Chapter Three

State Energy Policies and Programs

More than three dozen sections of the Connecticut General Statutes address state energy policy or assign energy-related duties to specific entities. Many of these laws were adopted in the late 1970s and early 1980s after the United States experienced high energy prices and fuel shortages, but additions continued throughout the 1990s.

A number of these statutes address areas still of concern today and propose solutions that remain feasible. Existing statutes already require:

• preparation of periodic energy plans;
• consideration of energy efficiency in the purchasing process;
• consumption monitoring by state facilities; and
• life-cycle cost analyses for space acquisitions and construction projects.

In addition, C.G.S. Sec. 16a-35k, adopted in 1978, outlines the state's energy policy in detail. It specifies the state should conserve energy resources by avoiding unnecessary and wasteful consumption as well as utilizing renewable energy resources. Although the policy is aimed at all of the state's citizens, the legislature specified implementation "constitutes a significant and valid purpose for all state actions."

In seeking solutions to today's energy issues, it is important to take into consideration compliance with current statutory requirements. The program review committee believes many of the elements of a comprehensive program targeting energy conservation and the use of multiple fuel sources by the state of Connecticut already exist in statute, but full implementation is not occurring.

Appendix C summarizes key statutes related to state government energy management, indicates the year of enactment, and provides an update on agency compliance with specific requirements. In many cases, state agencies undertook the initial steps to implement new energy-related programs and prepared required reports for a few years. Eventually, however, the activities were reduced or stopped, even though the statutory mandates were not changed.

For example, in the early 1990s, OPM was directed to establish two programs to give state agencies incentives to reduce energy consumption. Under C.G.S. Sec. 4-16f, agencies can receive bond funds for projects that reduce costs and increase efficiencies through capital investment, including those using energy efficiency measures. The program has not been widely publicized, and it does not appear to be well known. As of May 2002, only two agencies ever requested (and received) money for projects, and neither was energy-related. Approximately $600,000 of the original $2.9 million program allocation remains unused.

Concurrently, under C.G.S. Sec. 16a-37c, state agencies were to be offered incentives to achieve savings through energy conservation. Under the program, over the useful life of the conservation measures, participating agencies would retain at least 50 percent of the annual savings to use for future energy costs or conservation activities. Regulations governing the program went into effect in December 1991, but no agencies ever applied to the program.

Likewise, C.G.S. Sec. 16a-39b set up a task force to develop incentives for conserving energy in state buildings. The task force met occasionally and issued annual reports from 1990 to 1993. It has been inactive since.

In other cases, statutory requirements are met, but limited effort is made to share the information or link the results with other related requirements. An example involves the state's consumption monitoring database. As required by C.G.S. Sec. 16a-37u(a)(3), the OPM energy unit maintains a cumulative database on the quantity and cost of the energy consumed monthly by state facilities. Periodically, OPM staff examine the data for planning or budgeting purposes. They also prepare reports for other entities on request, but no annual compilation is published in a location readily available to the public or other governmental entities.

In still other instances, OPM has taken steps to implement mandates, but the outcome has been unsuccessful. For example, C.G.S. Sec. 16a-14e requires the state to set up an electricity purchasing pool. In December 1999, OPM, working with the Department of Administrative Services, issued a request for proposals (RFP) for an electric procurement contract. Two bids were received by the February 2000 deadline, but both were disqualified. (One arrived late; the other did not comply with bid requirements.)

In September 2002, OPM issued an RFP to cooperatively purchase electric generation services for the state's approximately 300 unmetered street lighting accounts in the service territory of Connecticut Light & Power Co. (Annual consumption is estimated at 3.5 million kWh.) Bids are due in early October 2002, with a targeted start date of no later than January 1, 2003.

The next attempt to set up a more comprehensive electric purchasing pool is expected to be announced in the second half of 2003. That RFP will seek to address problems identified with the scope of the first contracting effort. For example, the proposal may allow for the phase in of the required residential component for individuals receiving means-tested assistance.

A similar purchasing program initiated voluntarily by OPM has been more successful. Since 1996, OPM and DAS have operated a natural gas purchasing pool. (See Appendix D for detailed descriptions of the electric and natural gas purchasing programs.)

The natural gas contract is a competitively bid, multi-year agreement available for use by multiple state agencies. Participating agencies obtain natural gas supplies under a group, firm contract price negotiated by OPM and DAS. The participating agencies also attain other benefits including:

• experience working with suppliers of a less traditional commodity;
• a more efficient bill paying system; and
• some agencies were prompted to consolidate the meters in their facilities, thereby reducing monthly fees for equipment.

From FY 97 through FY 00, the number of state agencies signing up one or more facilities for the natural gas procurement program increased annually. In FY 01, participation leveled off at 19 agencies (with 31 reporting locations).

Figure III-1 shows annual program results from the start of the program in January 1997 through June 2002. Until FY 02, the state annually saved 12 to 22 percent of the dollars it would have spent for participating accounts, if there was no contract. Individual agency savings varied, and a few small agencies paid more.

In FY 02, all but three of the 31 participating accounts paid more than if they had remained traditional natural gas customers. Overall, the cost was 16 percent higher.

Despite the recent results, savings from the early years of the program still outweigh the losses. (Cumulative savings since the start of the program total $3.2 million.) While the possibility of losses always exists with contracts involving the volatile futures market, the program is important as an example of the state taking an innovative approach toward business operations, something more commonly found in the private sector.⁷

The key reasons for the difference in the state's success at implementing the natural gas purchasing effort versus the electricity purchasing pool are:

• variations in the nature of the marketplace for each fuel; and
• the absence of a requirement that customers besides state agencies be allowed to participate in the natural gas program.

Competition in the electric sector is controlled by restructuring legislation passed in 1998. It specifies many of the details of how the system must operate, including a cap on the overall price per kWh customers pay. Generation of electricity has been deregulated, but transmission continues to be regulated by the Federal Energy Regulatory Commission (FERC).

Competition within the natural gas market in Connecticut opened up in the late 1990s when the Department of Public Utility Control (DPUC) began allowing commercial and industrial customers to obtain natural gas from third-party suppliers. The latter system lets the market set the price based on a variety of factors, and customers buy from the vendor of their choice.

Another area where the state has had limited results concerns alternative and renewable energy. The role of these sources in the mix of fuels used by the state is small (as it is for most energy consumers). Indeed, a deterrent to wider use of alternative fuel sources in recent years has been the low price of fossil fuels, which widens the cost differential when comparisons are made with traditional approaches.

However, the state has undertaken several initiatives involving renewable energy.⁸ For example, photovoltaic and micro-turbine equipment are in use at state university campuses, and fuel cells are being installed at multiple state locations.⁹ Likewise, in mid-2002, DPW made a policy decision to have future major, state construction projects comply with minimum U.S. Green Building Council standards, which take into consideration energy and environmental concerns. At the same time, one of the program goals in the 2002 State Energy Plan (SEP) calls for the legislature, OPM, and DPW to work on development of a system to enable all state funded buildings to meet or exceed the Green Building Council's Silver Standard design rating.

In evaluating agency compliance with mandated energy-related tasks, it is appropriate to examine the value of the tasks completed and those left undone as well as inquire why mandated tasks are not being carried out. Causes for noncompliance vary, but key reasons seem to be decreases in the level of available resources and the priority given to energy-related goals.

During the past 25 years, executive branch staff assigned to energy-related tasks decreased considerably. At the end of the 1970s, OPM had a separate Energy Division and as many as 90 people in the agency -- 63 percent of them federally funded -- performed energy-related duties. In 2002, the 10-person energy unit is part of the Strategic Management Division, and federal funds support 56 percent of the cost.¹⁰ Furthermore, only some staff perform functions directly involving state government operations. Others work with municipalities, small businesses, petroleum vendors, and residential consumers on activities specific to their needs.

Energy-related resources at the Department of Public Works have also changed since 1970s. At that time, DPW was a bureau in the Department of Administrative Services. An Energy Management Division, which was eliminated in FY 87, employed a number of retired engineers -- some as state employees and some as consultants -- to conduct energy audits of state buildings. Other staff dealt with energy considerations within the context of the diverse range of activities the agency handles for state construction and leasing projects. Today, DPW is an independent agency, and three full-time equivalent staff are assigned to energy-related duties.

To facilitate the ongoing success of the state's energy management efforts, the program review committee believes the legislature should clarify what the agencies charged with implementation are expected to accomplish. Statutory language should set the direction of the state's energy management effort, but day-to-day operational details of individual programs should be left to the implementing agencies. At the same time, an agency unable to perform mandated functions must call attention to such situations and explain why the work cannot be done. Then the legislature can decide whether to continue the requirement or change the resources assigned to it.

Existing statutes related to state energy management should be reviewed to:

• eliminate out-of-date energy-related requirements (whether completed or not);
• delete completed, one-time tasks;
• consolidate related tasks;
• remove requirements where the cost of enforcement considerably outweighs the consequences of a violation; and
• clarify the agencies performing specific tasks.

Nearly a dozen sections of the statutes are candidates for revision. The program review committee recommends the following statutory changes related to state energy management activities:

• amend Sec. 16a-35m to replace the requirement for a comprehensive energy plan prepared every four years with a biennial report on the energy situation in Connecticut, including any unique issues facing state government as an energy consumer;
• repeal Sec. 16a-36 re minimum temperature setting of 78^o for artificial cooling of state buildings because enforcement is impractical;
• repeal Sec. 16a-36a re maximum temperature setting of 65^o for artificial heating of state buildings because enforcement is impractical;
• repeal Sec. 16a-37d and Sec. 16a-37e to eliminate a program aimed at improving energy performance in state buildings that has been superseded by new programs;
• repeal subsection c of Sec. 16a-37u requiring the connection of state buildings to a district heating/cooling system because all feasible connections have been made;
• amend Sec. 16a-38a to replace detailed requirements for energy audits of all state-owned buildings (in subsection a) and an out-of-date schedule for retrofit projects (in subsection b) with provisions for an on-going process to evaluate the energy requirements and retrofit opportunities of individual state buildings periodically, but at a minimum prior to any major renovation;
• transfer subsection c of Sec. 16a-38a regarding energy performance preferences in leased space to Sec. 16a-38h to combine energy-related requirements involving leased space;
• amend Sec. 16a-38i to require DPW to establish a standardized process for calculating annual average energy use based on the state buildings under its control and give OPM responsibility for implementing the system statewide in conjunction with its energy use and cost monitoring duties under subsection a of Sec. 16a-37u; and
• amend Sec. 16a-39b to replace the task force on conserving energy in state buildings with a requirement for periodic meetings of the personnel responsible for energy management at the state's largest energy consuming agencies to discuss opportunities for savings.

The statutes listed above were adopted at various times between 1977 and 1991, although some were subsequently modified. They specify, often in great detail, tasks agencies are to perform -- some only once; others on a recurring basis.

As indicated, most of these statutes need modification to reflect completion of a task or acknowledgement of changes already implemented administratively. If state agencies or other affected parties believe statutes proposed for repeal or amendment should be retained as currently written, they will be able to present evidence explaining why as part of the public hearing process during the 2003 legislative session.

To complement the changes presented above, the program review committee also proposes several additional requirements to elevate consideration of energy-related issues, particularly during the budget process. Specifically, the program review committee recommends:

• each state agency be required to include as part of its biennial budget, the total dollars requested for energy within the budget, its plans for energy conservation in the coming biennium, and the progress the department has made in the prior biennial period in energy conservation;
• the Office of Policy and Management be required to ask all state agencies to report on how each agency can reduce energy costs and provide that information as part of a joint public hearing before the Appropriations, Energy and Technology, and Program Review and Investigations Committees; and
• the Office of Policy and Management be required to report on agency compliance with life-cycle cost analysis requirements.

To ensure future construction projects undertaken for the state of Connecticut incorporate energy-related elements, the program review committee recommends setting a new construction standard for state-owned buildings equal to or greater than accepted national standards for energy conservation in new construction.

⁷ Another approach used by DPW to reduce natural gas costs in several buildings is a flexible, interruptible rate. Under the agreement with the natural gas company, if DPW can show it would cost the state less to switch over to oil, the designated backup fuel, the utility gives the state a comparable rate to keep them as a customer.

⁸ Sec.16-245n defines "renewable energy" as solar, wind, ocean thermal, wave or tidal energy, fuel cells, landfill gas and low emission advanced biomass conversion technologies, and other resources and emerging technologies not involving combustion of coal, petroleum, petroleum products, municipal solid waste, or nuclear fission.

⁹ The Connecticut Clean Energy Fund's support of Connecticut based companies marketing new technologies also assists state government by increasing the range of alternative energy options available to all energy consumers.

¹⁰ In 1990, energy-related functions were placed in the Policy Development and Planning Division of OPM. They moved to the current division during FY 99.