June 14, 2006
LEGISLATIVE ENERGY INITIATIVES SINCE ELECTRIC RESTRUCTURING
By: Kevin E. McCarthy, Principal Analyst
You asked for a discussion of legislation passed since the adoption of electric restructuring in 1998 that has been designed to promote energy efficiency and renewable energy and restrain increases in energy prices.
The legislature restructured the electric industry in 1998 with the passage of PA 98-28, which allowed customers to choose their electric suppliers. It required electric utilities to provide standard offer service to customers who did not choose a competitive supplier, and capped prices for this service at 10% below the utilities' 1996 rates. Initially, standard offer service was to run through 2003. The act required competitive suppliers to obtain part of their power from renewable energy resources. The act also created funding mechanisms for renewable energy and utility conservation programs.
Since 1998, the legislature has passed a variety of acts to encourage conservation and renewable energy use and to constrain price increases for electricity, the most significant of which were adopted in 2003, 2004, and 2005. In 2003, the legislature extended the standard offer requirements, although with a higher cap on rates. The 2003 legislation included several measures to promote renewable energy and expanded energy planning requirements. In 2004, the legislature required the Department of Public Utility Control (DPUC) to set energy efficiency standards for various heating, cooling, and lighting, and other types of products.
Legislation adopted in 2005 established several initiatives to reduce costs associated with congestion on the electric transmission system. It created incentives for customers to install “distributed resources” on their premises. These resources include small- and medium-size generating facilities and conservation measures. Another 2005 act increased energy assistance benefits and established a new conservation program. It exempted energy efficiency products and energy efficient heating equipment from the sales tax from November 25, 2005 to April 1, 2006. It also has several measures to discourage price gouging.
POST RESTRUCTURING ENERGY LEGISLATION
PA 99-13 delayed the termination date for the residential energy conservation service program from July 1, 1999 to July 1, 2002. By law, participants in the program had to provide or arrange for low-cost energy audits. Electric and gas utilities and large heating oil dealers had to participate in the program; municipal utilities could participate.
PA 02-5 allowed the Department of Economic and Community Development commissioner to establish a three-year matching grant demonstration program to promote environmentally safe housing and energy conservation by repairing and replacing wooden windows in two-to-six-family buildings built before 1950. The maximum grant was $100 per window. Under the act, the program was to end on June 30, 2005 (PA 05-132 extended this deadline).
PA 03-135 substantially revised the electric restructuring law, particularly its provisions requiring utilities to provide service to customers who do not choose a competitive supplier. It extended, for three years, the requirement that the utilities provide standard offer service (renamed "transitional standard offer service") to such customers and increased the maximum rate that they could charge for the service.
The act modified the requirement that utilities provide default service to such customers after the standard offer service requirement ends in 2006. It established separate pricing rules for such service provided to (1) small and medium-sized customers (named "standard service") and (2) large customers ("last resort service"). It requires utilities to procure power for standard service in a way that mitigates rapid changes in electricity prices.
Under the act, DPUC can require a utility to offer, through a competitive supplier, one or more alternatives to transitional standard offer service and standard service, including an alternative that includes more renewable energy than is required by law and one that promotes energy conservation.
The law requires electric suppliers to obtain part of their power from renewable resources. This provision is known as the “renewable portfolio standard” (RPS). The act (1) reduced the total amount of renewable power suppliers must obtain, (2) modified what counts as renewable resources and where it can be produced, and (3) extended the modified RPS to apply to utilities in the service they provide to customers who do not choose suppliers. The act extended to utilities other environmental provisions that currently apply to suppliers.
The act allows (1) DPUC to issue a request for proposals if it determines that the construction of new temporary generation facilities would reduce federally mandated transmission costs and (2) the costs of these facilities to be recovered in the systems benefits charge component of electric bills.
PA 03-140 expanded the responsibilities of the Connecticut Energy Advisory Board (CEAB) to include energy planning and the identification of alternative solutions to the state's energy infrastructure needs. It requires CEAB to prepare an annual plan on the need for new energy resources, transmission facilities, and energy conservation initiatives in the state. This requirement supersedes a mandate that the Office of Policy and Management (OPM) develop a similar plan every four years and that CEAB report its recommendations on energy policy every other year.
CEAB must issue a request for proposals (RFP) when the Siting Council receives an application for a certificate to build an energy facility (electric transmission line, power plant, substation, or gas transmission line) in order to identify alternative solutions. The act allows the board to issue an RFP on its own initiative to address the needs identified in its annual plan. The act required CEAB to develop guidelines by December 1, 2004, for evaluating alternative proposals for addressing the state's energy infrastructure needs, and requires it to evaluate any proposals received in response to the RFP, as well as the original application, using those guidelines. CEAB must report its findings to the Siting Council. The report becomes part of the record upon which the Siting Council must make its decision.
PA 04-85 required DPUC to establish, by regulation, energy efficiency standards by July 1, 2005 for specified heating, cooling, lighting, and other types of products. The act repealed existing standards for fluorescent ballasts and lamps and showerheads.
Under prior law, showerheads and fluorescent lamps that did not meet state standards generally could not be sold, offered for sale, or installed in the state. The act instead subjects the products it covers, and additional products as designated by DPUC, to this prohibition generally starting July 1, 2006. Under the act, commercial clothes washers must meet the standards by July 1, 2007; commercial refrigerators and freezers by July 1, 2008; and large packaged air conditioning equipment, by July 1, 2009.
PA 05-1, June 2005 Special Session establishes several initiatives to reduce costs associated with congestion on the electric transmission system. It creates incentives for customers for installing “distributed resources” on their premises. These resources include small- and medium-size generating facilities and conservation and load management measures. The incentives include capital- and operating-cost subsidies and the provision of long-term financing.
The act requires DPUC to identify near-term measures that could reduce the transmission congestion costs and order the utilities to begin implementing the steps DPUC considers appropriate by January 1, 2006.
The act requires DPUC to issue a request for proposals to identify measures that would reduce congestion costs over the 2006 to 2010 period. Proposals can be submitted for distributed resources, larger generating plants, and contractual rights to the generating capacity of power plants. Electric utilities can submit proposals subject to several
conditions and restrictions. Proposals submitted by other entities that are selected by DPUC are eligible to enter into long-term contracts with the electric utilities, with DPUC approval. The act facilitates the siting of the generation projects approved or ordered by DPUC.
The act requires that the groups that recommend how the electric conservation and Clean Energy funds are used give preference to funding projects that maximize the reduction in these congestion costs. It provides incentives for the electric utilities to develop new conservation programs. The act also requires electric utilities and competitive suppliers to acquire 1% of their supply from distributed resources starting in 2007. This requirement increases to 4% by 2010.
In addition, the act:
1. makes several changes to the requirements that electric utilities enter into long-term contracts with renewable energy generators;
2. sets a floor on municipal electric utility expenditures on renewable energy sources and conservation and load-management programs, phased in over five years; and
3. establishes a process for the development and review of natural gas conservation programs
PA 05-2, October 25, 2005 Special Session:
1. increases benefits under the Connecticut Energy Assistance Program (CEAP), which helps low-income households pay their heating bills and provides benefits for moderate-income households under the Contingency Heating Assistance Program component of CEAP;
2. establishes a new HEARTH program to provide subsidies for furnace tune-ups and other energy efficiency services, available to all income groups;
3. exempts energy efficiency products and energy efficient heating equipment from the sales tax from November 25, 2005 to April 1, 2006;
4. lowers the interest rate on certain energy conservation loans;
5. bars energy sellers from charging “unconscionably excessive prices” in connection with abnormal market disruptions and allows the attorney general to seek civil penalties and damages when it receives referrals;
6. requires OPM to take various steps to increase the transparency of the home heating oil market; and
7. requires heating oil dealers to obtain futures contracts or surety bonds in connection with fixed-price contracts.
PA 05-4, October 25 Special Session expands the types of energy efficient or products eligible for the temporary sales exemption created by PA 05-2, October 25 Special Session. It generally expands the types of contractors who can participate in the HEARTH program established by that act for assistance and reimbursements for heating equipment tune-ups.
PA 05-132 extends to June 30, 2008, the end date for the DECD window replacement matching grant demonstration program. The act requires DECD to report to the Housing Committee by February 1, 2008, on (1) the number of eligible buildings that received assistance, (2) program costs and effectiveness, and (3) recommendations whether to expand the program and make it permanent.
PA 06-74 modifies the RPS and what types of wood and other types of biomass counts as a renewable resource under it.
PA 06-187 reinstates the sales tax exemption for energy efficiency products during the period June 1, 2006 to June 30, 2007.