You asked for a description of potential funding sources for municipal “green building” projects. As we use the term, these projects include initiatives to increase the energy efficiency of municipal buildings or promote the use of renewable energy.

This report primarily addresses funding available to municipalities served by Connecticut Light and Power (CL&P) and United Illuminating (UI). The municipal electric utilities, which serve Groton, Jewett City, Norwalk, Norwich, and Wallingford, have funded efficiency programs for their respective municipalities, most notably lighting efficiency programs. In addition, the Norwich municipal utility is considering installing solar photovoltaic panels on municipal buildings.

Municipalities are eligible for funding under several existing programs to increase the efficiency of their electric use, promote the use of renewable energy, and encourage the installation of distributed generation (on-site generation technologies such as micro-turbines and fuel cells). There are separate efficiency programs for new and existing buildings.

PA 07-242 contains several provisions that may provide funding for municipal “green building” projects in the future. It requires Connecticut Innovations, Inc. (CII), to establish a grant program for municipalities that install renewable or efficient energy generation facilities in municipal buildings. The act makes municipalities eligible for several other programs that it creates or modifies. These include (1) the electric efficiency partnership program through which electric company customers can receive funding and low interest financing for a wide variety of efficiency and distributed generation measures and (2) natural gas and heating oil conservation programs. The municipal grant and low interest financing programs will be funded by bonds, which have not been issued to date. Funding for the natural gas and heating conservation programs will depend on future tax revenues.

In addition, the act makes non-residential buildings (including municipal buildings) eligible for net metering programs which pay electric customers who install renewable energy systems for the power these systems generate. These payments can be used to help finance the systems. The act also requires major new construction projects in both the public and private sectors to meet “green building” standards. The requirement applies to major new buildings starting in 2009 and major renovations starting in 2010.

PA 07-242 requires certain public sector building projects to meet specified energy and environmental standards. The standards are a silver rating under the Leadership in Energy and Environmental Design (LEED) program or its equivalent. Among other things, the requirement applies to new school construction projects authorized by the legislature on or after January 1, 2009 that cost $ 5 million or more, and school renovation projects authorized by the legislature on or after that date costing at least $ 2 million. The Office of Policy and Management secretary, in consultation with the public works commissioner and the Institute for Sustainable Energy, must waive the requirements if he finds that the cost of compliance significantly outweighs the benefits.

In addition, the act requires the state building inspector and the Codes and Standards Committee to amend the State Building Code to require (1) buildings costing $ 5 million or more built after January 1, 2009 and (2) renovations costing $ 2 million or more starting January 1, 2010 to meet the LEED silver standard or its equivalent. The requirements apply to private and public sector projects of this size, other than residential buildings with up to four units. The act requires the inspector and the committee to waive these requirements if the Institute for Sustainable Energy finds that the cost of compliance significantly outweighs the benefits.

By law, the electric companies must develop and implement, with Department of Public Utility Control (DPUC) approval, comprehensive conservation programs using the Connecticut Energy Efficiency Fund. The fund is financed from a surcharge on electric bills. Further information about the fund is available at www. ctsavesenergy. org.

Municipal buildings are considered commercial and industrial (C&I) customers, and are eligible for a wide variety of electric company efficiency programs. These programs are available for municipal offices, educational facilities, libraries, wastewater treatment plants, transportation and parking facilities, and housing authority developments. Table 1 describes these programs. As noted in the table, while these programs are available from both CL&P and UI, there are some differences in program eligibility.

The Energy Conscious Blueprint Program provides incentives for the design and installation of energy efficient equipment in new buildings and building renovations. The program promotes efficiency in lighting; heating, ventilation, and air conditioning (HVAC) systems, refrigeration, and motors. It also subsidizes energy efficient windows. Further information about this program is available at www. cl-p. com/clmbus/target/indexconstruction. asp.

The remaining programs serve existing buildings, addressing their equipment, operation and management, and project financing. These programs can cover up to 100% of the incremental cost of the eligible equipment (i. e. , the difference between equipment that meets the state building code and more efficient equipment). Further information about these programs is available at http: //www. cl-p. com/clpcommon/pdfs/clmbus/custom/CEEF_Programs. pdf.

Table 1: Electric Company Conservation Programs

Among the municipalities that received funding from these programs in 2006 were Bridgeport, Bristol, East Haddam, New Haven, Prospect Southbury, and West Hartford. The fund also financed conservation projects in public schools in municipalities including Coventry, Hamden, Old Lyme, Plainfield, Redding, and Stratford.

The Connecticut Clean Energy Fund is administered by CII and is financed by a surcharge on electric company bills. The fund provides rebates to municipalities, as well as residents and nonprofit organizations, that install solar photovoltaic systems of up to 10 kilowatts using an eligible installer. The fund's On-Site Renewable DG Program provides funding to stimulate demand for installations of renewable energy at Connecticut commercial, industrial, and institutional buildings. Funding is available for installations of generation from wind, solar, fuel cells, biomass, landfill gas, and certain types of hydropower. South Windsor High School and the Fairfield Water Pollution Control Authority have received funding under this program. Further information about these programs is available at www. ctinnovations. com/funding/ccef/incentives. php.

The law requires electric companies and competitive suppliers to get part of their power from renewable resources. In practice, they often purchase renewable energy credits (RECs) from owners of renewable generation. The RECs are sold separately from the power itself on the wholesale electric market. If a municipality installs renewable generating systems on site, it may be able to use the revenue stream from the sale of the RECs to help finance the system.

The law provides 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. Distributed resources include generating equipment that has a capacity of up to 65 megawatts (a typical power plant has a capacity of 500 megawatts or more) and that is connected to the transmission or distribution grid. The incentives include capital- and operating-cost subsidies and the provision of long-term financing.

Baseload facilities (those that operate routinely) are eligible for a one-time capital grant of $ 450 per kilowatt or more. (DPUC has suspended providing grants for emergency generation due to changes in the wholesale market. ) In addition, the charges imposed when base load generation goes out of service can be reduced. This is done by eliminating backup rates and demand ratchets for customers who install these projects. (The ratchets increase charges based o peek demand). Distributed resource projects that use natural gas can qualify for reduced rates from the customer's gas company. In addition, a low interest loan program is available for customer-side distributed resource projects (generation or conservation) of 50 kilowatts or more. The interest rate will be 1% below the customer's applicable rate but no more than the prime rate. Further information about these incentives is available at http: //www. dpuc. state. ct. us.

The act requires CII, in consultation with DPUC and the departments of Education and Emergency Management and Homeland Security, to establish a municipal renewable energy and efficient energy generation grant program. CII must make grants under the program to municipalities to purchase and operate (1) renewable energy sources, including solar energy, geothermal energy, and fuel cells or other energy-efficient hydrogen-fueled energy or (2) energy-efficient generation sources, including cogeneration units that are at least 65% efficient, for municipal buildings. Applications must include a complete description of the proposed generation source. CII must give priority to applications for grants for disaster relief centers and high schools. Each grant must make the cost of purchasing and operating the generation source competitive with the municipality's current electricity expenses.

The act authorizes up to $ 50 million in bonding for the program, with the proceeds going into a separate account within the Clean Energy Fund. For FY 08 and each of the next five fiscal years, at least $ 10 million must go into the account. Any balance not used for the grants during a fiscal year must be carried forward to the next fiscal year. Bond funds have not yet been allocated for this program.

The act requires the Energy Conservation Management Board (ECMB), in consultation with the Clean Energy Fund advisory committee, to evaluate and approve technologies that can be deployed by “Connecticut electric efficiency partners” (including electric company customers and energy management companies) to reduce electric demand. These technologies can include demand-side measures such as conservation and supply-side measures such as renewable generation and emergency generators that can be centrally dispatched, as well as high efficiency natural gas and oil furnaces. ECMB had to file its evaluation with DPUC by October 15, 2007 for DPUC's approval. Also by October 15, 2007, ECMB had to evaluate the costs and benefits of these measures and set funding levels for the partnership program.

Starting April 1, 2008, anyone can seek DPUC approval and funding as a partner by showing adequate financial resources, managerial ability, and technical competence. The application must describe the services and DPUC-approved technologies that the partner will buy or provide and the amount of funding it is seeking. In evaluating the application, DPUC must consider the applicant's potential to reduce overall and peak demand. DPUC must determine how much of the cost of an approved application the customer will bear and how much will be funded by ratepayers. DPUC must ensure that approved applications achieve a two-to-one payback ratio. At least 75% of the investment must go for the technologies themselves. Starting February 1, 2010, partners can receive funding only if chosen in a request for proposals conducted by DPUC, subject to the same cost-benefit test. No more than $ 60 million in ratepayer funds can go to this program each year.

A person cannot receive ratepayer funding under these provisions for a project that is receiving funding from the Connecticut Energy Efficiency Fund. Partners must comply with DPUC orders and are subject to civil penalties if they do not.

The act also requires DPUC to develop a low-interest loan program to finance the customer's share of the capital cost of the approved technologies. DPUC can provide these loans through a mechanism in existing law, under an agreement with the Connecticut Development Authority, or through an entity chosen by competitive bid. The financing agreements entered into with the Connecticut Development Authority cannot exceed $ 10 million dollars. Bond funds have not yet been allocated for this program.

Prior to this year, electric utilities and competitive suppliers had to give a bill credit to their customers in one- to four-dwelling unit properties who generated electricity using class I resources, such as solar or wind power. The act expands these provisions to cover all customers with generation capacity up to two megawatts. It provides for credits to customers who generate more power than they use in a given billing period, with annual reconciliation in which the customer is paid for any excess production at the avoided wholesale cost, and makes related changes.

By law, natural gas companies must develop annual conservation plans, but prior law did not provide a funding mechanism. The act requires that the plans be funded by the growth in the utilities gross receipts tax in each fiscal year over the amount contained in the revenue estimate in the adopted state budget for that year, subject to a $ 10 million per year cap. Under the act, the money goes into an ECMB account, which is used to reimburse gas companies for their conservation expenditures. By law, the gas conservation programs are subject to the same evaluation and approval processes as the current electric conservation programs, i. e. , programs must be cost-effective and reviewed by the ECMB.

The act establishes a 13-member Fuel Oil Conservation Board, and requires it to choose an entity to administer oil conservation programs. By March 1, 2008, the program administrator must submit a comprehensive oil conservation plan for the rest of 2008 to the ECMB for its approval. In subsequent years, the administrator must submit a plan for the next calendar year by October 1 to ECMB and the Fuel Oil Conservation Board for their approval. The Fuel Oil Conservation Board must assist the administrator with plan development and implementation. The act imposes cost-effectiveness and other requirements on programs in the plan that parallel those in existing law for electric and natural gas conservation plans.

Under the act, funding for the oil conservation programs comes from the excess in revenue from the petroleum products gross receipts tax sales above the 2006 revenue, subject to a $ 10 million annual cap. (PA 07-1, June Special Session, reduced the limit to $ 5 million per year starting in FY 09. ) The Fuel Oil Conservation Board must authorize specific amounts from the account for grants, which must be awarded twice a year.

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