You asked for a summary of the major provisions of SB 493, An Act Reducing Electricity Costs and Promoting Renewable Energy. OLR Report 2010-R-0220 provides a detailed section-by-section analysis of this bill.

SUMMARY

The bill establishes several programs to promote solar energy, including ones that (1) provide incentives for people to install photovoltaic (PV) systems on their homes, (2) require electric companies to enter into long-term contracts with developers of large-scale PV and provide payments that are based on the energy produced by such systems, and (3) require the Department of Public Utility Control (DPUC) to study the feasibility of installing PV systems on state facilities. The bill has other provisions promoting renewable energy systems, including fuel cells, wind, and hydropower.

The bill requires DPUC to establish a pilot program to provide loans for installing combined heat and power (cogeneration) systems and energy efficient replacement furnaces and related equipment. DPUC must arrange with an electric or gas company to pay a loan made under the program through the borrower's monthly electric or gas bill, as applicable.

The bill allows municipalities to establish loan programs for residents and local businesses to make energy efficiency and renewable energy improvements to their property. It allows participating municipalities to issue bonds for these programs that are backed by an assessment on the participant's property that is treated like a property tax.

The bill establishes a program for energy conservation and load management projects for customers in municipalities with enterprise zones. The program must provide funding at a level equal to at least 3% of the total collected for (1) the Energy Conservation and Load Management Fund and (2) the Clean Energy Fund. The money must (1) be used for programs directly benefiting residential or small business electric customers in municipalities with enterprise zones and (2) include a job training component for existing or potential minority business enterprises.

The bill establishes energy efficiency standards for compact audio players, televisions, DVD players, and DVD recorders. The standards go into effect January 1, 2013.

By law, the electric companies must provide standard service to small and medium size electric customers who do not choose a competitive supplier. Currently, the electric companies procure the power to provide this service. The bill requires DPUC to review the companies' performance in providing standard service every two years and allows DPUC to transfer this responsibility to another entity. It changes the rules that govern procuring power for this service.

The bill establishes a code of conduct for competitive suppliers and related entities. Among other things, the code regulates when and how they can conduct door-to-door sales. It also limits the fee suppliers can charge a residential customer for termination or early cancellation of a contract.

The bill establishes a new division within DPUC that is responsible for power procurement, conservation and renewable energy, and research. It creates a working group to develop plans to implement organizational and structural changes in state government related to the establishment of the new division.

RENEWABLE ENERGY

Solar Programs

Residential. Under the bill, the Clean Energy Fund board must offer financial incentives to buy or lease PV systems for residential buildings that have one to four units. The incentive can be paid out on either a per kilowatt-hour basis or as a one-time upfront incentive based on expected system performance. Funding for these incentives must come from the renewable energy surcharge on electric bills but this funding may not use more than one-third of this revenue, plus any federal funding that becomes available.

Large Systems. Starting January 1, 2011 and ending December 31, 2021, each electric company must solicit and file with DPUC, for its approval, one or more long-term (at least 15 years) power purchase contracts with owners or developers of PV generation projects located in the state of less than 2,000 kilowatts (2 megawatts or MW) capacity. These systems must be located on the customer side of the meter and serve the electric company's distribution system. Developers cannot participate in both this program and the feed-in tariff program described below. Electric companies are not required to enter into a contract that provides a payment of more than $650 per megawatt-hour (65 cents per kilowatt-hour) in its initial year. The costs of the electric companies and DPUC in implementing these provisions are recovered in electric rates.

Feed-in Tariff. The bill requires each electric company, by July 1, 2011, to file with DPUC for its approval, a tariff for production-based payments to owners or operators of in-state, grid-connected solar projects that are one megawatt or larger. The tariffs must provide production-based payments for at least 15 years from the project's in-service date.

The tariffs must include an aggregate eligibility cap of 50 MWs, apportioned among each electric company in proportion to its distribution load. The costs of the tariff can be included in any subsequent rates, so long as they are for projects that begin operating on or after July 1, 2010.

Starting July 1, 2011, electric companies may build, own, and operate solar electric generating facilities up to one-third of their proportional share of the 50 MW cap. These projects must be located on brownfields or other locations in municipalities with enterprise zones. DPUC must

authorize the electric company to recover in rates its costs to construct, own, and operate the facilities, including a return on its investment capped at 8%.

Solar on State Buildings. The bill requires DPUC, by July 1, 2011, to complete, or have private vendors complete, a comprehensive solar feasibility survey of facilities owned or operated by the state with a load of 50 kilowatts or more. DPUC must issue one or more requests for proposals (RFP) for deploying PV systems at state facilities. In the RFPs, DPUC may seek the services of an entity to finance, design, construct, own, or maintain PV systems under a long-term solar services agreement.

Solar Thermal Technologies. The bill requires DPUC, in consultation with the Clean Energy and Energy Efficiency funds to develop coordinated programs to create a self-sustaining market for solar thermal systems (e.g., solar hot water systems) for electricity, natural gas, and fuel oil customers.

Funding Cap on Solar Programs. The bill establishes a funding cap for all of the solar programs described above. From January 1, 2011 to June 30, 2013, the aggregate net annual cost recovered from electric ratepayers cannot exceed 0.5% of total retail electricity sales revenues of each electric company. Between July 1, 2013 and June 30, 2015, the cap is 0.75% of these revenues, and for each 12-month period starting July 1, 2015 and July 1 thereafter for the duration of the programs established under the bill, the cap is 1% of these revenues.

If DPUC projects that the annual cost cap is within 20% of being exceeded, it must report to the Energy and Technology Committee and take specified steps to ensure that the cap is not exceeded.

Other Renewable Energy Programs

The bill requires the Clean Energy Fund Board to establish a pilot program to install fuel cells in state buildings using $5 million from the renewable energy surcharge on electric bills. As part of the program, the board must identify state buildings where installing fuel cells would provide the greatest public benefit and cause the greatest reduction in total energy consumption, and consider a fuel cell's reliability and environmental characteristics. The board must require state buildings to undergo energy efficiency upgrades before receiving fuel cells under this program.

By December 31, 2012, the board and the Connecticut Center for Advanced Technology must jointly report to the Energy and Technology Committee on whether the program reduced the cost of producing fuel cells by 25% and the total cost of energy from fuel cells compared to other Class I renewable resources.

By law, the electric companies must enter into long-term contracts with renewable energy generators that meet certain criteria. Under current law, they must sign contracts for at least 150 megawatts (MW) of generating capacity. The bill requires the companies to file contracts with DPUC, by July 1, 2011, for 25 MW of capacity from wind projects, 15 MW from low-head hydropower, and 5 MW from other class I renewable resources located in Connecticut that receive funding from the Clean Energy Fund. The bill eliminates a requirement that projects have a generating capacity of at least 1 MW to be eligible for the program. It also changes one of the pricing options available to generators who participate in the program.

LOAN PROGRAMS

DPUC Program

The bill requires DPUC to establish a pilot program to provide loans for installing combined heat and power (CHP) systems, energy efficient heating oil burners, boilers, and furnaces and natural gas boilers and furnaces by eligible entities. Among the individuals and entities who may participate in the program are residential, commercial, institutional, or industrial electric or gas company customers who use or install an eligible in-state energy savings technology. In addition to the costs of the technology, the following can be covered by the program: installation, labor, costs of engineering, permits, application fees, and other reasonable costs incurred by eligible entities for operating eligible technologies. DPUC must arrange with an electric or gas company to provide for paying a loan made under the program through the borrower's monthly electric or gas bill, as applicable.

By law, gas companies must develop conservation plans that are funded by any growth in the utility company gross receipts tax from the time that the revenue estimate is adopted for a fiscal year until the end of that fiscal year. The bill requires, for FYs 11, 12, and 13, that half of the growth in revenue be used to fund the loan program for gas projects.

By law, the Electric Efficiency Partners Program provides electric ratepayer funding for various efficiency projects. The bill reduces, from two to one, to one and one half to one, the minimum payback ratio that a project must achieve to be eligible for funding under the program. It requires, for FYs 11, 12, and 13, that $5 million of the funding for the partners program be used for CHP projects and $5 million be used for the other projects funded under the loan program.

Municipal Program

The bill allows any municipality to establish a loan program for financing energy improvements to real property located within the municipality. Under the bill, the energy improvements are (1) any renovation or retrofitting of qualifying real property to reduce energy consumption or (2) installation of a renewable energy system to serve the property. Qualifying real property are single- or multi-family residential dwellings or commercial or industrial buildings that a municipality determines can benefit from energy improvements. A municipality that establishes a loan program may issue bonds to (1) offer loans to participating property owners to finance energy improvements, (2) conduct related energy audits, and (3) conduct renewable energy system feasibility studies and verify the installation of any improvements. The bonds and financing must be backed by special assessments on the benefitted property, which is treated like property taxes.

ELECTRIC DISCOUNTS FOR LOW-INCOME CUSTOMERS

The bill requires DPUC to conduct a proceeding, by June 30, 2011, to develop discounted rates for electric company customers whose household income is up to 60% of the state median. The discounts must be funded by transferring money from existing programs that serve low-income customers and from other resources.

By July 1, 2012, DPUC must report to the Energy and Technology Committee on the benefits and costs of the discounted rates and any recommended modifications. If the low-income rate is not at least 10% below the standard service rate, DPUC must include steps to reach this goal in the report.

EFFICIENCY AND RENEWABLES IN POORER TOWNS

Under the bill, DPUC must require the Energy Conservation Management Board, the Clean Energy Fund Board, and electric companies to establish a program for energy conservation and load management projects for customers in municipalities with enterprise zones. The program must provide funding at a level equal to at least 3% of the total collected for (1) the Energy Conservation and Load Management Fund and (2) the Clean Energy Fund. This money must be derived initially from funds made available to the state under the federal American Recovery and Reinvestment Act of 2009 and then from state funds. The money must be used for programs directly benefiting residential or small business electric customers in municipalities with enterprise zones. The program must include a job training component for existing or potential minority business enterprises.

ENERGY EFFICIENCY STANDARDS

The bill establishes energy efficiency standards for compact audio players, televisions, DVD players, and DVD recorders. The standards go into effect January 1, 2013.

Under current law, the Office of Policy and Management (OPM) must adopt regulations establishing energy efficiency standards for products not covered by the statutes if it determines that (1) such standards would promote energy conservation in the state, (2) they would be cost-effective for consumers who purchase and use the new products, and (3) multiple products are available that meet such standards. These standards may not become effective until one year after OPM adopts them.

The bill requires OPM, in consultation with the Multi-State Appliance Standards Collaborative, to identify additional appliance and equipment efficiency standards. Within six months after a cooperative member state (California, New York, Oregon, Rhode Island, or Washington) adopts an efficiency standard for a product that is not subject to an equivalent Connecticut or federal standard, OPM must adopt regulations adopting this efficiency standard unless it specifically finds that the standard does not meet the three criteria listed above.

STANDARD SERVICE

By law, the electric companies must provide standard service to small and medium size electric customers who do not choose a competitive supplier. Currently, the electric companies procure the power to provide this service.

The bill requires, by July 1, 2012, and every two years thereafter, DPUC to review the companies' performance in providing standard service. If it determines that it is in the best interest of standard service customers to seek an alternative to the companies' procurement of electricity, DPUC must conduct a request for proposals for the procurement services. Any contract for these services must be for two years or less.

The bill eliminates existing rules governing how the companies procure power for this service. Among other things, current law generally requires that the purchased power contracts be for at least six months and that they overlap in time. The bill establishes rules for the electric company or procurement entity that vary somewhat by the length of the proposed contract. The goal of the new rules is to reduce the average cost of standard service over time, compared to current costs, while seeking to limit cost volatility.

CODE OF CONDUCT FOR ELECTRIC SUPPLIERS

The bill imposes rules, starting July 1, 2010, governing sales and solicitations of generation services to customers having a demand of up to 100 kilowatts by a supplier, aggregator, or its agent that are conducted and consummated entirely by mail, door-to-door sales, or certain other means. Among other things, these sales must be conducted in accordance with any municipal ordinances regarding door-to-door solicitations and may not be conducted before 10 a.m. or after 6 p.m. The bill prohibits anyone who sells any electric generation services for a supplier from engaging in any deceptive acts or practices in the marketing, sale, or solicitation of these services. It imposes additional disclosure requirements on “green” suppliers that claim that they get more power from renewable resources than the law requires.

The bill requires each supplier to provide customers with a demand of less than 100 kilowatts with a written contract, and specifies the contents of these contracts. Under the bill, a supplier may not make a material change in the terms or duration of any contract without the customer's express consent. The bill bars suppliers from charging a residential customer a fee for termination or early cancellation of a contract of more than (1) $100 or (2) twice the estimated bill for energy services for an average month, whichever is less. The supplier must provide a residential customer an estimate of the customer's average monthly bill when it offers a contract.

The bill allows DPUC to impose the following sanctions for any violation or failure to comply with existing law's consumer protection provisions, as expanded by the bill: (1) civil penalties of up to $ 10,000, (2) suspension or revocation of a supplier's or aggregator's license, or (3) a prohibition, following a contested case hearing, on accepting new customers.

DPUC REORGANIZATION

The bill renames DPUC as the Connecticut Energy and Technology Authority (CETA). It creates two divisions within CETA: the Division of Research, Energy and Technology (DRET) consisting of three bureaus: power procurement, conservation and renewable energy, and research, and the Division of Public Utility Control (essentially DPUC's existing staff.

The bill requires DRET to:

1. increase the state's energy independence and security by promoting conservation and efficiency and the use of diverse indigenous and regional electric resources;

2. encourage the use of renewable resources and new electric technologies;

3. minimize costs of electric services to state consumers while maintaining reliable service;

4. discourage undue electric service price volatility; and

5. encourage competition, if in the interests of state consumers.

DRET must do these things in accordance with the integrated resources plan, under which electric companies use savings from conservation programs and other resources to meet their customers' needs. The bill also specifies the duties of the procurement and conservation and renewables bureaus and sets up a study to plan the operation of the research bureau.

The bill establishes a working group consisting of: the OPM secretary, the consumer counsel, the DPUC chairperson, the attorney general, the executive director of Connecticut Innovations, Incorporated, or their designees, and the chairpersons and ranking members of the Energy and Technology Committee.

The group must develop plans to implement organizational and structural changes in state government related to the establishment of CETA and the two divisions and to provide recommendations for the most efficient and effective way to meet the bill's goals. By January 1, 2011, the group must issue a report of its findings, including draft legislation needed for this implementation.

OTHER PROVISIONS

Integrated Resources Plan. By law, the electric companies must develop an integrated resources plan that meets customers' needs by a mix of savings from conservation and from electric generation. The bill requires that the integrated resources plan to be adopted in 2010 indicate options to reduce the price of electricity by at least 15% less than the current price by July 1, 2012, and maintain at least this decrease for another five years. The options may include procuring new sources of generation.

Review of Wholesale Market. By August 1, 2010, the bill requires DPUC to initiate a proceeding to identify the impact on Connecticut ratepayers and the New England and state wholesale electric power market of the operation of ISO-New England and the rules it uses to set wholesale prices. By January 1, 2011, the DPUC must report to the Energy and Technology Committee.

Energy Performance-based Contracting. The bill explicitly allows municipalities to enter into performance-based energy contracts. Typically, under these contracts a private firm installs energy efficiency measures at its own cost in exchange for part of the resulting energy cost savings.

KM:ts