Direct Energy's Kallaher Sees Positive Takeaways from Broad Policy Support for Connecticut Retail Auction, Despite Omission from Final Budget

Although disappointing, the takeaways from attempts to auction off retail Standard Service customers in Connecticut this legislative session are more positive than meets the eye, Chris Kallaher, senior director of government and regulatory affairs for Direct Energy, told Matters.

As noted earlier this week, the auction was removed from the final budget due to, among other reasons, opposition from consumer advocates.

Kallaher noted, however, that the Connecticut Senate was prepared to pass the budget with the retail auction included in the budget. It was the House Democratic caucus which presented the roadblock.

Kallaher also stressed that the retail auction proposal came from the governor and Department of Energy & Environmental Protection, and had the support of the Senate President, Speaker of the House, and the chairs of key committees, including Finance and Energy & Technology.

Had someone told Kallaher a year ago that all these stakeholders in Connecticut would be supporting a one-time retail auction of customers to retail supply, he would have been surprised.

Kallaher also reported that support for the auction was not solely based on its use as a source of revenue to fill a budget gap, and that many legislators favored the auction based on policy.

Kallaher said that Direct Energy would immediately get back to work on building consensus for the auction in the next legislative session, particularly working with House lawmakers to address any concerns.

Kallaher stressed that, tactically, auction supporters need to show an immediate and undeniable benefit to customers. Although the proposed Connecticut auction included a 5% discount to Standard Service rates, this was less tangible than, say, a $50 bonus payment to customers, as had been proposed in other states. Instead, in Connecticut, all revenues from the auction, representing the value placed by suppliers on customer acqusition through the auction, would have been used to fill a budget gap.

While that made the auction palatable to some policymakers, it also opened the auction to criticism that it was simply a "gimmick" and not designed with customers in mind.

Kallaher suggested that using revenues generated from the auction for a customer-focused purpose could create more support. Kallaher suggested, in particular, the potential use of auction revenues to support smart grid investment or other economic development in Connecticut. Matters notes, aside from a customer bonus payment, other potential uses of the revenues to generate support would be contribution to state low-income energy assistance programs, or funding of Connecticut's various renewable energy/distributed generation incentive programs.

Additional time to explain the auction process and specific mechanics and details will also help assuage operational and consumer protection concerns raised by policymakers, Kallaher said.