June 30, 2011 | By Keith Martin in Washington, DC

Connecticut enacted a new tax on electricity generators on May 4. The tax applies to nuclear and fossil fuel power plants. Renewable energy facilities are exempted. The rate is 0.25¢ a kilowatt hour. It is expected to go into effect on July 1.

An earlier version of the tax from which the legislature backed away would have imposed a tax of 2¢ a kilowatt hour on nuclear projects, with lower rates on other fuels. As a result, most revenue from the tax would have been collected from a 2,180 megawatt nuclear power plant owned by Dominion. After lobbying, the state backed off.

The industry has been told that the tax is to remain in effect for two years to help the state overcome a large budget deficit, but there are still unhappy independent generators who see the tax cutting significantly into their expected profits from building plants in the state, and there is skepticism that the tax will be allowed to expire.

Keith Martin