November 15, 2006
GOVERNOR'S ENERGY PROPOSALS
By: Kevin E. McCarthy, Principal Analyst
You asked for a summary of the governor's proposed energy plan. The plan (enclosed) is also available online at http://www.ct.gov/governorrell/lib/governorrell/ctenergyvisionsept19.pdf.
The plan would establish several long term energy goals for the state, such using clean or renewable resources to produce 20% of the energy used in the state by 2020.
The plan has several tax proposals, including (1) a cap on the petroleum products tax as it applies to gasoline wholesalers; (2) expansion of the sales tax exemption on electric sales to businesses; (3) extended and new sales tax exemptions for energy efficiency, renewable energy, and hybrid vehicles; and (4) related property tax exemptions.
The plan proposes to strengthen the Office of Policy and Management's (OPM) Energy Unit, authorizing it to coordinate state planning for energy development, conservation, and new energy technologies. It has several proposals to increase energy efficiency, including a restoration of the funding for the Energy Conservation Fund.
With regard to gasoline and other vehicle fuels, the plan would eliminate zone pricing for two years. It also proposes several incentives for alternative fuels, including fuels produced from crops and other biofuels.
The plan has several other proposals, including retaining the increased benefit levels under the Connecticut Energy Assistance Program that were adopted in 2006.
Most of the plan's proposals would require legislation. However, the plan contemplates that some measures, such as energy efficiency requirements for equipment bought by the state, could be implemented by executive order or other administrative means.
The plan proposes that, by 2020:
1. 20% of all energy used and sold in the state come from clean or renewable resources,
2. the state achieve a 20% reduction in electric-peak consumption,
3. state fossil fuel consumption be reduced by 20%,
4. all commercial transportation fuels sold in the state be required to include a mixture of 20% alternative fuels, and
5. all residential and commercial heating oil used in the state contain 20% alternative fuels.
The plan also reaffirms the goal, contained in Executive Order 32, that 20% of state agency and state university electricity purchases come from class 1 renewable resources such as solar energy and fuel cells.
The plan proposes to:
1. cap the petroleum products tax on oil wholesalers when the wholesale price of gasoline reaches $1.75 per gallon (wholesale prices peaked at $2.33 per gallon);
2. totally eliminate the sales tax on electricity sold to commercial customers (currently sales above $150 per month are subject to the tax);
3. exempt room air conditioners that meet federal Energy Star standards from the sales tax;
4. exempt the purchase and installation costs for residential renewable energy projects, such as solar installations, from the sales tax;
5. extend the sales tax exemption for weatherization and related products, which is currently scheduled to expire on June 30, 2007, to June 30, 2010;
6. extend the state sales tax exemption for hybrid vehicles that get at least forty miles per gallon on the highway, which is currently scheduled to expire on October 1, 2008, through June 30, 2010;
7. study the feasibility of extending this exemption to any vehicle that gets at least forty miles per gallon on the highway.
The plan also proposes to (1) expand the local property tax exemption for renewable energy projects to include the plumbing and ancillary costs of such projects and (2) exempt hybrid vehicles from property taxes for a period of three years beginning with new vehicles placed on a town's grand list on or after October 1, 2006.
ENERGY POLICY AND PLANNING
The plan proposes to strengthen the OPM Energy Unit, giving it the authority to coordinate the state's assets for planning state energy development, conservation, and new energy technologies. Under the plan, the unit would:
1. establish a biennial energy plan and goals;
2. maximize state acquisition and use of federal funds and coordinate the distribution of these funds across state agencies;
3. coordinate and integrate energy activities and programs at other state agencies;
4. represent the state on regional energy planning boards and commissions;
5. coordinate the use of state facilities as test sites for innovative energy saving technologies;
6. promote the diversification of energy generation technology by supporting a broad cross-section of clean energy technologies;
7. advance the development of resources native to and viable in Connecticut, so that it is less reliant on other states and foreign countries for its energy; and
8. encourage the use of distributed generation projects for public infrastructure around the state.
The plan also calls for the creation of a single OPM website where consumers can obtain information about the various energy efficiency, renewable energy, and cost-saving programs and incentives.
The plan proposes to (1) restore the money taken from the Energy Conservation Fund in 2003, and (2) increase funding for residential weatherization and efficiency under the Weatherization Assistance Program. It proposes to establish an informational campaign targeted at residential and commercial consumers to inform them about the conservation and technological resources available and the benefits that come from undertaking efficiency projects and using renewable energy sources.
The plan also proposes to establish an Energy Efficiency Resource Center for small businesses in Connecticut within the Department of Economic and Community Development (DECD). The center would provide information about energy programs and incentives to small businesses to undertake energy efficiency improvements. The plan also proposes to establish a small business loan program within DECD to help assist small businesses by giving them access to technical and financial assistance programs to help offset rising energy costs that affect their bottom line. The program would provide low-interest rate financing to qualifying small businesses that implement energy saving and efficiency measures and provide gap funding for projects funded through existing programs.
GASOLINE AND ALTERNATIVE FUELS
The plan would eliminate zone pricing for gasoline for two years. Under zone pricing, dealers are charged different amounts for gasoline based on factors like traffic volume, station facilities, and area household incomes. The proposal would also ban exclusivity agreement provisions that limit gas stations access to renewable fuels.
The plan also proposes the establishment of:
1. a low-interest forgivable loan pool for service stations to reduce or eliminate the upfront costs of installing new alternative fuel pumps or converting gas or diesel pumps to dispense alternative fuels;
2. tax incentives and loan programs to promote the construction of processing facilities for local biofuel feedstock crops and production plants that use virgin oil and recycled frying oil to create fuel; and
3. grants, low interest loans, and loan guarantees to make the cultivation of biofuel crops a viable option for Connecticut farmers.
PUBLIC BUILDINGS AND STATE ENERGY PROCUREMENT
Under the plan, equipment and appliances purchased for or by state agencies must be certified under the federal Energy Star program, provided such equipment is commercially available. The plan would also require all state and local school construction projects paid with state funds to be energy efficient. The state would also facilitate opportunities for these new projects to incorporate distributed generation and clean energy technologies. The plan calls for the creation of an Energy Efficiency Improvement Fund within OPM to be used for energy efficiency improvements to state buildings.
Under the plan, starting in 2012, the entire state fleet would be required to use a 10% biofuel mixture. The governor also plans on working with other northeastern governors in seeking an amendment to federal energy regulations so that hybrid cars count towards the requirement that 75% of state fleet vehicles operate on alternative fuels.
The plan would:
1. maintain the increased benefit levels that were adopted in 2006 under the Connecticut Energy Assistance Program;
2. establish a working committee of academic, scientific and industry leaders to examine the current and future business opportunities in moving to a hydrogen-based economy; and
3. add a consumer advocate and a business advocate as non-voting members of the Public Utilities Control Authority, which governs the Department of Public Utility Control.
The plan also calls on the major oil companies to partner with the states and voluntarily contribute 5% of this year's profits to a national “Energy Assistance and Energy Efficiency Fund.” Money in the fund would be distributed among the states to offset increased demand for the energy assistance and to provide incentives and assistance to low and middle-income citizens to become efficient energy users.
The plan proposes to allow the Connecticut Health & Education Financing Authority to (1) become an electric aggregator and to purchase energy collectively for hospitals, universities, and non-profits located in the state and (2) provide support for private aggregators.
The plan would allow all electric customers, rather than just residential customers, to benefit from net metering. Under net metering the electric company in effect runs the meter backwards when the customer generates electricity using renewable resources.