OLR Bill Analysis

sHB 5688

AN ACT CONCERNING ENERGY EFFICIENCY AND ELECTRIC DEREGULATION AND THE GROSS RECEIPTS TAX.

SUMMARY:

This bill requires construction projects financed by the state on or after January 1, 2007 to meet specified energy/environmental standards. The requirement applies to new buildings (including schools) costing $ 5 million or more and renovation projects costing $ 2 million or more. In the case of schools, if complying with this requirement increases the project's capital cost, the bill requires the state to pay 100% of the difference, as determined by the education commissioner in consultation with the secretary of the Office of Policy and Management (OPM), under the school construction grant

The bill establishes energy efficiency standards for several appliances and equipment.

It establishes energy efficiency standards for residential furnaces and related products bought by the state on or after January 1, 2008. It requires equipment and appliances bought by the Department of Administrative Services and other procurement agencies to comply with federal Energy Star standards

The bill modifies how the gross earnings tax is calculated for municipal electric utilities. Currently, these utilities pay a tax of 4% of their gross receipts from their residential customers and 5% on their nonresidential customers. The bill instead requires the utilities to pay a tax of 6. 8% of their gross receipts from transmitting power to residential customers and 8. 5% on their nonresidential transmission revenues (i. e. , their revenues from generating power would not be subject to the tax). The latter rates currently apply to electric companies.

The bill also requires the Connecticut Municipal Electric Energy Cooperative (CMEEC) to adopt standards regarding the promotion of renewable energy and file a report with the Renewable Energy Investment Fund Advisory Committee. CMEEC procures power for municipal electric utilities in the state, among other things.

The bill broadens what counts as Class III renewable resources. By law, electric companies and competitive suppliers must meet part of their demand from “Class III renewable resources. ” Under current law, these resources are (1) electricity produced by systems that produce heat and power that are developed at commercial and industrial facilities and (2) electricity savings from conservation and load management programs at these facilities that begin on or after January 1, 2006. The bill expands the latter provision by counting (1) electricity savings from conservation and load management measures that began on or after January 1, 2006 and (2) savings produced by residential customers, so long as they resulted from programs and measures funded by the Conservation and Load Management Fund.

The bill delays, from February 1, 2006 to February 1, 2007, the Department of Public Utility Control's deadline for concluding a proceeding establishing the administrative process for implementing a Class III credit trading program. Under this program, companies and suppliers who exceed the Class III requirements will earn credits, which they can sell to other companies and suppliers who have not met their requirements. The bill also deletes a requirement that the proceeding address the feasibility and benefits of expanding Class III resources to include electricity savings achieved by residential customers.

EFFECTIVE DATES: The tax rate change provisions are generally effective July 1, 2006 (see COMMENT) and the other provisions are effective October 1, 2006.

§ 8 — STANDARDS FOR STATE-FUNDED BUILDINGS

This bill requires buildings, including schools and housing projects, funded by the state on or after January 1, 2007 to meet specified energy and environmental standards for new construction projects costing $ 5 million or more and renovation projects $ 2 million or more. By January 1, 2007, the OPM secretary, in consultation with the public works, environmental protection, and public safety commissioners, must adopt regulations adopting construction standards that meet or exceed the silver building rating of the Leadership in Energy and Environmental Design's (LEED) rating system for new commercial construction and major renovation projects or an equivalent standard. The alternative standard must at least include a two globe rating under the Green Globes USA design program. The secretary must update the regulations as he considers necessary. The secretary, in consultation with public works commissioner, must exempt a facility from the regulations if the Institute for Sustainable Energy finds, in a written analysis, that the cost of compliance significantly outweighs the benefits of compliance.

Both rating systems give projects points for their environmental characteristics, such energy and water efficiency, and use of recycled materials and renewable energy. Based on the number of points a project receives, it can be given a silver, gold, or platinum award under the LEED system and one to four globes under the Green Globes system.

§ 10 — ENERGY EFFICIENCY

Appliance and Equipment Efficiency Standards

The bill establishes efficiency standards for the following products. The standards go into effect January 1, 2008, except for the standard for electric pool pumps, which goes into effect on January 1, 2010.

TABLE 1: APPLIANCE AND EQUIPMENT ENERGY EFFICIENCY STANDARDS

The bill also prohibits, starting January 1, 2008, metal halide lamp fixtures manufactured with 150 to 500 watt lamps from containing a device called a probe-start ballast in the vertical base up or vertical base down position only. This device starts lamps by using a third starting electrode probe in the arc tube.

Under current law, state energy efficiency standards for commercial refrigerators and freezers do not include walk-in models or products regulated under federal law. The bill eliminates these exceptions and specifies that the standards apply to appliances that are designed for the refrigerated or frozen storage of food or food products. As noted above, the bill establishes specific standards for walk-in models.

State-Purchased Furnaces, Boilers, and Air Handlers

The bill establishes efficiency standards for furnace air handlers (the part of a furnace that includes the fan, blower and housing) and residential furnaces and boilers (other than hot water boilers) bought by the state on or after January 1, 2008. Under the bill, furnace air handlers must have an electricity ratio of 2. 0 or less, except that handlers for small oil furnaces (less than 94,000 British Thermal Units per hour) can have an electricity ratio of up to 2. 3. The electricity ratio is the ratio of furnace electricity use to total furnace energy use.

Under the bill (1) residential gas and propane furnaces must have an annual fuel use efficiency (AFUE) of 90%; (2) oil furnaces must have an AFUE of 83%; (3) gas, oil, and propane hot water boilers must have an AFUE of 84%; (4) oil-fired hot water boilers must have an AFUE of 84%; and, (5) gas, oil, and propane steam boilers must have an AFUE of 82%. The bill's standards apply to furnaces and boilers that use only single-phase electric current, or single-phase electric current or DC current in conjunction with natural gas, propane or home heating oil. The furnace or boiler must (1) be designed to be the principal heating source for the living space of a residence; (2) not be contained within the same cabinet with a central air conditioner with a rated cooling capacity of not less than 65,000 BTUs per hour; (3) be an electric central furnace, electric boiler, forced-air central furnace, gravity central furnace, or low pressure steam or hot water boiler; and (D) have a heat input rate of less than 300,000 BTUs per hour for electric boilers and low pressure steam or hot water boilers and less than 225,000 BTUs per hour for forced-air central furnaces, gravity central furnaces and electric central furnaces. The bill applies to central furnaces that supply heated air through ducts of more than 10 inches in length.

§ 7 — CONNECTICUT MUNICIPAL ELECTRIC ENERGY COOPERATIVE

The bill requires CMEEC to develop standards for the promotion of renewable resources that apply to each municipal electric utility in the state. By January 1 annually, starting in 2007, CMEEC must submit the standards to the Renewable Energy Investment Advisory Committee. This committee advises Connecticut Innovations, Inc. , which administers the Renewable Energy Investment Fund.

The bill also requires CMEEC to submit a comprehensive report to the committee on the activities of municipal electric utilities regarding the promotion of renewable energy resources. The report must identify the utilities' standards and activities in the promotion, encouragement, expanded deployment and use of renewable resources in the previous calendar year in the utilities' service territories. CMEEC must submit the report to the committee within 90 days after the end of the calendar year. The report must cover renewable energy promotion and development activities for all customer classes.

COMMENT

Inconsistent Effective Dates for Tax Changes

The bill has contradictory provisions regarding the tax rates applicable to municipal electric utilities due to inconsistent effective dates. Section 1 makes the tax rate that applies to municipal utilities, effective July 1, 2006, the same as the rate that currently applies to electric companies (6. 8% on residential transmission services and 8. 5% on non-residential transmission services). However, Section 2 does not become effective until July 1, 2007. Until then, under this section, the current tax rate (4% on all residential services and 5% on all non-residential services) will continue to apply. In addition, Section 2 defines the term “municipal utility” which is used in Sections 3 – 6 even though those sections go into effect one year earlier on July 1, 2006.

COMMITTEE ACTION

Energy and Technology Committee

Joint Favorable Substitute Change of Reference

Finance, Revenue and Bonding Committee

Joint Favorable Substitute