OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 (860) 240-0200

http: //www. cga. ct. gov/ofa

HB-7432

AN ACT CONCERNING ELECTRICITY AND ENERGY EFFICIENCY.

As Amended by House "A" (LCO 8629)

House Calendar No. : 702

OFA Fiscal Note

State Impact: See Below

Municipal Impact: See Below

Explanation

The budget bill, sHB 7077, as favorably reported by the Appropriations Committee contains $7. 0 million in FY 08 and FY 09 in the Office of Policy and Management (OPM) to implement provisions of sHB 7098, and permits the transfer of funds to agencies as necessary.

The bill makes various changes in the electric industry structure and energy related programs that could affect rates paid by the state and municipalities, the extent of which cannot be determined at this time.

The bill also results in other fiscal impacts, as follows:

Section 1 establishes a $500 rebate for the purchase and installation of replacement residential gas and oil heating equipment in residential structures containing up to four dwelling units from July 1, 2007 through July 1, 2017. Up to $5. 0 million is to be provided annually for such grants. There is no fiscal impact to the Office of Policy and Management (OPM) for administering this rebate program.

Section 2: PA 05-2 (OSS) authorized the one-time issuance of $5. 0 million in General Obligation (GO) bonds for the Energy Conservation Loan Fund. Section 2: (a) changes the bond authorization to the annual issuance of $5. 0 million and (b) permits the funds to be used the purposes of Section 1 of the bill. Increasing the GO bond authorization to $5. 0 million per year will result in a General Fund debt service cost that will increase from $0. 5 million to $7. 6 million per year, over a period of 20 years, assuming that each annual issuance of $5. 0 million is for a term of 20 years at a 5. 0% interest rate.

Section 3 requires the Energy Conservation Management Board (ECMB) to establish a rebate program to replace air conditioners that do not meet Energy Star efficiency standards with ones that do. ECMB estimates the cost of this program to be approximately $9. 7 million. In 20061, the Conservation and Load Management (CL&M) Fund, now referred to as the Connecticut Energy Efficiency Fund (CEEF) has a budget of approximately $70. 2 million and experienced inflows of approximately $68. 6 million and outflows of approximately $71. 02 million (see table below):

Utility Company

Inflows ($)

Outflows ($)

CT Light & Power, Inc.

55. 5 million

55. 9 million

United Illuminating, Inc.

13. 1 million

15. 1 million

Total

68. 6 million

71. 0 million

This section could result in fine revenue, of up to $10,000 to be collected by the Department of Consumer Protection, in the event a retailer does not remove or dispose of an air conditioner that was surrendered for the rebate. The amount of revenue that could be generated as a result of this fine cannot be determined.

Section 4 requires DPUC to order certain electric generators to start their oil or natural gas facilities (dual fuel) within forty-eight hours under certain conditions, if it is in the best interest of the consumer. Two Lead Rate Specialists would be required, at a salary of $77,607 plus fringe benefits, to perform this task. In addition, these positions would carryout provisions detailed in Sections 17, 42, 43, 44, 50, 52, and 71.

Section 5 requires DPUC to begin an uncontested proceeding to study various technical provisions concerning number of linemen, consolidation of repair facilities and associated personnel, new technologies that could reduce energy outages, and effective ways of notifying the public during outages. In order to perform these technical engineering tasks by the specified time frame, DPUC would require an Engineer, at a salary of $75,345 plus fringe benefits. This Engineer would also assist with tasks required of DPUC as outlined in Sections 6, 9, and 37-38.

Section 6 requires DPUC to review appropriate staffing levels pertaining to the wire maintenance plan submitted by the electric distribution companies. In order to meet this technical requirement, DPUC would use the Engineer position detailed in Section 5 to assist with this function.

Section 8 requires the Connecticut Siting Council (CSC) to initiate a contested case, by means of an executive session, to investigate energy security in conjunction with DPUC. It is anticipated that outside consultants could cost CSC $50,000-$100,000 which would be borne by ratepayers.

Section 9 requires DPUC to assess in an uncontested proceeding the reliability of electric generation facilities located in the state during periods of peak electricity demand. DPUC would use the Engineer position detailed in Section 5 to assist with this assessment.

Section 10: PA 06-187 requires that new state facilities costing $5. 0 million or more must comply with energy efficiency building standards adopted by OPM. Section 4 increases the standards and extends them to: (a) renovation projects at state facilities costing $2. 0 million or more and (b) new construction of a facility costing at least $5. 0 million, of which at least $2. 0 million is state funding. It also requires the Institute for Sustainable Energy rather than OPM to determine whether the cost of compliance significantly outweighs the benefits. It is anticipated that any additional construction costs associated with the energy efficiency building standards would only be incurred in cases where the operational savings exceed the cost, over the life of the building.

These provisions are expected to have potentially significant impacts on the operating budgets and debt service accounts of both the General Fund and Transportation Fund. Since building construction is financed with bond funds, any increase in construction costs would result in an increase in General Fund or Transportation Fund debt service costs. Under the provisions of PA 06-187, the up-front cost to design and construct a building to a "silver rating" was minimal and was not expected to significantly increase the cost and resulting debt service cost related to capital project bonding. This bill sets the state standard higher by requiring that the building additionally meet energy standards that surpass by 20% the standards set by the American Society of Heating, Ventilation and Air Conditioning Engineers (ASHRAE3), which may increase building costs significantly.

The additional construction costs could be offset by savings in the operations of the new buildings over their lifetime, especially in heating and ventilation costs. These savings are estimated by industry sources to be up to 30% of annual utility costs. Any General Fund operating budget savings would be achieved through the Department of Public Works (DPW), the Judicial Department, the University of Connecticut (UCONN) and any agency with care and control if its buildings. Any Transportation Fund operating budget savings would be achieved through the Department of Transportation (DOT) and the Department of Motor Vehicles (DMV).

Sections 10, 11 extends the “green building” requirement to many local school building projects which would result in increased costs to local and regional school districts in addition to the state It is estimated that “green building” requirements result in an approximate increase of 2% in total school construction project costs. Based on recent yearly school construction project totals, the “green building” requirement would likely result in a total cost increase of approximately $8. 0 million to $10. 0 million per year in shared costs between the state and local and regional school districts.

Section 12 makes OPM, rather than DPUC, responsible for implementing and revising energy efficiency standards for a variety of equipment. It is anticipated that OPM would require two additional staff members with annual salaries totaling $120,000, plus fringe benefits, and associated other expenses of $2,500 annually.

Section 16 requires the Department of Administrative Services (DAS) and other purchasing agencies to buy appliances and equipment that meet or exceed federal Energy Star standards. Purchasing certain appliances and equipment that meet or exceed federal Energy Star standards would be more costly than appliances and equipment currently purchased by the state. The new requirement would result in increased costs to DAS and various state agencies, the amount of which cannot be determined at this time.

Section 17 requires DPUC to conduct a contested case to determine a municipal electric utility's share of one-time awards made to customer-side distributed resources. The two Lead Rate Specialists required for provisions in Section 4 would assist in this process as well.

Section 19 allows municipalities to exempt hybrid motor vehicles and vehicles with fuel efficiencies of at least 40 miles per gallon from the property tax.   Municipalities electing to exempt these vehicles from the property tax would experience a loss to their net grand list (assessed value less exemptions permitted under state law) and would likely necessitate an increase in a municipality's mill rate or a modification to their budget to offset the loss of taxable property.

Section 20 establishes a sales tax exemption for vehicles with fuel efficiencies of at least 40 miles per gallon from 1/1/08 to 7/1/10.   This is anticipated to result in a General fund revenue loss of up to $1. 0 million in FY 08 and up to $2. 0 million4 in FY 09 and FY 10.

Sections 21-36 permit Energy Improvement District Boards to issue bonds. This has no state fiscal impact because these bonds are not obligations of the state.

The bonding provisions create a liability for any municipality that chooses to guarantee such bonds. If the revenues intended to pay debt service on the bonds are insufficient to cover the liability, the guarantee requires that the municipality appropriate sufficient funds to cover the shortfall. This would require the municipality to either reduce funding for its own budget, or increase revenue collected from taxes. The language specifies that the guaranteed bonds would not count toward a municipality's debt cap, so municipalities choosing to provide a guarantee for these bonds would not be limited in their ability to issue bonds for other purposes.

The bill increases energy efficiency standards and extends them to renovation projects for school construction and housing projects costing $2. 0 million or more, when state funds are used. The Institute for Sustainable Energy would be able to exempt any buildings when the cost of compliance significantly outweighs the benefits. Therefore, the increase in construction costs for municipalities would be offset by: (1) the 2% increase in the state reimbursement rate for school construction projects, and (2) potentially significant savings in the operating costs of these buildings over their lifetime. It is a state mandate since it would increase capital construction costs.

Section 38 require DPUC to issue a final decision on interconnection standards between electric utilities and non-utility generators. The additional Engineer position described under Section 5 would assist the agency with this task.

Sections 42, 43, 44 require DPUC to conduct a contested case to develop a plan for awarding and aggregating Class III credits, and to conduct an annual proceeding. The two Lead Rate Specialists required for provisions in Section 4 would assist in this process, as well.

Section 45 results in a potential increase in the administrative workload of the Department of Environmental Protection (DEP) incurred from entering into a lease agreement with a private entity for hydroelectricity. This is anticipated to be minimal and could be handled within existing resources. Any potential revenue gain to the state would depend upon the parameters of the lease agreements and is anticipated to be minimal.

Section 46, 47 of the bill require, rather than allow, municipalities to exempt any Class I renewable resource and hydropower facilities from the property tax. It also requires them to exempt solar water or space heating systems and geothermal energy resources from the tax. Municipalities will experience a loss to their net grand list (assessed value less exemptions permitted under state law) as a result of having to exempt this property and will likely necessitate an increase in a municipality's mill rate or modification to their budget to offset the loss of taxable property.

Section 50 requires DPUC to review electric companies' plan to build peaking generation plants in a contested case. The plan must be approved by DPUC within 120 days of receiving the plan, if it is deemed to be in the best interest of ratepayers. Although this section allows DPUC to retain outside consultants, two Lead Rate Specialists required for provisions in Section 4 would assist in this process, and no consultant is anticipated.

Section 51 requires DPUC to consider the resource plan devised by the electric distribution companies, in consultation with the Connecticut Energy Advisory Board (CEAB), in an uncontested proceeding and must approve or modify the plan. DPUC must also oversee the electric companies' implementation of the plan. If any new resources are required as a result of the plan, DPUC must also approve the request for proposals (RFP). In order to accomplish these tasks, DPUC would require two additional Energy Planners, at a salary of $75,000-$80,000 each, plus fringe benefits.

This section also allows CEAB, in consultation with the electric distribution companies, to retain outside consultants regarding energy procurement. Since the cost for any consultants would be recoverable through rates there is no direct impact to the state or municipalities.

Section 56 results in a cost to the DOT and is anticipated to be in excess of $1. 0 million. PA 05-210 eliminated DOT's cost sharing requirements when electric transmission and trunkline facilities had to be relocated in highway rights-of-way. This section of the bill limits these changes to facilities owned by an electric distribution company. Therefore, DOT will incur significant costs, in excess of $1. 0 million, to relocate a transmission line that is not owned by electric distribution companies but is rather owned by a power generator, municipality, or other entity.

Currently, a portion of a 345-kilovolt transmission line is being constructed within the state right-of-way. Construction costs are in the range of $2. 0 million to $4. 0 million per 1,500 foot section. Any relocation required due to improvement of the transportation system in the future would cost at least the same amount. Relocation of one mile of the transmission line could potentially cost over $10. 0 million.

Section 61 results in an estimated cost to the State Department of Education (SDE) of approximately $125,000 due to the requirements surrounding “See the Light Week. ” Currently the agency has no staff with expertise in the duties and knowledge areas contained in the section, thus new staff would need to be hired or contracted in order to meet the section's requirements.

This section also requires ECMB to coordinate with DPUC and SDE for the development and implementation of this fundraiser program. Any costs incurred to ECMB would be paid through the ratepayer surcharge. The state-wide energy efficiency and outreach account established under Section 44 of this bill would fund the provisions to be carried out under DPUC in this section.

Section 65 requires the Department of Social Services (DSS) to (a) maintain basic and contingency heating assistance program benefits under the Connecticut Energy Assistance Program (CEAP) at 2006/2007 levels during the 2007/2008 heating season; (b) increase the number of households weatherized pursuant to CEAP; and (c) increase the number of households receiving home heating equipment tune-ups and home energy efficiency measures pursuant to the HEARTH program5.

The ability of the agency to comply with the bill's provisions without needing to expend state dollars during 2008 will depend upon (a) the amount of federal dollars received by Connecticut in FY 08; (b) whether CEAP enrollment is restricted or open, and (c) the number of households weatherized, and receiving heating tune-ups/other home energy efficiency measures.

CEAP is funded with federal Low Income Home Energy Assistance Program (LIHEAP) dollars. To date, a total of approximately $60. 1 million has been made available to support the state's 2006/2007 plan. Additional federal dollars may be received if the President releases previously authorized contingency funding, and/or if supplemental FY 07 appropriations bills are passed.

Original estimates indicated that the 2006/2007 CEAP plan would result in program costs of approximately $64. 3 million ($4. 2 million more than currently available funding). If no additional federal funding is forthcoming, the DSS may incur unbudgeted state costs in 2007. (While the Commissioner of Social Services has the discretion to limit program enrollment to operate within available funding, he does not intend to close enrollment this year. ) The President's FY 08 proposed LIHEAP budget includes an estimated $30. 8 million for Connecticut. Final federal appropriations will likely not be known until Fall 2007.

The CEAP plan has traditionally included moneys (usually $0. 5 or $1. 0 million annually) for emergency heating system repairs/replacement for heating systems determined to be unsafe or inoperable. It is assumed that comparable funding would be proposed within the 2007/2008 plan, and would meet the bill's requirement that the agency increase the number of households receiving home heating equipment tune-ups and home energy efficiency measures. CEAP eligible households have also historically been allowed to use a portion of their basic or crisis benefits to cover the cost of a clean, tune and test of their deliverable fuel heating system.

However, the state has not historically utilized LIHEAP dollars for household weatherization activities. Estimated average costs per household of $3,000 would be incurred. The ability of the agency to support these costs within available LIHEAP funding would depend upon the number of households receiving these weatherization services (not specified in the bill), and overall available program funding, as discussed above.

Section 66 expands the types of fuel that can be purchased under CEAP to any deliverable fuel (currently number two home heating oil), and requires DSS to utilize fixed price, capped price, pre-purchase, summer-fill, or other programs that reduce the cost of fuel purchased. The extent of any resulting savings would depend upon the agency's success in utilizing these cost reduction strategies, which cannot be determined in advance.

Requiring community action agencies to accept CEAP applications no later than September 1st annually, and report pricing information per Section 79 (c) would potentially result in significant administrative costs. Reimbursing these private agencies for their additional administrative efforts would reduce resources available for benefits and services to participating households.

Section 68-70 exempt various energy related items from the sales tax, which is anticipated to result in a General Fund revenue loss of $21. 0 million in FY 08 and $8. 0 million in FY 09. The table below presents the loss associated with each item.

Item

FY 08

FY 09

     

Solar energy, geothermal, and ice storage systems

$500,000

$700,000

Weatherization products, including compact fluorescent light bulbs

7,500,000

7,500,000

Household appliances6 that meet the federal Energy Star standard

13,000,000

-

     

Total

$21,000,000

$8,000,000

Section 71 requires DPUC to begin a contested case proceeding to examine if long-term contracts should be used to procure renewable energy certificates. The two Lead Rate Specialists required for provisions in Section 4 would assist in this process.

Section 72 increases the maximum credit under the Neighborhood Assistance tax credit program from 60% to 100% for a firm's investments in energy conservation projects in low income housing developments or properties occupied by charitable organizations. It also expands the program to include investments in energy conservation projects for other facilities owned by charitable organizations. These changes are anticipated to result in a General Fund revenue loss of up $1. 0 million beginning in FY 09.

About 90 to 100 corporations claim approximately $1. 3 million per year (the program has a cap of $5. 0 million per year) under the Neighborhood Assistance program.

Section 73 authorizes the issuance of $30. 0 million in General Obligation (GO) bonds for energy conservation projects in state-owned buildings. The General Fund debt service cost to bond this amount over 20 years at a 5. 0% interest rate is $45. 8 million.

Section 74 permits CHEFA to provide financial assistance to certain organizations for: (1) energy efficient construction or renovation projects or (2) renewable energy construction or renovation projects using bonds issued by CHEFA. This has no state fiscal impact because these bonds are not obligations of the state.

Section 75 reinstates the reduction in the potential maximum interest rate for loans under the Energy Conservation Loan Program from provisions in PA 05-2 Special Session, but excludes siding and replacement roofs from these rates.   This is anticipated to have a minimal impact on the number of loans closed in a year and have no impact on costs to the state.   The Connecticut Housing Investment Fund Inc. (CHIF) has the contract to administer the Energy Conservation Loan (ECL) program for the Department of Economic and Community Development (DECD. )  The ECL revolving loan fund has an estimated balance of $4. 9 million and the current unallocated General Obligation (GO) bond balance for the ECLF is $5. 0 million as of 5/15/07.   The administrative costs will be handled through program funds.

Section 80 reinstates the reduction in the potential maximum interest rate for loans under the Energy Conservation Loan Program from provisions in PA 05-2 Special Session, but excludes siding and replacement roofs from these rates. In addition, the bill increases the maximum loan to owners of residential properties with no more than 4 units from $15,000 to $25,000 per structure. The change in the maximum loan is anticipated to have a very minimal impact on the number of loans closed in a year and has no impact on costs to the state. The Connecticut Housing Investment Fund Inc. (CHIF) has the contract to administer the Energy Conservation Loan (ECL) program for the Department of Economic and Community Development (DECD). The ECL revolving loan fund has an estimated balance of $3. 1 million and the current unallocated General Obligation (GO) bond balance for the ECLF is $5. 0 million as of 5/15/07. The administrative costs will be handled through program funds.

Section 86 requires DPUC to direct an electric distribution company to negotiate long-term contracts for the energy output of each generation project selected by the agency. DPUC may only approve those long-term projects that would reduce and stabilize the cost of electricity to ratepayers. The two Lead Rate Specialists described under Section 4 would assist in determining what is in the public interest, as required under the bill.

Sections 87, 89, 100 requires DPUC, in consultation with ECMB, to establish a state-wide energy efficiency and outreach marketing campaign to provide targeted educational information to electric consumers in various sectors. This marketing campaign requires DPUC to develop a real-time energy report for daily use by television and other media, customer bill inserts, media advertisements, real-time electronic mail and cellular phone alert system, and a website. $5. 0 million is appropriated to a newly established energy efficiency and outreach account (a separate non-lapsing General Fund account) to carryout these provisions, under Section 126.

DPUC would require an additional staff position with experience in media and marketing for this new awareness position, at an estimated salary of $75,000-$80,000, plus fringe benefits. An outside consultant may also be utilized to supplement the media/marketing position and any associated consultant costs would be funded by ratepayers, through the Consumer Counsel and Public Utility Control fund.

Section 90 authorizes the issuance of $50. 0 million in General Obligation (GO) bonds for a municipal renewable energy and efficient energy generation grant program. The General Fund debt service cost to bond this amount over 20 years at a 5. 0% interest rate is $76. 3 million.

Section 91 establishes a municipal renewable energy and efficient energy generation grant program for municipal buildings.   The program is to be administered by Connecticut Innovations, Inc. (CII), a quasi-public agency. It is anticipated that CII would require additional staff to administer the program.   A program director and a contract administrator (half-time, initially) at an estimated cost of $112,500, plus fringe benefits, and funds for associated other expenses would be required.   It is anticipated that these costs would be covered by CII's operating funds; these costs would be reimbursable from the Clean Energy Fund. This section creates as separate non-lapsing account within the Renewable Energy Investment Fund from which CII may issue grants-in-aid.

Section 93 requires DEP to adopt regulations to implement the Regional Greenhouse Gas Initiative.   It is anticipated that DEP would require funding to contract with a consultant or hire the equivalent of half an Environmental Analyst to draft the regulations.   The section requires DEP, in conjunction with DPUC, to auction the carbon dioxide credits under the Regional Greenhouse Gas Initiative cap and trade program (which allows power plant owners to buy and sell credits to comply with emission caps). This will result in millions of dollars (currently estimated at $20. 0 to $50. 0 million) being raised for consumer benefits, including energy efficiency programs.  

The auction is to be conducted by a contractor or trustee, which will result in a cost that is presently indeterminate.   Such cost may be considered to be part of administrative costs which may be covered from the proceeds of the auction.   The regulations may allow for up to 5% of the proceeds to be used for administrative costs.   This could result in funds of between $1. 0 million to $2. 5 million being available to cover administrative costs.

Section 94: In order to carryout provisions required under the partnership program DPUC would require a Lead Rate Specialist and a Utilities Examiner (Accountant) both at a salary of $77,607 each plus fringe benefits. These additional staff resources are required since it is an ongoing program and not one-time in nature, and require a technical and financial staff expertise that does not currently exist. It is anticipated that CII would be able to handle the work associated with the memorandum of understanding with DPUC within their normal budgetary resources.

Annual ratepayer contributions for purposes detailed in this section would not exceed $60. 0 million. In addition no person would receive ratepayer funding if funds are already being received by the Energy Conservation and Load Management Funds. Contractual financing agreements entered into with the Connecticut Development Authority would not exceed $10. 0 million.

Section 95 specifies that bonds issued for electric demand responses, conservation and load management, distributed generation and renewable energy projects will not be calculated toward a municipality's debt cap. Municipalities choosing to issue bonds for these purposes will therefore not be limited in their ability to issue bonds for other purposes.

Section 98 requires electric distribution companies to implement an advanced metering system, the cost of which would be borne by the company and would be recoverable through rates.

Section 101 requires the Office of Policy and Management (OPM), in consultation with the Department of Public Works (DPW), to develop a strategic plan to increase energy efficiency in state buildings by September 1, 2007, and annually thereafter, to file a plan with the Connecticut Energy Advisory Board (CEAB). This section also requires CEAB to approve such a plan, to measure the success of the implementation, and determine any financial benefits beginning March 15, 2008 and annually thereafter.   The bill permits OPM to perform all acts necessary for the negotiation, execution, and administration of any contract that is reasonably incidental to accomplish these tasks, and permits OPM to retain the services of a third party entity for any managerial, technical and financial assistance.   To the extent that OPM needs additional staff or the use of consultant services, potentially significant costs may result, the extent of any such costs is unknown. The bill requires that any such costs are paid from annual state appropriations.   There are no funds in sHB 7077, the budget bill, as favorably reported by the Appropriations Committee for such purposes.  

Finally, the bill directs any resulting savings from implementation of the plan to be allocated as follows: 75% is to be retained by electric rate-payers with the remaining half to be equally divided between re-investment into energy efficiency programs and investment into energy efficiency programs and technologies, on behalf of participants of energy assistance programs administered by the Department of Social Services (DSS).   To the extent that such savings accrue, DSS experience a revenue gain.  

Section 102 requires the Department of Environmental Protection (DEP) to issue a general permit regarding the construction and operation of new or existing emergency engines and distributed generation resources.   The agency considers general permits to be similar to the development of regulations.   Thus, it would be necessary to hire a consultant or divert existing staff from their duties to accomplish this.   The preparation of the report required by 2/1/08 may also require the services of a consultant or the diversion of existing staff.   A potential cost may result, which may not be covered by normal budgetary resources.

Section 103 requires DPUC to conduct a pilot program for emergency generation resources that could be implemented on or before December 1, 2007. DPUC must use revenues derived from Federally Mandated Congestion Charges (FMCC), not to exceed $10. 0 million, for implementing provisions in this section. These sections also require DPUC to conduct a feasibility study concerning different standard service options and a financial incentive program. In order to accomplish these duties, DPUC would require a Utilities Examiner (Accountant) position at a salary of $77,607 plus fringe benefits, due to current inadequate financial staff resources. This Utilities Examiner would also assist in carrying out provisions in Sections 108, 109.

Section 108 establishes a grant program to be developed by DPUC, in consultation with other entities for clean and distributive generation from Class I renewable energy sources, and projects for businesses and state buildings. Not more than $25. 0 million would be awarded to fuel cell projects, and not more than $25. 0 million would be awarded to any other clean and distributive generation project. A Lead Rate Specialist would be required to develop this grant program, due to the lacking technical staff resources currently in the department, at a salary of $77,607 plus fringe benefits. The Utilities Examiner required for Sections 102, 103, 104, 106 would also assist with developing this grant program.

Section 109 authorizes the issuance of $50. 0 million in General Obligation (GO) bonds for the grant program established in Section 108. The General Fund debt service cost to bond this amount over 20 years at a 5. 0% interest rate is $76. 3 million.

 Section 111, 119 establishes a state-wide energy efficiency and outreach account as a separate non-lapsing account within the General Fund. These funds would be expended by DPUC to carryout provisions in Sections 61, 87, 88, and 100 of the bill.

Section 115 funds natural gas conservation programs with up to $10. 0 million in revenue from the public service companies' tax that is in excess of the amount approved by the Finance, Revenue, and Bonding Committee in support of the state budget. This could result in a General Fund revenue loss of up $10. 0 million per year.

Section 116 establishes a fuel oil conservation account, which would be a separate, non-lapsing account within the General Fund. Revenue generated by the gross earning tax on petroleum products, in excess of revenue collected for this purpose in 2006, would be deposited into this new account, not to exceed $10. 0 million.

Section 121 authorizes the issuance of $30. 0 million in General Obligation (GO) bonds for energy conservation projects in state-owned buildings. The General Fund debt service cost to bond this amount over 20 years at a 5. 0% interest rate is $45. 8 million.

Section 122 requires that any car or light duty truck purchased by the state after January 1, 2008 have an efficiency rating in the top third of its class, and 50% of such cars and light duty trucks must be alternative fueled, hybrid electric or plug-in electric vehicles. As the state meets the federal requirement that 75% of cars and light duty trucks purchased must be alternative fueled, this provision has no fiscal impact.

Requiring that cars and light duty trucks purchased after January 1, 2008 must have an efficiency rating in the top third of all vehicles in its class could conflict with federal law requiring the purchase of alternative fueled vehicles (which are not always “efficient” as that term is defined in the industry). Non-compliance with federal law could subject the state to the risk of fines and penalties.

The bill also requires that cars and light duty trucks purchased by the state after January 1, 2010 must have an efficiency rating in the top third of its class, and 100% of such cars and light duty trucks must be alternative fueled, hybrid electric or plug-in electric vehicles. There will be increased costs in FY 10 for the state to purchase cars and light duty trucks that are 100% alternative fueled, hybrid electric or plug-in electric.

Section 126 provides $95. 0 million from the General Fund in FY 07 to defease7 state rate reduction bonds that mature after 12/30/07. The $95 million will be deposited into an irrevocable trust account where it will be invested and accumulate interest. The funds in this account will be used to pay the debt service due on the bonds at their maturity date (column c in table below).

Special Obligation Rate Reduction Bonds Outstanding after 12/30/07

($ millions)

Maturity Date

Principal

Interest

Total Debt Service

 

a

b

a+b

06/30/08

14. 7

2. 7

17. 4

12/30/08

15. 1

2. 4

17. 4

06/30/09

15. 5

2. 0

17. 4

12/30/09

15. 8

1. 6

17. 4

06/30/10

16. 2

1. 2

17. 4

12/30/10

16. 6

0. 8

17. 4

06/30/11

17. 0

0. 4

17. 4

Total

111. 0

11. 1

122. 1

There is no fiscal impact to State Treasurer's Office for bond defeasance.

Section 127 appropriates $5. 0 million to DPUC from the General Fund for FY 08 for the state-wide energy efficiency and outreach account.

Section 128 appropriates $2. 5 million to OPM for implementing the clean-slate program established under Section 81. This section also appropriates $1. 75 million to OPM for the expansion of Operation Fuel, and $750,000 to OPM for Operation Fuel's infrastructure, technology support, and case management services.

House “A” strikes the underling bill and results in the fiscal impact as indicated above.

The Out Years

Except as otherwise described above, the annualized ongoing fiscal impact identified above would continue into the future subject to inflation. In addition, the future effects on the state and municipalities as electric ratepayers is uncertain and cannot be determined at this time.

The preceding Fiscal Impact statement is prepared for the benefit of the members of the General Assembly, solely for the purposes of information, summarization and explanation and does not represent the intent of the General Assembly or either chamber thereof for any purpose.

1 The CL& M Fund's fiscal year begins January 1.

2 Inflows were less than outflows, because collections are based on actual kilowatt sales, which were less than projected.

3 The standards are contained in the 2004 edition of the ASHRAE standard 90. 1.

4 According to fueleconomy. com there are four 2007 models with fuel efficiencies of at least 40 miles per gallon: (1) the Honda Civic (automatic 5-speed), (2) the Toyota Yaris (manual 5-speed), (3) the Toyota Corolla (manual 5-speed), and (4) the Mini Cooper (manual, 6 speed). Therefore, the estimates assume only a small number of overall new vehicles sales will be affected.

5 The Office of Policy and Management was authorized to operate the HEARTH program during FY 06. DSS expended $205,744 for HEARTH benefits for CEAP households in that year. The program was not authorized in FY 07.

6 This estimate includes refrigerators, clothes washers, air conditioners, and dishwashers.

7 The bonds will be defeased because they are not callable.