicles, you could simply order all state vehicles purchased in the future be natural gas and you would increase the market quite a bit and it would probably lead to some cost efficiencies.
I'd like to address that act concerning emergency planning a little bit at length but first there's a bill to fund discoverer's advisory committee. I've been to several of their meetings. I've seen their people speak to the NRC and they're really quite worthless and I don't think it's worth any of the taxpayers money to give them any money. If they want to do it voluntarily, okay.
Just as an example, the last NRC hearing the big contribution to safety at Millstone from this group was that they recommended that Little Harbor be retained into the future to oversee concerns at Millstone. I mean, Little Harbor under contract from Northeast Utilities to guide them to a predetermined destiny to make sure they got approval and that is just that Committee's big thing. That's their big thing. They're really quite worthless.
I went to a hearing on emergency planning and they didn't even bring up the issue of potassium iodine. The meeting started at 7:30. Potassium iodine wasn't mentioned until after 10:00 when I brought it up. The people are really quite worthless and if they want to do it voluntarily fine, but I urge no taxpayer money for them at all.
SEN. PETERS: May I just interject please that is recognition of potassium iodine issue in their report to this Committee. So, they may be doing more than what you actually see as someone sitting in the audience.
TOM MCCORMICK: Yes, I think they were dragged to it and they were very reluctant even to have the issue discussed. Very reluctant even to discuss the issue.
Okay. They finally got there.
SEN. PETERS: This is not an appropriate forum to be fingerpointing and casting blame and calling each other names so please continue.
TOM MCCORMICK: I'm just saying I don't support paying taxpayer money for them. That's it.
SEN. PETERS: Please continue with your --
TOM MCCORMICK: Emergency planning. Some education, the Office of Emergency Management needs some education to start with. Last time I saw the director, someone asked him about the 10 mile limit and he thought that 10 miles was about as far as radiation could go out from a plant. I don't know if he thought that the fuel source impelling that radioactive particle would only get it 10 miles and not 15 or 20. But to start with, some education for the emergency management people themselves in this bill.
And this whole conception of emergency planning zone is a myth, a fallacy, it's ludicrous, of 10 miles. The Rasmussen report also referred to reactor safety study. It's quite explicit in its language that you could have severe impacts from a nuclear accident 25 miles away from a plant just as easily as one mile or three miles or 10 miles, depending on atmosphere conditions and in fact you would most likely have radiological consequences further than the 10 miles just because if it goes out of stack, gets up in the wind, then it's going to go a lot farther than three miles or 10 miles.
So we're talking about something here in this bill that while yes, it's okay to do this, it's grossly inadequate. The NRC itself requires the operator of a plant to look at a 50 mile zone of radiological consequences. So yes, okay, but change this 10 mile business.
SEN. PETERS: Mr. McCormick, what bill are you testifying on please.
TOM MCCORMICK: SB1196.
SEN. PETERS: Thank you.
REP. GIANNAROS: Go ahead please.
TOM MCCORMICK: So the planning zone is grossly inadequate and I would suggest to change the bill to bring it out at least to 25 miles or you could get a conformance with the NRC and make it a 50 mile radius from the plant.
Also there's no mention of distribution of potassium iodine in this bill. I think that would be a valuable thing to get into the bill. I don't know how it's going to be funded, if the state is considering funding it or making the towns, but get into the planning process. Poland was spared a great deal of thyroid cancer when Chernobyl went bad. You could do a great deal of good to protect the health and safety of people in the State of Connecticut.
And of course, when you consider any bill, you have to consider the likelihood or the reason or the motivation for the bill, how necessary it is to have planning for a nuclear accident. Well, Chernobyl certainly showed us that these plants can go bad. They can go bad in a very large way. I think the death zone around Chernobyl is 30 miles right now. The Ukrainian Health Minister is projecting up to 100,000 deaths from Chernobyl which clearly points out that in your bill that you're going to limit it to 10 miles or three miles as it's presently construed. It's grossly and totally inadequate.
Again, how often is it going to happen, or is it going to happen? Just for an example, in 1986 there was a cavity fuel failure at Connecticut Yankee. The refueling channel between the reactor and the (indistinguishable), a seal gave way and the water flooded out of that channel back into the plant. Just some mild consequences. It wasn't too bad. But that was just pure luck because if a fuel assembly had been hanging there when that seal went, you would have had in the estimation of every nuclear physicist that I've talked to, Chernobyl-like or greater than Chernobyl consequences.
Some of these people even work for NU have told me this and every single physicist I've asked around the country, Chernobyl or greater.
Did it happen at Connecticut Yankee solely as a function of time. Solely as a function of time. That gasket didn't fail because or there wasn't the fuel assembly hanging there. The fuel assembly hanging there, the entire Connecticut River Valley and Long Island Sound, massive radiological consequences wiped out, which just goes to the point that the present bill recognizing, if you're going to recognize a 10 mile zone is grossly inadequate.
I have some literature here for you. One said, (indistinguishable) a nuclear act disaster is a near certain event. It has quite a bit of reasons from a variety of scientists why that's so, so I'll give that for the Committee. And just some other general reading here for you about radiological missions because you're planning here worrying about the health consequences of nuclear power when the fact of the matter is, every single day that plant is spewing radio-nuclear (indistinguishable) into the environment and poisoning us.
So, be concerned about an accident, yes. But the accident is an accident that's happening every single day and I think you should be aware of that.
Just to conclude, I hope you are all in receipt of a letter you got from the Citizens Awareness Network addressing some electric deregulation amendments. If you're going to hope to cut electric rates 10%, you're going to have to put a cap on the line charges. Simply, the decommissioning cost, spent fuel costs and stranded costs for Millstone are going to overwhelm any possible savings that could be achieved in the generation area. Totally overwhelmed that you will not have any 10% cut.
SEN. PETERS: Mr. McCormick, those remarks have nothing to do with what's on our agenda.
TOM MCCORMICK: No. I just asked if you were in receipt of the letter and have read it. Okay, thank you.
REP. GIANNAROS: Representative DelGobbo.
REP. DELGOBBO: Thank you, Mr. Chairman. The first question, Mr. McCormick is, where within this bill, and I can't find it, does it specifically limit the mile limit of the zone.
TOM MCCORMICK: It doesn't. But that is, under the present way it's set up by the NRC and is recognized by the towns, it's three miles or something, it's 10 miles for other things.
REP. DELGOBBO: I understand. And my point to that is, and I'm not familiar, other than your good intentions with what your background is in evaluating what the appropriate zones are, but obviously having some familiarity with FEMA, with NRC in terms of how they evaluate potential dangers and hazards both for the public, I would just point out that that's not an evaluation that this Committee itself makes, but one which is a standard, I guess in a sense of (indistinguishable rate in terms of ability to make a professional evaluation of what the appropriate zone is. That's my comment, Sir. I'm not asking for a response.
I'd also point out that one of your comments which seems frankly somewhat disparaging to some of the state's personnel. One of the purposes of this bill as it already exists, or the language already existing, that this bill simply adds onto is continued training of state, local emergency response personnel. And I just wanted to point that out.
TOM MCCORMICK: I was just pointing out that they need it, from what I've heard from them in the past, they need it desperately.
REP. DELGOBBO: And my final question is, because I did receive your letter, but I point at both to this testimony and the general, what exactly is the Citizens Network? What is this organization?
TOM MCCORMICK: Well, it's an organization that got founded up in western Massachusetts to challenge the Nuclear Regulatory Commission and the company dismantling the reactor because it was being done in direct violation of federal law. Went into court, got a judge to rule that decommissioning was in violation and that's how it started. It's been instrumental in getting the Pilgrim Health Study which showed a raise in cancer rates around the Pilgrim reactor operating in New York around the Fitzpatrick and Nine Mile Point, operating in southern Vermont around Vermont Yankee. They were working in Maine, but that's pretty much stopped with the closure of Maine Yankee.
REP. DELGOBBO: Okay, thank you.
REP. GIANNAROS: Further questions? Thank you, Mr. McCormick. Scott Feron.
SCOTT FERON: Good afternoon. Mr. Chairman, Representatives, Senator Peters, distinguished Committee members, my name is Scott Feron. I am the general manager with Yellow Cab Company from Bloomfield, Connecticut. I'm here today to speak in favor of raised SB1239.
These credits are vital to small fleets to do their part in converting to clean alternative fuel vehicles. Tax credits are an incentive for small businesses with fleets to become involved in cleaning up our tailpipe emissions. These tax credits are extremely important to companies making improvements for new construction of fueling stations to help create the infrastructure needed to continue operation of clean alternative fuel vehicles.
Raised SB1239 gives credit to offset the incremental costs for small fleets to purchase dedicated clean alternative fuel vehicles and Yellow Cab Company respectfully asks that you consider this bill favorably.
As a recent purchaser of 31 original equipment manufactured dedicated natural gas vehicles, we will continue to replace our fleet. We and other small business fleets would surely continue to replace our old fleet rather than convert.
Currently, we can utilize the used oil from our new original equipment manufacturer dedicated natural gas vehicles as fresh oil for our aging fleet, showing that the new original equipment manufactured dedicated vehicles are the best for the small fleets.
Thank you for your time and your commitment to our environment.
REP. GIANNAROS: Thank you for coming. Just for clarification. How many vehicles do you have on the road right now?
SCOTT FERON: Currently we have just converted or put into our fleet, 31 natural gas vehicles.
REP. GIANNAROS: Thirty-one are converted.
SCOTT FERON: Dedicated natural gas vehicles.
REP. GIANNAROS: But the question is, how many in total do you have on the road?
SCOTT FERON: In total we've got 69 in operation.
REP. GIANNAROS: So that's almost half, about 40%.
SCOTT FERON: Yeah, around half. About a third actually.
REP. GIANNAROS: Questions? Senator Peters.
SEN. PETERS: Mr. Feron, I just want to say it's delightful to have you here before the Committee testifying.
SCOTT FERON: Thank you.
SEN. PETERS: We usually see a number of the same old faces and it's nice to have some other input. And I say that respectfully from my friends that usually testify. I invite you back again and actually to thank Yellow Cab for its endeavors in cleaning up the environment and doing what I think is the right thing. Thanks.
SCOTT FERON: Thank you.
REP. GIANNAROS: Thank you. Any other questions? Yes, Representative Horton.
REP. HORTON: If I might just inquire, what has been the bottom line impact. How has your bottom line been affected by using these natural gas dedicated cars?
SCOTT FERON: We're still in the experimental stages. As the first of these vehicles went on the road October 1st, so we're really trying to, we're putting together like a data base to see what the overall outcome is going to be.
What we've noticed so far from the response from our drivers, the response from the overwhelming, the public response in the Greater Hartford area itself is that these vehicles are definitely a benefit, not only for the economic reasons but the pollution. People are, to me they give us a better response because they know that they're helping by taking a natural gas vehicle or a natural gas taxicab that they're doing their part, which they may not otherwise be able to do in taking transportation.
Our gas mileage is further than we would normally go. We've actually got, as I stated here, our oil that comes out. We change our oil on these vehicles on a dedicated natural gas vehicle, we change our oil twice as, I'm sorry, two times longer than you would normally do. We average about 4500 miles between oil changes. And the oil is so clean out of these vehicles that we can then use that recycled oil into our aging fleet until such time that we can afford to continue to replace that portion of our fleet.
REP. HORTON: Is it fair for me to assume then that the tax credit, this tax credit has helped your business to acquire these cars and improve your fleet?
SCOTT FERON: Yes, it has.
REP. HORTON: Okay.
REP. GIANNAROS: One further question relating to the benefits. Is there any difference in terms of pollution noise level?
SCOTT FERON: No, actually the cars sound just as a normal gasoline driven engine. You don't get a big tremendous difference there. It's a new vehicle. New vehicles typically sound nice. So we're hoping to try, a little bit further down the road I can give you an example. We've got our first ones that hit the road October 1st. Those first six vehicles have an excess of 35,000 miles on them already. So by this time next year I could probably give you a better answer because typically the taxi vehicle is a high mileage fleet compared to some other small business fleets. Our cabs are on the road 24 hours a day, seven days a week, 366 days a year. We get Leap Year once in a while.
REP. GIANNAROS: All set.
SCOTT FERON: Thank you.
REP. GIANNAROS: Thanks for coming. Next, Charles King.
CHARLES KING: Senator Peters, Representative Giannaros, other members of the Committee. I am here to speak in favor, oh, I am Charles King from Northeast Utilities. I'm the electric vehicle program coordinator there and I want to speak in favor of raised SB1239.
However, I have some prepared remarks and some specific suggestions for the bill. But before that, I heard a number of very good questions raised during the course of this afternoon and I thought in perhaps an unprepared way try to speak to them and address really why we need these continued incentives.
We just heard from Scott Feron about the alternative vehicles success story that Yellow Cab is experiencing here in the city. Alternate fuel vehicles in general have you know, been touted of an environmental benefit and reduced pollution coming out the tailpipes I think is not up for question. Also, depending upon the fuel, the alternative fuel that's used, there's an energy savings. I'd like to say that you know, to go a mile you use less energy or less equivalent perhaps BTUs out of a barrel of oil we're pulling out of the ground, so it's actually more efficient.
But I think the problem that we're all facing is from a customer perspective. It's in their pocketbook and it's the economics. As you know, the, and I think the big problem is in the first cost of the vehicles. As Doug pointed out, we're probably looking a $4,000, $5,000 incremental extra cost for a natural gas vehicle and I don't even want to go into what they are for electric, depending on the battery technology.
The good news is that there's a fuel benefit and I think it's fair to say that all of the alternative fuels on a cents per mile basis are cheaper than gasoline.
Also, what Scott's beginning to see here is that some of the touted benefits from a reduced maintenance perspective are in fact coming to play and that can actually reduce, from a fleet perspective, reduce the costs. So you're weighing reduced maintenance, reduced fueling costs versus a higher incremental cost on a vehicle and that's why, and I speak for my friends in the natural gas industry that have seen the most use, the most penetration of natural gas vehicles is, when you get a fleet with a large number of vehicles and especially vehicles that go a good number of miles a year, that they're, you're doing it on a total cost basis, their break even points are much closer in.
The, to come back to this particular bill, some of the section this thing both speaks to trying to reduce, effectively reduce the first cost of the vehicle and also in the case of some of the natural gas provisions and perhaps a propane provision, try to give a contingent, a little bit of an edge on the cost of the fuel.
I would like to now speak to some of the specific things that I have in here as far as suggestions, and please take them as creative suggestions to this particular bill.
In the, what is it, this is actually line 6 which refers to the business tax credit. Let me back up by saying, based on the research, I've done all of these bills or the provisions in this particular bill are ones that have been around for a while and really what this particular bill tries to do is extend them for a few years and we're very appreciative of that.
But in this first part here, where we talk about the business tax credit on the incremental cost of vehicles, I'd like to see or suggest that that be raised from 10% to 50%. The reason is that a 10%, and this is kind of my own feeling, a 10% tax credit if we're talking a $3,000 or $4,000 differential, we're talking natural gas vehicle, it may not be worth the paperwork to fill it out to try and get that tax credit. So I'm just suggesting that something of a higher amount, I mean 50% would be wonderful and that would really go a long way.
Another thought in that, and this is on line 9, is to just be sure that when we're defining vehicle, that maybe we certainly want to keep the current motor vehicles, but let's expand this to transit vehicles, perhaps because there's some definite benefits and perhaps with buses and school buses, transit buses such as that and also material handling vehicles. There are some definite benefits to be had from an environmental perspective in replacing some of these smaller engines or replacing the emissions in some of these smaller engines.
REP. GIANNAROS: Your last comment needs some clarification. You're referring to line 9, I think you said.
CHARLES KING: I think it's line 9 where they just talk about vehicle, the word vehicle. I'm just making sure. Maybe it's broad enough right now that you know, transit and material handling would be included in there, that's what I'm trying to say.
REP. GIANNAROS: Okay, thanks.
CHARLES KING: Line 17, we have a bit of a nonparity here where the tax credit allowed for filling stations currently only includes those of gas use nature and I'm just suggesting I'd like to see the word electric included in there.
And then finally, on line 122 and this particular statute I believe there's a sales tax exemption in there. Right now the wording is a new motor vehicle and again, I'd like to see that that idea of motor vehicle be extended to include transit vehicles.
SEN. PETERS: On what line? Line 22?
CHARLES KING: I think it's on line 122.
SEN. PETERS: 122.
CHARLES KING: 122.
REP. GIANNAROS: So you'd like to see (inaudible-two speaking at once.
CHARLES KING: Where it says new motor vehicles to include transit vehicles and material handling vehicles.
I'd also just make a comment. You're asking about, you had suggested you know, do I have any forecasts of this stuff. As you know, I think we're still in a chicken and egg situation and a lot of this is being driven by the manufacturers of the products. Fortunately, and probably some of my compatriots in the gas industry could elaborate, but it looks like from a natural gas perspective, I guess just a year or so ago only Ford was making vehicles, although they had an extensive line of different types of vehicles. But now if I'm not mistaken, General Motors and Chrysler are actually jumping in.
So I think the good news in this whole alternative vehicle thing is centralized now in the gas arena as far as the fuel is concerned, but it does look like successes are being seen here in Hartford, apparently are taking place around the country and the manufacturers are jumping in with a much expanded product line.
For an electric there's one dealer in Connecticut, Stephen's Ford and you want to go kick the tires on an electric Ford Ranger, you can do that. Thank you.
REP. GIANNAROS: Thank you. Question. With regard to the incremental costs, let's call it converting vehicles from one fuel to another. Is there a significant difference, or should there be between a converted vehicle utilizing electricity versus utilizing natural gas, because I've been hearing some estimated prices for forthcoming vehicles, I guess.
CHARLES KING: With a natural gas vehicle, when you convert it, and I'm not an expert on this, but you're still using the basic internal combustion engine. What you're adding is high pressure tanks in the back to house the quantity of fuel and a mechanism to get it up to the front and then something to reduce the pressure and get it into your fuel injection mechanism.
So and again, there is added equipment that is more costly than the current gas tank in this thing. But even as with electric vehicles, it's a price volume thing. You know, the more of these that you can make the more that incremental cost can be reduced.
With electric vehicles right now, everything, it is a new propulsion system and everything under that hood, the electronics, the motor, everything, is new and if say Ford made 500 of these things last year, those were the first 500 that they made, so they're right at the beginning of a volume price curb.
The other big unknown and the real kicker for electrics right now is the battery. The good news this year is that all of the manufacturers are putting into their products the first advance battery which is a nickel metal hydride which promises to hopefully double the range in general on these vehicles. So now we're going from 50 to 60 miles to over 100 miles. The problem is, those batteries, I've heard prices, well, they're certainly getting for less than this but you're talking $10,000, $15,000, $20,000 for the battery. That's just the battery.
REP. GIANNAROS: Now, the reason that I asked that question. I'm trying to determine if we're subsidizing consumers of these types of vehicles to provide an incentive for them to move into cleaner energy type of consumption, I see a much bigger subsidy, especially when you refer to 50% for electric vehicles.
CHARLES KING: That's for natural gas or propane. No question. No question.
REP. GIANNAROS: Some of the price estimates that I had heard about some of the cars coming out with electric power are twice as high as the normal vehicle price?
CHARLES KING: I should mention, and t his goes to the way the manufacturers are pricing these things. I'm not sure of this but Ford anyway, is eating a lot in their electric vehicles to begin with. I mean, if they're leasing these things for three years for $400 a month or something like that, they're getting back, what is that $16,000 or $17,000 which probably doesn't cover the cost of that vehicle.
They have, and I know, just to get anybody to take the nickel metal hydride batteries, I think the price and don't hold me to this, but it's something like $600. So even though the vehicle is tremendously more expensive, the incremental cost from them for this brand new battery technology is not much. Okay?
REP. GIANNAROS: But the way the language reads in the bill
(GAP FROM CASS. 1 TO CASS. 2)
$10,000, $20,000 as the cost of the vehicle.
CHARLES KING: For those who take advantage of the electric option there's a lot more of a, there's certainly a lot more of a subsidy in there.
REP. GIANNAROS: So I guess what I'm heading at. If we were going to do a bill like this, I'd like to see some fairness in its application. Would it not make sense for us to cap the amount?
CHARLES KING: Probably.
REP. GIANNAROS: Okay. Thank you.
SEN. PETERS: Can I just add to that? Another concern that I would have is that we have, we already have this legislation on the books in terms of state policy and we're looking to extend that out another few more years. The concern I would have is, in the Finance Committee, quite frankly, and it certainly has some impact. They're already operating under one set of numbers. If we start loading it down with other costs, then in fact it may send us in a regressive mode.
CHARLES KING: Then please forget that first suggestion I made. I mean, really, because there's no question that I don't want to scuttle any of these things. You go so far and then you fall off the edge of somebody's world.
SEN. PETERS: But your comments are well taken, thank you.
REP. GIANNAROS: Thank you. Any other questions? Representative Sayers.
REP. SAYERS: I'm just trying to visualize what's an electric filling station because I think in terms of the batteries that you talk about. Are you talking about a row of plugs? Or, what, does it exist currently?
CHARLES KING: We have an electric vehicle at work that basically you plug into any 115 volt outlet. So from that perspective, wherever those little outlets are you can charge a vehicle. More practically, though, what the major manufacturers, the vehicles that they're coming out with there's actually what they're calling a charging station. And it's a little box that sits on the wall of your garage or it can be mounted on a pole outside and there is a cable that comes out of it with some type of a plug or a connector that kind of looks in some cases like a gas pump nozzle. It's made specifically to look like that. It plugs into the vehicle and you recharge your vehicle in that manner.
REP. SAYERS: Right, but that would take some time. I mean, we're not talking about you go in and you fill up, you take 15 minutes and you're on your way.
CHARLES KING: No question.
REP. SAYERS: And in terms of a filling station, I mean, I think in terms of, I drive in, I need a charge, can I get it in 15 minutes and be on my way? And I don't visualize that, but maybe I'm missing something.
CHARLES KING: Well, no, in the context of this, that's what they're talking about is kind of a gas pump type filling station. What I alluded to was the way you can recharge this thing at home in a garage.
There is another, oh, and by the way, that other charging may take overnight. It might take six to eight hours.
REP. SAYERS: Right, by allowing, by extending the tax credit to an electric filling station, then that would be this thing that would be in my garage. Are we talking that?
CHARLES KING: No. And you brought up a good thing because there's two ways to do this. The other way which the hardware really isn't even available for it yet, for electric vehicles is called a quick charge. And there are devices that, actually they're out of a lab. There are a couple of manufacturers making them. It's a box like a gas filling pump but it actually has the ability to fill certain electric vehicles if they are configured for it in something like 15 or 20 minutes. They're pretty expensive right now and some of the utilities, some of the manufacturers have cooperative ventures to get them out into the neighborhoods and whatever in certain places.
But you bring up a good point. I think the idea of filling station would more apply to these fast charge bigger units than they would to the type of thing that's in your garage.
REP. SAYERS: Right. But my concern is that the way this is indicated that if there's nothing out there currently, it would probably be reflective more of what a homeowner would have that had an electric vehicle as their mechanism for recharging that battery.
CHARLES KING: Right.
REP. GIANNAROS: The last name I have on my list is Lynn Vasquez.
LYNN VASQUEZ: Good afternoon, Representative Giannaros and members of the Energy and Technology Committee. I am Lynn Vasquez, the community relations administrator for Northeast Utilities. We appreciate the opportunity to testify today in support of raised SB1197 which would continue the residential energy conservation program until July 1, 2000.
The Connecticut Office of Policy and Management is responsible for the residential energy conservation program. The program provides at no cost to clients energy audits of residential housing occupied by low income households. An audit is required by the U. S. Department when weatherization assistance program funds are used to weatherize housing units.
Through this program, the cost of the audits is paid by the major gas and electric companies and by petroleum dealers whose sales exceed $1 million a year. Each company pays for audits within its service area or area of normal operation. This program has been a real benefit to the state's low income weatherization program because community action agencies can use federal weatherization funds that would otherwise be used for audits
typified conservation services to additional housing units.
In 1998, Connecticut Light and Power paid for energy conservation and weatherization services in some 4,500 units of housing occupied by low income households. However, when the community action agencies ask us to fund services supplemental to those, they do with the federal weatherization funds and when we recruit participation by high electric use customers we find the audit valuable.
It provides sound basis for the agency selecting appropriate cost-effective services. We therefore urge the Committee to act favorably on raised SB1197. Thank you.
REP. GIANNAROS: Thank you. A question that I have, what happens after July 1, 2000?
LYNN VASQUEZ: I surmise the program will end. I don't know what will happen.
REP. GIANNAROS: Does it have anything to do with the industry moving into a competitive environment?
LYNN VASQUEZ: I don't know.
REP. GIANNAROS: Any other questions? Representative Nardello.
REP. NARDELLO: Well, actually, Representative Giannaros asked my question as well. But my question to you would be, since you clearly indicated that this is a valuable program, particularly low income customers, correct?
LYNN VASQUEZ: Yes it is.
REP. NARDELLO: Okay. So then why would we want to stop it as soon as we go into a restructured environment. Is there any reason that we should stop it? Won't we still want them to conserve energy even in a new environment?
LYNN VASQUEZ: Well, I think --
REP. GIANNAROS: Could you please move to the microphone. For the record. Please give us your name and affiliation.
PEG MORTON: Peg Morton, Northeast Utilities. I wasn't prepared to answer this question but this bill has a sunset on it and what we want to do is just expand the sunset. We do not want this bill to go away when dereg comes in. That's why we're here supporting the bill. But there's a sunset on this. It's extending it to 2000 and if you want to extend it beyond, that's okay, too. That's the way the bill is written.
REP. NARDELLO: Can anybody address what happens after 2000?
PEG MORTON: Well, if it's not extended to 2000 then it will go away.
REP. NARDELLO: No, but in other words, if we don't extend it, if we let it expire in 2000 what happens to these individuals?
LYNN VASQUEZ: They won't receive weatherization.
PEG MORTON: Yes, the program will end unless we pick it up ourselves not required by law. I don't know what our, what Connecticut Light & Power plan would be. I would assume that we would try to continue it, but I can't speak for other utilities. I would think that the utilities are worried about the low income individuals.
REP. GIANNAROS: Representative Scipio, do you have a question?
REP. SCIPIO: No, I just wanted you to call on Ms. Morton.
REP. GIANNAROS: Okay, thank you. Senator Herlihy.
SEN. HERLIHY: Now I'm confused. My understanding of the purpose of this bill was to extend the sunset so that the program didn't end in the year 2000.
PEG MORTON: And that's why we're here.
SEN. HERLIHY: And would continue until the year 2002.
PEG MORTON: Right. I don't remember the exact number. You asked the question though before about what would happen. The original bill had a sunset on it and we want to extend that.
SEN. HERLIHY: Which means that the program would remain in continuation --
PEG MORTON: Yes.
SEN. HERLIHY: -- until the sunset.
PEG MORTON: Yes.
SEN. HERLIHY: So I think Vicki, I think there was maybe some confusion as to the year 2000 versus 2002 and the purpose of this is the continuation of this program.
REP. NARDELLO: Yeah, but it still sunsets in 2000.
REP. GIANNAROS: Let me just take one at a time. (Laughter) Representative Scipio.
REP. SCIPIO: It sunsets at 2000 and so Ed wants it to continue on beyond the sunset.
PEG MORTON: Well, we're in favor of the bill to extend it to 2000, to extend it to 2000. And when it sunsets we'll be back. This has been extended a number of times.
REP. GIANNAROS: Representative Horton.
REP. HORTON: Mr. Chairman, as I read the text of the bill, it does say on lines 10, 11, and 12, the energy conservation service program shall terminate on July, 1999 underlined 2000.
REP. GIANNAROS: 2,000 is the change.
REP. HORTON: Would be the change. I mean, what I'm hearing is that Northeast Utilities, it sounds to me like we could just say, let's make it the year 3000. I mean, would that be consistent with your position?
REP. GIANNAROS: If they anticipate being in business in the year 3000.
PEG MORTON: Well, on that issue I have a couple more (laughter)
REP. HORTON: But my understanding is, it just says, participants in the program shall provide and arrange for low cost energy audits. I mean, I'm assuming when it says participants it means Northeast Utilities and whomever else will be participating in it.
REP. GIANNAROS: Representative Nardello has a clarification.
REP. NARDELLO: Yeah. We don't want the program to, but actually I'm going to ask you to make sure that you bring back this information. My understanding is that we have allowed for this in the new language of the restructuring bill, we've allowed monies for it and we have asked that these programs be continued. And I just want a clarification to make sure that the understanding is that these will continue even if this sunsets.
If there is a problem with them continuing, then I think you need to get back to this Committee. But my understanding is the language of our restructuring bill has covered this in a different manner, that this will terminate and it will be picked up in another manner.
If for some reason NU feels that that has not been covered and that we need to authorize it in some way, then you need to get back to this Committee.
PEG MORTON: Okay. There are funding mechanisms as Representative Nardello says, for low income individuals in the restructured.
REP. GIANNAROS: May I suggest that any other electric company who's involved in this energy conservation program related issue, that they get back to us before Tuesday of next week because we may have to amend. Thank you. Any other questions? Anyone else who is wishing to speak? If not, do I have a motion to adjourn. Seconded. Thank you.
(Whereupon, the hearing was adjourned.)