The Impoverishing of Connecticut’s Middle Class

Energy users in Connecticut – all of us, poor and rich alike – must feel as if they had stepped into a mice roundabout. It is becoming nearly impossible in the “state of steady habits” for most people, including the vast middle class that absorbs the brunt of taxation, to get out from under costs directly related to 1) taxation, 2) the cost of regulations passed on by businesses to their customers, and 3) the solicitous and smoldering heap of empathy extended to all by politicians who are there “to help.”

Luther Turmelle, a business reporter with Hearst Connecticut Media Group, tells us in the Stamford Advocate, “Standard & Poor's Global Ratings on Monday downgraded the credit rating of a pair of Eversource Energy subsidiaries, according to officials with the utility.” The credit rating agency had “downgraded Connecticut Light & Power, from an ‘A’ to an ‘A- while the energy company's natural gas subsidiary, Yankee Gas, saw its rating [plummet] from an ‘A-‘ to ‘BBB.’" And, adding a few blocks of wood to the fire, “The lowered credit rating for Eversource comes on the heels of an announcement Friday by Standard & Poor's that it was reducing the credit ratings of Orange-based Avangrid's two natural gas utilities, Southern Connecticut Gas and Connecticut Natural Gas. Southern Connecticut Gas' credit rating was reduced from an ‘A- to a ‘BBB+’ while Connecticut Natural Gas saw its rating drop two levels from an ‘A’ to ‘BBB+’"

So then, what happens when a rating agency downgrades a company?

Any politician worth his or her salt should be able to bat that question out of the park. The downgrades make borrowing, necessary for product improvement, much more expensive. Just as companies recover the cost of taxation by passing along the cost to its consumers, so companies recover the costs of regulations occasioning downgrades in the same time-honored way. This is no secret. Everyone, including politicians who broadly hint during election cycles that, in order to relieve the vast middle class of the ravages of taxation, they will be boosting taxes on greedy companies, know how the economy works in any state short of a utopian communist enterprise that arranges trips to gulags for recalcitrant businessmen. A free and independent economy provides products and services that are not “free.”

Every regulation is a tax. Energy regulations imposed on providers, with a wink from solicitous politicians, are particularly onerous because the state’s middle class now finds itself in a state bordering on quiet desperation, and the downgrade in ratings, a hidden tax upon the consumers of energy, make it impossible for energy providers to develop profitable and creative measures that may in the near future reduce the cost of their product.

Eversource's vice president of distribution rates and regulatory requirements Douglas Horton has said the rating reductions provide “independent confirmation that the Connecticut regulatory environment is harming the ability of electric, water and gas companies to hold financing costs down for customers, particularly residents and businesses who are feeling the burden of high energy costs… Credit ratings are a report card on the financial health of a state’s business environment, and this new ratings action shows that not only is Connecticut failing that test, there is now a ripple effect for our customers in Massachusetts and New Hampshire as well. The negative impact of these credit rating downgrades will be long-lasting, costing customers more money for decades, extending far beyond any single rate cycle. This ratings action will ultimately impact the availability of capital resources needed to fund utility operations at a favorable cost and our company’s ability to invest in initiatives to implement public policy, including power purchase agreements [emphasis mine]."

This is what conservatives and libertarians call a prime illustration of “the law of unintended consequences.” And the consequences are dire for everyone but platitude spouting politicians. Platitudes, always useful in political campaigns, don’t put bread on the table. Tax reductions, a loosening of harmful regulations – most importantly, spending reductions that mitigate the ravages of inflation, itself a hidden and hideous political tax – do put bread on the table.

No man or woman in Connecticut will be made more independent and self-sufficient by a government that moves from their already reduced daily budgets a dollar on a flimsy promise to return to the taxpayer more than a dollar’s worth of products and services.

Much to his credit, staff writer Luther Turmelle of the Stamford Advocate puts the matter plainly and lucidly in his story. In a written statement, House Republican Leader Vincent Candelora responded vigorously to a Turmelle query: “The credit rating downgrades of these utilities is a clear rebuke of the toxic regulatory environment fostered by the Lamont administration and legislative Democrats. They ignore the heavy cost associated with their polices and mandates on utilities, while at the same time delaying the recovery of the costs. The ‘we’re fighting for you’ rhetoric from Democrats sounds nice in a news release, but the reality is that their approach on energy and the resulting credit downgrades will discourage innovation, jeopardize reliability, and ultimately burden ratepayers with skyrocketing costs."

Those who question the justice of Candelora’s rebuke will find confirmation of it in their future energy bills.