AN ACT CONCERNING ENERGY AND THE STATE'S ECONOMY.

This bill broadens the scope of and makes many other changes to the Connecticut electric efficiency partner program. This program provides financial incentives, funded by electric company ratepayers, for various demand-side management (energy efficiency and on-site generation) technologies. Among other things, the bill broadens the entities involved in administering the program and expands the types of technologies that can be funded. It also allows electric companies to participate as partners in the program. Under current law only technology providers and electric company customers can do so.

The bill changes how the program is administered. Under current law, the Department of Public Utility Control (DPUC) simultaneously reviews an entity's application to be certified as a partner and its application for funding under the program. The bill splits these two reviews between the DPUC and the Energy Innovation Council that it creates. It generally requires DPUC to determine whether an applicant qualifies as a partner within 30 days. It requires the council to approve funding and how the funding is spent. It requires the council to monitor spending under the program and report on it to the Energy and Technology Committee.

The bill changes how projects are funded. Under current law, a participating customer pays half or more of the cost of an approved project and ratepayers pay the remaining costs. The bill allows ratepayer funding under the partner program even if the customer or other partner has received or is receiving funding from the Energy Conservation and Load Management Funds for the project. The bill eliminates a requirement that DPUC develop a program to provide long-term, low-interest loans to finance the customer's share of the costs but provides alternative financing mechanisms. The bill appears to retain a cap of $ 60 million that electric companies can recover from ratepayers in any one year for this program but makes provisions for when the companies income is more than $ 60 million in cost in a year. The bill allows the electric company to earn a return on its costs and investments through the systems benefits charge (SBC), a charge on electric bills that is used to pay various public policy costs. The bill establishes a $ 30 million cap on ratepayer funding for electric company projects using this charge.

The bill also broadens the program to allow electric companies to develop, purchase, own, and operate certain types of renewable energy source generation. The companies are allowed to earn a rate of return on these investments. Under the bill, an electric company must recover the costs it incurs before 2012 for class I generation projects (e. g. , solar or fuel cell projects) from the funding provided for partners program as described above. The bill has a separate cost-recovery mechanism for other facilities the company owns and operates. It appears that the $ 60 million cap includes the costs associated with the company's renewable generation.

The bill requires electric companies and the council to (1) study the energy intensity of certain customers and (2) determine the best locations and characteristics for installing Class I renewable energy sources under the program.

The bill exempts projects developed under its provisions from requiring Siting Council approval.

EFFECTIVE DATE: July 1, 2009 for the Siting Council provision; upon passage for the remaining provisions.

Under current law, the purpose of the partner program is to conserve electricity and reduce demand in Connecticut through the purchase and deployment of energy efficient technologies. The bill expands the purpose to include increasing the efficiency of electricity use and promoting the development and use of Class I renewable energy sources.

Under current law, the program involves DPUC, persons and entities providing enhanced demand-side management technologies, and electric consumers. (The technologies include both efficiency measures and certain types of on-site generation. ) The bill additionally involves the Connecticut Center for Advanced Technologies (CCAT), the Clean Energy Fund, electric companies, and the Institute of Sustainable Energy at Eastern Connecticut State University.

The bill expands the range of technologies that can be developed under the program. Under current law, enhanced demand-side management technologies are those that (1) reduce electricity consumption; (2) change when electricity is consumed (which can lower costs); or (3) use certain technologies to generate electricity on-site, as well as high efficiency natural gas and oil boilers and furnaces. The bill expands the range of enhanced demand-side technologies to include:

1. technologies that reduce natural gas or oil consumption;

2. technologies that manage, optimize, or improve the efficiency of electricity use or the ability to procure energy more effectively relative to a customer' s specific load characteristics;

3. technologies that improve the efficiency or performance of the electric system;

4. combined heat and power (cogeneration) systems;

5. solar thermal and geothermal systems; and

6. other Class I renewable sources located on the customer's side of the electric meter.

Under current law, the “partners” who can participate in the program are electric company customers who acquire enhanced demand-side management technologies and a person that provides these technologies to the customer. The bill expands that latter group to include electric companies.

The bill repeals a provision that allows DPUC to retain a consultant with expertise in relevant areas to help develop and operate the program. Under current law, the consultant's costs are recoverable through the SBC.

The bill requires DPUC to establish an Energy Innovation Council to expedite the commercialization and impact of enhanced energy management technologies. Under the bill, the council consists of (1) CCAT's executive director, (2) the director of the Clean Energy Fund, (3) the chairman of the Institute for Sustainable Energy, and (4) a DPUC commissioner or staff designee. Under the bill, the council must oversee the partner program. It must confer at least monthly and provide written reports of its meetings and actions. Each member may draw upon expertise from within its entity to support the council's efforts. Each electric company must appoint a representative to advise the council and facilitate its communications with the company.

By law, entities that seek to participate in the program must be certified as partners by DPUC. The certificate application must include the technologies that the applicant will purchase or provide that have been approved by DPUC. DPUC may grant a certificate if the applicant possesses and demonstrates adequate financial resources, managerial ability, and technical competency.

The bill requires DPUC to act on any application within 30 days of receiving it. It allows DPUC, with the applicant's consent, to extend this deadline by 30 days if more time is needed to obtain additional information on the applicant or the technologies it seeks to have funded.

The bill transfers the responsibility for approving funding under the program from DPUC to the council on the date the bill passes. Under the bill, the council must evaluate and approve, within 90 days of submittal, new applications from partners for projects and grants for enhanced demand-side management technologies as part of the program. The bill does not define “project” but it appears to mean the installation of a technology in a particular setting.

To help partners develop their applications, the bill allows an applicant to seek written verification from the council that its proposed project is sufficiently and reasonably defined. The council must make this determination within 30 days. After this verification and with the written permission of the affected customer or customers, the partner may request billing and usage data on the customer's behalf from an electric company, which must provide the requested information within 30 days from receipt of the request.

Under the bill, all applications for projects seeking grants must indicate that the participating customer will pay for at least 50% of the installed costs. However, the customer's share may be offset with applicable tax credit, energy value, or other savings (see COMMENT).

The bill repeals provisions that require DPUC, in evaluating applications, to (1) consider the applicant's potential to reduce customers' electric demand, including peak electric demand, and associated electric charges tied to electric demand and peak electric demand growth and (2) determine the portion of the total cost of each project that will be paid for by the participating customer and the portion that will be paid for by all electric ratepayers.

The bill requires the council to award grants on an individual application basis. It entitles approved projects to a one-time grant, not to exceed 50% of the project's total installed cost. The council must adjust the size of the grant based on (1) the project's economics, (2) whether it preserves or creates jobs in Connecticut, (3) the environmental benefits the project creates, (4) the project's ancillary electric market or system benefits, and (5) the degree of technology integration and innovation. The grants must be funded directly through the program.

Under current law, DPUC can approve technologies only if the ratepayer investments in them have at least a two-to-one payback ratio, i. e. , the savings to ratepayers as a whole are at least twice as much as the ratepayer contributions toward the technology. The bill instead requires the applicant to demonstrate that a proposed project will have (1) an electric system benefit/cost ratio of at least 1. 5 to one for the project, or (2) an electric system benefit/cost ratio of at least one-to-one if the project integrates Class I renewable energy sources or produces natural gas or oil savings. It appears that the bill is using payback ratio and benefit/cost ratio as synonyms.

The bill repeals technology approval provisions scheduled to take effect on February 1, 2010. These provisions specify that a certified partner may receive funding only if selected in a request for proposal developed, issued, and evaluated by DPUC. Under current law, DPUC must use a cost benefit test to rank responses for selection. The law's provisions also broaden the factors DPUC must consider in deciding whether to approve an application.

The bill repeals a requirement that DPUC develop a long-term low-interest loan program to help certified partners finance the customer portion of the capital costs of approved technologies using one of three strategies.

Under current law, DPUC must provide for the payment of ratepayers' portion of the costs of deploying enhanced demand-side management technologies by entering into a financing agreement with the Connecticut Development Authority (CDA) or a private financing entity selected through an appropriate open competitive selection process.

The bill instead allows DPUC and the council to provide for the payment of a participating customer's portion of the costs of the technologies through these mechanisms or by (1) loans from the Clean Energy Fund or (2) a financing agreement with an electric company.

Under the bill, DPUC and the council must provide for the payment of the ratepayer's portion of the costs of these technologies by allowing an electric company to recover any remaining costs of participation through the SBC. These costs and return may be recovered over time by establishing a regulatory asset, with the electric company recovering a return through the SBC. (A regulatory asset is essentially an IOU held by a utility that entitles it to future recovery of DPUC-approved costs. ) DPUC must set the period over which the company will recover its costs and earn a return based on the expected useful life of the projects and programs. The rate of return may equal that approved by DPUC under a law that allowed the electric companies to build power plants that operate at times of peak demand. The bill exempts these loans and financing arrangements from a DPUC review that takes place when a utility disposes of its assets or merges with another company.

By law, financing agreements entered into with CDA may not exceed $ 10 million dollars. Any ratepayer costs resulting from such a financing agreement must be recovered from all ratepayers through the SBC.

Under current law, the annual ratepayer contribution for the partner program may not exceed $ 60 million dollars. It appears that the bill retains the cap. The bill provides that if actual or projected costs of all projects exceed $ 60 million in one year, the electric company may defer the excess, with a return, for future recovery (regulatory assets). The bill provides that in such circumstances, the council must adjust future grants and projects to assure that any such excess beyond $ 60 million of annual costs is minimized. It is not clear what happens if the company does not defer the excess.

The bill provides that no more than one-third of the total funding go to one technology. It also limits to $ 30 million per year ratepayer funding for approved electric company projects whose costs are recovered through the SBC.

The bill eliminates provisions of current law that (1) require that at least 75% of the annual ratepayer investment be used for the technologies themselves and (2) bar a partner from receiving funding under the program if it has received or is receiving funding from the Energy Conservation and Load Management Funds for the same technology.

Under the bill, for each project or program supported by ratepayer contribution, the council must require the affected partner to submit enough data to allow (1) DPUC and an electric company to determine annual revenue requirements on a forecasted and actual basis and (2) the council to monitor the efficacy and cost-effectiveness of the project or program. The council's monitoring must occur at least annually, starting in the year after the project or program begins operating. The council may work with the Energy Conservation Management Board or use a third-party consultant in conducting the monitoring. The costs of monitoring must be recoverable costs through the SBC.

The council must review the results of the monitoring and issue a report to the Energy and Technology and Commerce committees. If the council determines that a project or program has not provided or will not provide the benefits that formed the basis for the grant or other ratepayer contribution, the council may suspend further grants for the project or program. But any grants or costs awarded must continue to be recovered by the electric company.

Under current law, by February 15 annually, DPUC must report to the Energy and Technology Committee on the program's effectiveness. The bill instead requires the council to issue a single report by July 1, 2010. By law, the report must include (1) an accounting of all benefits and costs to ratepayers, (2) a description of the approved technologies, (3) the payback ratio of all investments, (4) the number of programs deployed, and (5) a list of proposed projects compared to approved projects and reasons for them not being approved.

Under the current law, by April 1, 2011, DPUC must initiate a proceeding to review the program's effectiveness and perform a ratepayer cost-benefit analysis. The bill instead requires DPUC to do this no earlier than April 1, 2012. Under current law, based on its findings in the proceeding, DPUC may modify or discontinue the program. The bill instead allows the council to recommend to the Energy and Technology Committee that the program be modified or discontinued.

Current law generally bars electric companies from owning power plants or other generation resources. The bill allows electric companies to develop, purchase, own, and operate certain types of renewable energy source generation. It specifically allows them to own and operate class I facilities in the state. The companies must work with local equipment manufacturers and craft workers in developing and constructing such facilities, so long as (1) the facilities are connected to the electric company's distribution system, (2) the equipment for the facilities are manufactured or assembled by companies in the state to the extent practicable, (3) the facilities are installed and maintained by workers employed in the state, and (4) the council approves the technologies used in the project.

The cumulative ownership of Class I renewable energy resources by electric companies may not exceed 30 megawatts (MW) of capacity by December 31, 2010, 65 MW by December 31, 2011, and 100 MW by December 31, 2012. (A MW is the amount of power used by 750 to 1,000 homes. ) The council must review the program, by February 15, 2012, and recommend to the Energy and Technology Committee whether to extend and expand it beyond 2012.

The bill appears to allow electric companies to develop, purchase, own and operate other classes of renewable energy source generation, so long as they are located on the customer's side of the meter (see § 1(j)).

Under the bill, an electric company must recover the costs it incurs before 2012 for class I projects from the funding provided for the partners program as described above, using the SBC.

The bill establishes a separate cost-recovery mechanism for other generation facilities owned and operated by an electric company. For these facilities, the company must recover its costs based on a formula. Before approving the formula, DPUC must hold a hearing, which must be separate from hearings on the company's distribution rates.

The formula must provide for full recovery of any incurred costs, including a return on investment based on traditional utility cost-of-service principles. The rate of return may equal that approved by DPUC under a law that allowed the electric companies to build power plants that operate at times of peak demand.

The projects are eligible for any state or federal incentives, grants, or credits, including those available under programs administered by the Clean Energy Fund's board.

The bill requires the council, in conjunction with the participating electric companies and certified electric efficiency partners, to issue a report to the Energy and Technology, Environment, and Commerce committees by January 15 in 2010, 2011, and 2012. The report must describe:

1. the status of the program, including the levels and types of participation;

2. the amount of authorized investment and its cost;

3. the actual and expected future benefits created by the program, including contributions to Connecticut jobs and commerce;

4. the improvement to the commercialization of Class I renewable energy sources and their integration with the state's power systems and energy markets; and

5. opportunities to improve the effectiveness of the program. The 2012 report must also include a summary of all three years and recommendations for further use of the program.

The council must retain an independent consulting firm from a list of firms developed by DPUC, in consultation with the Office of Consumer Counsel, to audit the council's records and the program operations and project results. The firm's report must be included in the council's annual report to the legislature.

The bill requires the council and electric companies to jointly identify, by September 1, 2009, at least two studies to determine the best locations and characteristics for installing Class I renewable energy sources under the program. Also by September 1, 2009, the council must provide the electric companies with an assessment of key issues pertinent to the commercialization of fuel cells and their integration with the state's electric systems and energy markets, including lessons learned from previously proposed or completed projects.

The electric companies must work with the council's staff (although the bill does not provide the council staff) or the council members' staff to issue, by December 31, 2009, the findings of the two studies, with consideration of the fuel cell assessment. The findings must provide guidance to the investments made under the program.

The bill requires the electric companies and the council to determine, by August 1, 2009, the scope of an energy intensity study of customers for whom energy is a material part of their costs. The companies and council must complete the study by September 30, 2009. The companies must contact customers identified in the study that appear to have energy characteristics who may benefit from participation in the partners program. The companies must seek their permission to be identified to entities that may offer solutions to them through a solicitation process administered by the council. The council must include information on this process in its annual reports to the legislature. (It is unclear to which reports this provision is referring. )

sSB 1129, reported favorably by the Commerce Committee, is identical to this bill.

The bill is unclear how the technology's vendor would recover its full costs under certain circumstances. The bill caps the ratepayer subsidy for approved projects under the program at 50% of installed costs. It requires the customer to pay at least 50% of the installed cost, but allows the customer's share to be offset with applicable tax credit, energy value or other customer savings. It is unclear how these offsets would help pay the installed cost. For example, if the installed cost of a technology was $ 1 million, the maximum grant would be $ 500,000. The customer's share would be at least $ 500,000. It is unclear how the vendor would recover its costs if tax credits, energy value, or other savings were counted towards the customer's share, since there is no requirement in the bill that the customer transfer them to the vendor or the electric company.

Yea

Nay

(03/19/2009)