You asked for a summary of “An Act Concerning Financing of Energy Efficiency and Renewable Energy” (sSB 463), as favorably reported by the Energy and Technology Committee, particularly with regard to sections 1 and 2. We describe each section of the bill in turn. Sections 1 through 16 are effective on passage, Sections 17 through 22 are effective July 1, 2010.

SECTION 1

The bill requires the electric companies to establish a program to provide loans for a wide variety of energy technologies. The companies must submit a plan to implement the program to an unspecified agency by October 1, 2010. The agency must approve or modify the plan within 30 days; if the agency takes no action the plan is considered approved.

Under the bill, the energy investments eligible for loans include efficiency measures such as insulation and energy efficient furnaces and windows, class I renewable resources such photovoltaic (PV) systems and fuel cells, solar hot water systems, and combined heat and power (CHP) cogeneration systems. The energy efficiency measures can be designed to save electricity, natural gas, or heating oil. The loans are available to electric and gas company customers, firms that provide energy management services, and renewable energy installers certified by the state's Clean Energy Fund. The loans can cover installation and other labor costs and permitting fees as well as the cost of the technologies. The electric companies must develop a one-page application for the loans.

Loan recipients must use Connecticut-based contractors to install the energy technologies. They must periodically show that the technologies are operating during the term of the loan. The maximum loan term is the lesser of (1) the manufacturer's estimate of a technology's useful life or (2) 125% of the time it takes for the investment to pay for itself through savings. Thus, if the investment is replacement windows that have a useful life of 20 years and pay for themselves in four years, the maximum loan term would be five years (125% of four years). There is a cap of $1 million per project.

The bill allows no more than 25% of the funding for the program to go to any one technology. It requires that an unspecified share of the funding go to residential projects and that the funding be spread geographically. It also requires that class I resources, PV systems, fuel cells, CHP, and efficiency projects get part of the funding, although it does not specify their shares.

By January 15, annually, each electric company must report to the Energy and Technology Committee on the program.

SECTION 2

The bill funds the loan program by reducing the growth in the state's renewable portfolio standard (RPS). The RPS requires that electric companies and competitive suppliers get an increasing share of their power from renewable resources. By law, the companies and suppliers must get 7% of their power this year from class I resources. Under current law, this proportion increases to 8% in 2011 and in steps to 20% starting in 2020.

The bill keeps the RPS at 7% in 2011 and slows the increase in the standard so that by 2020, the companies and suppliers must get 11.5%, rather than 20%, of their power from class I renewables. By October 1, 2010, each electric company must determine how much it will save due to the reduction in the RPS, as approved by the Department of Public Utility Control (DPUC). It must then transfer this money to an “energy savings infrastructure account,” which is used to fund the loan program described above.

SECTION 3

A law passed in 2005 created incentives to encourage “distributed resources” such as on-site generation systems. Current law provides a capital grant of $200 to $500 for each kilowatt (the amount of energy used by 10 100-watt light bulbs) of capacity installed. This grant is only available if the resources reduce federally-mandated charges associated with congestion on the transmission system (FMCCs). The law also provides a grant to electric companies to promote this program. The grant is currently $50 per kilowatt.

The bill eliminates the requirement that the resources reduce FMCCs. It limits the grant to the person installing the resources to $200 per kilowatt. It increases the grant to the electric company to $250 per kilowatt in 2010 and $140 in 2011, and then reduces it to $30 in 2012 and $25 starting in 2013.

SECTIONS 4 AND 5

The RPS requires electric companies and suppliers to get part of their power from class III resources, which include CHP systems that are at least 50% efficient and savings from conservation programs. The bill specifies that this efficiency rate must be determined quarterly on a rolling annual average.

The bill limits to 25% the proportion of class III credits that an electric company or supplier can use to meet its RPS requirements that can come from projects that are funded by the state's Energy Efficiency Fund.

SECTION 6

The bill allows municipalities to establish programs to provide loans to local residents and businesses for energy efficiency and renewable energy technologies. It allows them to issue bonds to finance these programs. The loan term cannot exceed the period needed to pay back the investment. The municipality can collect the loan repayment by placing a charge on the property that benefits from the loan, which is treated the same way as property taxes on the property.

SECTION 7

The bill allows electric companies to establish programs to promote energy efficiency and renewable energy projects at state and municipal buildings. The company earns a rate of return on its investments under this program, but the cost of the investment is recovered only from the governmental customer that benefits from them. In the case of state agencies, participating agencies get to keep 25% of the net energy savings the program produces, and this amount is not used in determining the agency's budget. The total program cost is capped at 1% of an electric company's revenues per year.

SECTIONS 8 - 16

The bill establishes a wide range of measures to promote solar energy systems. It requires the Clean Energy Fund Board to establish a program to install at least 30 megawatts of residential solar PV capacity by December 31, 2021. It requires the electric companies to seek to enter into long-term contracts to buy the power produced by nonresidential PV projects located on the customer's premises.  It requires each electric company to file with DPUC, for its approval, a tariff for production-based payments to owners or operators of utility-scale solar projects.  The tariff must provide for payments to up to 50 MW of generating capacity.  The electric companies can build and operate up to one-third of this capacity under certain circumstances. The bill requires the Clean Energy Fund and the Energy Efficiency Fund to develop coordinated programs to create a self-sustaining market for solar thermal systems for electric, natural gas, and fuel oil customers. The bill caps the total cost of all of the programs and specifies the steps that DPUC must take if it projects that the cap will be exceeded.

SECTIONS 17 – 22

The bill creates a wide range of incentives for CHP systems that meet specified efficiency criteria and that are used to supply power to the grid. It makes these systems eligible for net metering, under which electric companies must pay customers who own certain renewable technologies when their systems produce more power than the customer uses. It entitles these systems to a one-time grant of $200 per kilowatt and exempts them from certain electric and gas charges. It requires that DPUC develop a program to dispatch these systems (determine when they sell power to the grid). This provision may conflict with federal law, which governs the electric wholesale market.

The bill specifies the rate that participating CHP owners must be paid for the power they generate.

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