AN ACT CONCERNING NATURAL GAS AND OIL CONSERVATION.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. Subsection (b) of section 16-19b of the 2006 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2006):

(b) If the department finds that the changed price of purchased gas required for distribution by a gas company substantially threatens the ability of the company to earn a reasonable rate of return, [or] will cause the company to have an excessive rate of return, or is insufficient for procuring efficiency resources not recovered pursuant to a gas conservation plan pursuant to section 16-32f, as amended by this act, the department shall, after investigation and public hearing, approve a suitable purchased gas adjustment clause to be superimposed upon the existing rate schedule of the company. The department shall design any such purchased gas adjustment clause to allow the gas company to charge or to reimburse the consumer only for the changes in the cost of purchased gas which occur when the actual price of purchased gas differs from the price reflected in the base rates of the company. The department may establish an efficiency factor in the purchased gas adjustment clause of each gas company, which may provide for less than one hundred per cent recovery of the gross earnings tax imposed by section 12-264, as amended, on the revenues from such purchased gas. A purchased gas adjustment clause approved pursuant to this section shall apply to all gas companies similarly affected by the costs which form the basis for the adjustment clause.

Sec. 2. Section 16-32f of the 2006 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2006):

(a) On or before October first of each even-numbered year, a gas company, as defined in section 16-1, as amended, shall furnish a report to the Department of Public Utility Control containing a five-year forecast of loads and resources. The report shall describe the facilities and supply sources that, in the judgment of such gas company, will be required to meet gas demands during the forecast period. The report shall be made available to the public and shall be furnished to the chief executive officer of each municipality in the service area of such gas company, the regional planning agency which encompasses each such municipality, the Attorney General, the president pro tempore of the Senate, the speaker of the House of Representatives, the joint standing committee of the General Assembly having cognizance of matters relating to public utilities, any other member of the General Assembly making a request to the department for the report and such other state and municipal entities as the department may designate by regulation. The report shall include: (1) A tabulation of estimated peak loads and resources for each year; (2) data on gas use and peak loads for the five preceding calendar years; (3) a list of present and projected gas supply sources; (4) specific measures to control load growth and promote conservation; and (5) such other information as the department may require by regulation. A full description of the methodology used to arrive at the forecast of loads and resources shall also be furnished to the department. The department shall hold a public hearing on such reports upon the request of any person. On or before August first of each odd-numbered year, the department may request a gas company to furnish to the department an updated report. A gas company shall furnish any such updated report not later than sixty days following the request of the department.

(b) Not later than October 1, 2005, and annually thereafter, a gas company, as defined in section 16-1, as amended, shall submit to the Department of Public Utility Control a gas conservation plan, in accordance with the provisions of this section, to implement cost-effective energy conservation programs and market transformation initiatives. All supply and conservation and load management options shall be evaluated and selected within an integrated supply and demand planning framework. Such plan shall provide for annual expenditures for the implementation of the programs of the plan, which expenditures shall be amounts of not less than 1.1 cents per hundred cubic feet of natural gas projected to be distributed to customers by the company in 2007, 2.2 cents in 2008, and 3.3 cents in 2009 and annually thereafter. Services under the plan shall be available to all gas company customers and the costs shall be collected as a portion of the delivery charges. Expenditures pursuant to the plan may be recovered by the company as provided in section 16-19oo. The department shall, in an uncontested proceeding during which the department may hold a public hearing, approve, modify or reject the plan.

(c) (1) The Energy Conservation Management Board, established pursuant to section 16-245m, as amended by this act, shall advise and assist each such gas company in the development and implementation of the plan submitted under subsection (b) of this section. Each program contained in the plan shall be reviewed by each such gas company and shall be either accepted, modified or rejected by the Energy Conservation Management Board before submission of the plan to the department for approval. The Energy Conservation Management Board shall, as part of its review, examine opportunities to offer joint programs providing similar efficiency measures that save more than one fuel resource or to otherwise coordinate programs targeted at saving more than one fuel resource. Any costs for joint programs shall be allocated equitably among the conservation programs.

(2) Programs included in the plan shall be screened through cost-effectiveness testing that compares the value and payback period of program benefits to program costs to ensure that the programs are designed to obtain gas savings whose value is greater than the costs of the program. Program cost-effectiveness shall be reviewed annually by the department, or otherwise as is practicable. If the department determines that a program fails the cost-effectiveness test as part of the review process, the program shall either be modified to meet the test or shall be terminated. On or before January 1, 2007, and annually thereafter, the board shall provide a report, in accordance with the provisions of section 11-4a, to the joint standing committees of the General Assembly having cognizance of matters relating to energy and the environment, that documents expenditures and funding for such programs and evaluates the cost-effectiveness of such programs conducted in the preceding year, including any increased cost-effectiveness owing to offering programs that save more than one fuel resource.

(3) Programs included in the plan may include, but are not limited to: (A) Conservation and load management programs, including programs that benefit low-income individuals; (B) research, development and commercialization of products or processes that are more energy-efficient than those generally available; (C) development of markets for such products and processes; (D) support for energy use assessment, engineering studies and services related to new construction or major building renovations; (E) the design, manufacture, commercialization and purchase of energy-efficient appliances, air conditioning and heating devices; (F) program planning and evaluation; (G) joint fuel conservation initiatives and programs targeted at saving more than one fuel resource; and (H) public education regarding conservation. Such support may be by direct funding, manufacturers' rebates, sale price and loan subsidies, leases and promotional and educational activities. The plan shall also provide for expenditures by the Energy Conservation Management Board for the retention of expert consultants and reasonable administrative costs, provided such consultants shall not be employed by, or have any contractual relationship with, a gas company. Such costs shall not exceed five per cent of the total cost of the plan.

(d) [Nothing in this section shall be construed to require the Department of Public Utility Control to establish a conservation charge to support the programs in this section.] Services provided under the plan shall constitute a minimum level of support for conservation and efficiency activities. In addition, the gas companies shall consider energy efficiency programs and projects as a resource equal to gas supply, with all reasonably available cost-effective efficiency resources procured prior to the acquisition of gas supply. Any additional costs for procuring such efficiency resources that are not recovered pursuant to the plan shall be recovered pursuant to a purchased gas adjustment clause approved pursuant to section 16-19b, as amended by this act.

Sec. 3. (NEW) (Effective July 1, 2006) (a) For purposes of this section, "fuel oil" means the product designated by the American Society for Testing and Materials as "Specifications for Heating Oil D396-69", commonly known as number 2 heating oil, and grade number 4, grade number 5 and grade number 6 fuel oil, provided such heating and fuel oil are used for purposes other than the generation of power to propel motor vehicles or for the generation of electricity.

(b) On or before November 1, 2006, the Energy Conservation Management Board, established pursuant to section 16-245m of the 2006 supplement to the general statutes, as amended by this act, shall, after issuing a request for proposals, select an entity qualified to administer and implement conservation and energy efficiency programs for fuel oil customers, as described in this section, to act as the program administrator for such programs and shall enter into a contract not to exceed three years in duration for such purpose. At the expiration of the contract, the board may renew the contract if it finds that the administrator's performance has been satisfactory, or it may issue a new request for proposals.

(c) On or before March 1, 2007, the program administrator shall submit to the Energy Conservation Management Board a fuel oil conservation plan in accordance with the provisions of this section for the balance of 2007. On or before October 1, 2007, and annually thereafter, the program administrator shall submit to the Energy Conservation Management Board a fuel oil conservation plan in accordance with the provisions of this section. The board shall hold a public hearing on each such plan.

(d) (1) The Energy Conservation Management Board shall advise and assist the program administrator in the development and implementation of a comprehensive plan, which plan shall be approved by the board, that implements cost-effective fuel oil energy conservation programs and market transformation initiatives for residential, commercial and industrial fuel oil customers. The board shall, as part of its review, examine opportunities to offer joint programs providing similar efficiency measures that save more than one fuel resource or to otherwise coordinate programs targeted at saving more than one fuel resource. Any costs for joint programs shall be allocated equitably among the conservation programs.

(2) Program cost-effectiveness shall be reviewed annually by the Energy Conservation Management Board, or otherwise as practicable. Programs included in the plan shall be evaluated as to cost-effectiveness by comparing the value and payback period of the program benefits to the program costs to ensure that the programs are designed to obtain fuel oil savings, the value of which is greater than the costs of the program. If a program is determined by the board to fail the cost-effectiveness test as part of the review process, it shall either be modified to meet the test or it shall be terminated. On or before March 1, 2008, and annually thereafter, the board shall provide a report to the joint standing committees of the General Assembly having cognizance of matters relating to energy and the environment that documents expenditures and fund balances and evaluates the cost-effectiveness of such programs conducted in the preceding year, including any increased cost-effectiveness due to offering programs that save more than one fuel resource.

(3) Programs included in the plan may include, but not be limited to: (A) Conservation programs, including programs that benefit low-income persons; (B) research, development and commercialization of precuts or processes that are more energy-efficient than those generally available; (C) development of markets for such products and processes; (D) support for energy use assessment, engineering studies and services related to new construction or major building renovations; (E) the design, manufacture, commercialization and purchase of energy-efficient appliances and heating devices; (F) program planning and evaluation; (G) joint fuel conservation initiatives and programs targeted at saving more than one fuel resource; and (H) public education regarding conservation. Such support may be by direct funding, manufacturers' rebates, sale price and loan subsidies, leases and promotional and educational activities. The plan will also provide for expenditures by the Energy Conservation and Management Board for the retention of expert consultants and reasonable administrative costs, provided such consultants shall not be employed by, or have any contractual relationship with, a fuel oil company or the program administrator. Such costs shall not exceed five per cent of the total cost of the plan.

(e) There is established an account to be known as the "fuel oil conservation account" which shall be a separate, nonlapsing account within the General Fund. Any balance remaining in said account at the end of any fiscal year shall be carried forward in said account for the fiscal year next succeeding. Funds shall be deposited in the account in accordance with the provisions of subsection (f) of this section as follows: (1) A portion of such tax in the amount of five million dollars for 2007; (2) a portion of such tax in the amount of ten million dollars for 2008; and (3) a portion of such tax in the amount of fifteen million dollars for 2009. The Secretary of the Office of Policy and Management shall pay specific amounts from said account, upon authorization of the Energy Conservation and Management Board, to the program administrator selected to implement an approved plan.

(f) (1) There is established a Fuel Oil Conservation Board consisting of five members, including the Commissioner of Revenue of Services and the Attorney General, or their respective designees. The Governor shall appoint one member representing a retail fuel oil dealer, the president pro tempore of the Senate shall appoint one member representing a business organization, and the speaker of the House of Representatives shall appoint one member representing an environmental organization with experience in conservation programs, all of whom shall serve in accordance with section 4-1a of the general statutes.

(2) The board shall pay specific amounts from the fuel oil conservation account established pursuant to subsection (e) of this section to the program administrator selected to implement an approved plan upon authorization of the Energy Conservation and Management Board.

(3) The board shall establish itself as a tax exempt organization in accordance with the provisions of Section 501(c)(3) of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended. Not later than July 1, 2007, and biennially thereafter, a third party selected by the Attorney General shall audit the activities of the board. The results of such audit shall be submitted in a report to the joint standing committees of the General Assembly having cognizance of matters relating to energy and the environment.

Sec. 4. Subsection (c) of section 16-245m of the 2006 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2006):

(c) The Department of Public Utility Control shall appoint and convene an Energy Conservation Management Board which shall include representatives of: (1) An environmental group knowledgeable in energy conservation program collaboratives; (2) the Office of Consumer Counsel; (3) the Attorney General; (4) the Department of Environmental Protection; (5) the electric distribution companies in whose territories the activities take place for such programs; (6) a state-wide manufacturing association; (7) a chamber of commerce; (8) a state-wide business association; (9) a state-wide retail organization; (10) a representative of a municipal electric energy cooperative created pursuant to chapter 101a; (11) two representatives selected by the gas companies in this state; (12) a retail fuel oil dealers association in the state; and [(12)] (13) residential customers. Such members shall serve for a period of five years and may be reappointed. Representatives of the gas companies shall not vote on matters unrelated to gas conservation. Representatives of the electric distribution companies and the municipal electric energy cooperative shall not vote on matters unrelated to electricity conservation. The representative of the fuel oil dealers shall not vote on matters unrelated to fuel oil conservation.

Sec. 5. Subsection (j) of section 16-19b of the 2006 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2006):

(j) Any purchased gas adjustment clause or energy adjustment clause approved by the department may include a provision designed to allow the electric or gas company to charge or reimburse the customer for any under-recovery or over-recovery of overhead and fixed costs due solely to the deviation of actual retail sales of electricity or gas from projected retail sales of electricity or gas. The department shall include such provision in any energy adjustment clause approved for an electric company if it determines (1) that a significant cause of excess earnings by the electric company is an increase in actual retail sales of electricity over projected retail sales of electricity as determined at the time of the electric company's most recent rate amendment, and (2) that such provision is likely to benefit the customers of the electric company. Not later than January 1, 2008, the department shall include such provision in any purchased gas adjustment clause approved for a gas company on or after the issuance of a final decision in a proceeding on amendments to rate schedules for such company.

Sec. 6. Section 12-587 of the 2006 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2006):

(a) As used in this chapter: (1) "Company" includes a corporation, partnership, limited partnership, limited liability company, limited liability partnership, association, individual or any fiduciary thereof; (2) "quarterly period" means a period of three calendar months commencing on the first day of January, April, July or October and ending on the last day of March, June, September or December, respectively; (3) "gross earnings" means all consideration received from the first sale within this state of a petroleum product; (4) "petroleum products" means those products which contain or are made from petroleum or a petroleum derivative; (5) "first sale of petroleum products within this state" means the initial sale of a petroleum product delivered to a location in this state; (6) "export" or "exportation" means the conveyance of petroleum products from within this state to a location outside this state for the purpose of sale or use outside this state; and (7) "sale for exportation" means a sale of petroleum products to a purchaser which itself exports such products.

(b) (1) Except as otherwise provided in subdivision (2) of this subsection, any company which is engaged in the refining or distribution, or both, of petroleum products and which distributes such products in this state shall pay a quarterly tax on its gross earnings derived from the first sale of petroleum products within this state. Each company shall on or before the last day of the month next succeeding each quarterly period render to the commissioner a return on forms prescribed or furnished by the commissioner and signed by the person performing the duties of treasurer or an authorized agent or officer, including the amount of gross earnings derived from the first sale of petroleum products within this state for the quarterly period and such other facts as the commissioner may require for the purpose of making any computation required by this chapter. Except as otherwise provided in subdivision (3) of this subsection, the rate of tax shall be (A) five per cent with respect to calendar quarters prior to July 1, 2005; (B) five and eight-tenths per cent with respect to calendar quarters commencing on or after July 1, 2005, and prior to July 1, 2006; (C) six and three-tenths per cent with respect to calendar quarters commencing on or after July 1, 2006, and prior to July 1, 2007; (D) seven per cent with respect to calendar quarters commencing on or after July 1, 2007, and prior to July 1, 2008; (E) seven and one-half per cent with respect to calendar quarters commencing on or after July 1, 2008, and prior to July 1, 2013; and (F) eight and one-tenth per cent with respect to calendar quarters commencing on or after July 1, 2013.

(2) Gross earnings derived from the first sale of the following petroleum products within this state shall be exempt from tax: (A) Any petroleum products sold for exportation from this state for sale or use outside this state; (B) the product designated by the American Society for Testing and Materials as "Specification for Heating Oil D396-69", commonly known as number 2 heating oil, to be used exclusively for heating purposes or to be used in a commercial fishing vessel, which vessel qualifies for an exemption pursuant to section 12-412, as amended; (C) kerosene, commonly known as number 1 oil, to be used exclusively for heating purposes, provided delivery is of both number 1 and number 2 oil, and via a truck with a metered delivery ticket to a residential dwelling or to a centrally metered system serving a group of residential dwellings; (D) the product identified as propane gas, to be used exclusively for heating purposes; (E) bunker fuel oil, intermediate fuel, marine diesel oil and marine gas oil to be used in any vessel having a displacement exceeding four thousand dead weight tons; (F) for any first sale occurring prior to July 1, 2008, propane gas to be used as a fuel for a motor vehicle; (G) for any first sale occurring on or after July 1, 2002, grade number 6 fuel oil, as defined in regulations adopted pursuant to section 16a-22c, to be used exclusively by a company which, in accordance with census data contained in the Standard Industrial Classification Manual, United States Office of Management and Budget, 1987 edition, is included in code classifications 2000 to 3999, inclusive, or in Sector 31, 32 or 33 in the North American Industrial Classification System United States Manual, United States Office of Management and Budget, 1997 edition; (H) for any first sale occurring on or after July 1, 2002, number 2 heating oil to be used exclusively in a vessel primarily engaged in interstate commerce, which vessel qualifies for an exemption under section 12-412, as amended; (I) for any first sale occurring on or after July 1, 2000, paraffin or microcrystalline waxes; or (J) for any first sale occurring prior to July 1, 2008, petroleum products to be used as a fuel for a fuel cell, as defined in subdivision (113) of section 12-412, as amended.

(3) The rate of tax on gross earnings derived from the first sale of grade number 6 fuel oil, as defined in regulations adopted pursuant to section 16a-22c, to be used exclusively by a company which, in accordance with census data contained in the Standard Industrial Classification Manual, United States Office of Management and Budget, 1987 edition, is included in code classifications 2000 to 3999, inclusive, or in Sector 31, 32 or 33 in the North American Industrial Classification System United States Manual, United States Office of Management and Budget, 1997 edition, or number 2 heating oil used exclusively in a vessel primarily engaged in interstate commerce, which vessel qualifies for an exemption under section 12-412, as amended, shall be: (A) Four per cent with respect to calendar quarters commencing on or after July 1, 1998, and prior to July 1, 1999; (B) three per cent with respect to calendar quarters commencing on or after July 1, 1999, and prior to July 1, 2000; (C) two per cent with respect to calendar quarters commencing on or after July 1, 2000, and prior to July 1, 2001; and (D) one per cent with respect to calendar quarters commencing on or after July 1, 2001, and prior to July 1, 2002.

(c) (1) Any company which imports or causes to be imported into this state petroleum products for sale, use or consumption in this state, other than a company subject to and having paid the tax on such company's gross earnings from first sales of petroleum products within this state, which earnings include gross earnings attributable to such imported or caused to be imported petroleum products, in accordance with subsection (b) of this section, shall pay a quarterly tax on the consideration given or contracted to be given for such petroleum product if the consideration given or contracted to be given for all such deliveries during the quarterly period for which such tax is to be paid exceeds three thousand dollars. Except as otherwise provided in subdivision (3) of this subsection, the rate of tax shall be (A) five per cent with respect to calendar quarters commencing prior to July 1, 2005; (B) five and eight-tenths per cent with respect to calendar quarters commencing on or after July 1, 2005, and prior to July 1, 2006; (C) six and three-tenths per cent with respect to calendar quarters commencing on or after July 1, 2006, and prior to July 1, 2007; (D) seven per cent with respect to calendar quarters commencing on or after July 1, 2007, and prior to July 1, 2008; (E) seven and one-half per cent with respect to calendar quarters commencing on or after July 1, 2008, and prior to July 1, 2013; and (F) eight and one-tenth per cent with respect to calendar quarters commencing on or after July 1, 2013. Fuel in the fuel supply tanks of a motor vehicle, which fuel tanks are directly connected to the engine, shall not be considered a delivery for the purposes of this subsection.

(2) Consideration given or contracted to be given for petroleum products, gross earnings from the first sale of which are exempt from tax under subdivision (2) of subsection (b) of this section, shall be exempt from tax.

(3) The rate of tax on consideration given or contracted to be given for grade number 6 fuel oil, as defined in regulations adopted pursuant to section 16a-22c, to be used exclusively by a company which, in accordance with census data contained in the Standard Industrial Classification Manual, United States Office of Management and Budget, 1987 edition, is included in code classifications 2000 to 3999, inclusive, or in Sector 31, 32 or 33 in the North American Industrial Classification System United States Manual, United States Office of Management and Budget, 1997 edition, or number 2 heating oil used exclusively in a vessel primarily engaged in interstate commerce, which vessel qualifies for an exemption under section 12-412, as amended, shall be: (A) Four per cent with respect to calendar quarters commencing on or after July 1, 1998, and prior to July 1, 1999; (B) three per cent with respect to calendar quarters commencing on or after July 1, 1999, and prior to July 1, 2000; (C) two per cent with respect to calendar quarters commencing on or after July 1, 2000, and prior to July 1, 2001; and (D) one per cent with respect to calendar quarters commencing on or after July 1, 2001, and prior to July 1, 2002.

(d) The amount of tax reported to be due on such return shall be due and payable on or before the last day of the month next succeeding the quarterly period. The tax imposed under the provisions of this chapter shall be in addition to any other tax imposed by this state on such company. The Commissioner of Revenue Services shall provide the company submitting the tax with a credit on the amount of tax due in accordance with the estimates determined pursuant to subsection (f) of this section, which credit the company shall deposit into the fuel oil conservation account, established pursuant to section 3 of this act.

(e) For the purposes of this chapter, the gross earnings of any producer or refiner of petroleum products operating a service station along the highways or interstate highways within the state pursuant to a contract with the Department of Transportation or operating a service station which is used as a training or test marketing center under the provisions of subsection (b) of section 14-344d, shall be calculated by multiplying the volume of petroleum products delivered by any producer or refiner to any such station by such producer's or refiner's dealer tank wagon price or dealer wholesale price in the area of the service station.

(f) Not later than every quarterly period, the Commissioner of Revenue Services shall conduct a review to estimate the percentage of the revenues collected pursuant to this section that are necessary to fund the fuel oil conservation account in accordance with the provisions of section 3 of this act.

Statement of Purpose:

To establish financing guidelines for the natural gas conservation program and to establish a fuel oil conservation program.

[Proposed deletions are enclosed in brackets. Proposed additions are indicated by underline, except that when the entire text of a bill or resolution or a section of a bill or resolution is new, it is not underlined.]