Energy-Fund Sweeps Survive Constitutional Challenge

HARTFORD, Conn. (CN) — Dismissing claims by energy-efficient businesses and environmental groups late Thursday, a federal judge left it up to the Connecticut General Assembly to deal with blowback over its use of $145 million in ratepayer funds to balance the 2017 state budget.

In a 27-page decision, U.S. District Judge Janet Hall found that the state’s move to sweep ratepayer funds last year did not impair contracts between ratepayers and their electric-distribution companies because neither utility tariffs nor state law ever promised ratepayers that their dollars would not be transferred to the General Fund for unrelated purposes.

“This case shows how incredibly difficult it is to stop the state from converting millions of dollars dedicated for a specific purposes — in this case, energy efficiency, renewables, and investments in clean energy — and converting the money into general fund purposes on a legislative whim even when the state treasury had already collected an unanticipated surplus of $1.7 billion dollars,” Stephen J. Humes, a partner at Holland & Knight and co-counsel on the case, said in a statement. “While voters can hold their legislators accountable in 11 days, the sad reality is that more than 3,000 jobs have been lost and a number of energy efficiency projects across the state have been halted as a result. We disagree with the court’s decision and are considering our right to appeal to the Second Circuit Court of Appeals in New York.”

To stop the 2017 sweep of Connecticut’s energy-efficiency and clean-energy funds, and to prevent future diversions of ratepayer funds, energy-efficiency businesses, clean-energy businesses, environmental nonprofits and utility ratepayer organizations brought the lawsuit here on May 15, 2018.

The required transfers for fiscal-year 2018 occurred a month later. On June 25, a total of $77.5 million was transferred from the Conservation and Load Management Fund ($63.5 million) and the Clean Energy Fund to the General Fund ($14 million). The transfers for fiscal year 2019 are scheduled to occur on June 25, 2019.

But Hall found Thursday that there was no legal right to enforce the assumption that the funds needed to be used for energy efficiency, even if that was the expectation when they were approved.

“The plaintiffs do not have an implied contractual right over how the money in Energy Funds is spent,” Hall wrote.

Even though the rate doctrine may have spelled it out, “they did not … give the plaintiffs any right to legally enforce those expectations,” Hall added.

The plaintiffs argue that the filed-rate doctrine creates the expectation that the terms and conditions of the tariffs will remain in effect until regulators approve a new set of tariffs.

The original complaint argued that using ratepayer funding for other than its intended purpose violates the Contract Clause and Equal Protection Clause of the U.S. Constitution and functions as an illegal tax on tax-exempt organizations like churches and nonprofits.

Roger Reynolds, chief legal director for the Connecticut Fund for the Environment, said Friday that no decision has been made about whether to appeal.

He said their goal remains to remedy the injury to the raids.

“Residents paid the charge on their electric bills, trusting that their ratepayer dollars would go towards energy efficiency and clean energy programs that save money and reduce climate pollution — not be used to plug an unrelated budget hole,” Reynolds said.

Leticia Colon de Mejias, chair of Efficiency For All and one of the plaintiffs, said they won’t stop fighting for fairness.

“Even in these difficult times, it is obvious that stealing ratepayer funds intended to help Connecticut residents and businesses reduce energy waste and use cleaner resources is a bad choice,” Colon de Mejas, said in a statement. “No matter your political party, efficiency is efficient. While we decide next steps, legislators don’t have to wait for anyone else’s decision—they can take action themselves. This is the message to send your legislators and those hoping to be elected in just a couple weeks.”

The General Assembly doesn’t reconvene until January 2019.

A spokeswoman for the state Attorney General’s Office declined to comment.

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