Richard Blumenthal

State-operated power plants and a windfall profits tax on generators are on the table after Connecticut Attorney General Richard Blumenthal on Wednesday proposed changes to control electricity costs in the state.

Blumenthal’s plan calls for a state authority that could purchase power and finance, build and operate power plants, which he says would supply inexpensive power. The windfall profits tax would return excess power plant profits to consumers, and could provide seed money for a new agency called the Connecticut Electric Authority, according to the Attorney General’s Office.

It is unclear what sort of legislative support there is for the plan, but opponents say it could harm consumers.

A spokeswoman for ISO-New England, the region’s power grid operator, told the Associated Press that Blumenthal’s plan does not account for global market forces that are driving up the cost of energy.

“His plan does not appear to protect consumers, but it could expose them to additional risks,” said Ellen Foley of ISO-New England, which is based in Holyoke, Mass.

But Blumenthal’s plan – which is not yet spelled out in a bill – could have some merit, according to Mitch Gross, spokesman for Connecticut Light & Power Co., which distributes energy in Connecticut and would continue to do so under Blumenthal’s plan.

“His proposal is another way of possibly addressing the problem [of high energy prices],” Gross said.

Deregulation intended to foster more competition and lower prices has not worked as intended, Gross said. However, the real problem comes down to the cost of the fuel needed to make the electricity, he said.

Blumenthal claims his plan would “shield consumers and businesses from billions of dollars in future federally imposed charges by giving Connecticut the means to build or help finance new power plants demanded by federal regulators,” according to a statement.

“This public power authority would put the reins on a runaway market. Our new strategy should help cut and contain out-of-control electricity prices before they cripple Connecticut’s economy,” Blumenthal said in a prepared statement. “Customers of [Connecticut Light & Power] – 80 percent of our state’s electric consumers – now pay the second-highest power prices in the nation, enduring a nearly 70 percent increase in three years. Those prices will continue to spiral astronomically through 2010 and beyond if the state fails to act.

“If you think prices are high now, you ain’t seen nothing yet,” he added. “The federal government’s attempt to create a free market has cratered, and Connecticut must act swiftly to stop skyrocketing power prices from strangling our economy. Consumers and businesses, already reeling from double-digit price hikes, simply cannot afford to pay more. My proposals will restore stability and sanity to a chaotic, anti-competitive and out-of-control electricity market. Without these steps, power prices will continue to soar, wrecking Connecticut’s competitiveness and crushing consumers.”

New power plants are necessary in Connecticut, Blumenthal said.

“The state needs new power plants, but the private sector either will not or cannot build them. CEA would fill a void left by failed markets and fatally flawed federal policies,” he noted. “Using bonds to build, finance or buy generation, CEA will ignite competition and help restore price stability. By building its own plants or backing new privately owned ones, the authority will eliminate the rationale for new federally imposed charges that could result in additional double-digit rate increases. We can play [the Federal Energy Regulatory Commission’s] game, but win for our citizens.”