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.

AMENDMENT

LCO No.: 8665

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 this bill, and permits the transfer of funds to agencies as necessary.

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

Section 1 establishes a $500 rebate for the purchase and installation of replacement residential natural gas, propane, and oil furnaces and burners that meet or exceed federal Energy Star standards in residential structures, containing up to four dwelling units, between September 1, 2007 and September 1, 2012. There is no fiscal impact to OPM to administer this 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 amendment. 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 cost-effective 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 calendar year (CY) 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 $71.0 million (see 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

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

Section 5 requires DPUC to order certain electric generators to start their oil or natural gas facilities (duel 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 determine if it actually would be in the best interest of the consumer. In addition, these positions would carryout provisions detailed in Sections 19, 45-47, 54, 56-58, and 83.

Section 6 requires DPUC to begin an uncontested case 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 highly technical engineering tasks by the specified time frame (2/1/08) , 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 7, 10, and 39-40.

Section 7 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 6 to assist with this function.

Section 9 requires the Connecticut Siting Council (CSC) to initiate a contested case to investigate energy security. It is anticipated that outside consultants could cost CSC $50, 000-$100, 000 which would be borne by ratepayers. The extent to which this additional cost may affect the state and municipalities as ratepayers, cannot be determined at this time, but is not anticipated to be significant.

Section 10 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 6 to assist with this assessment.

Section 11 requires that new state facilities costing $5.0 million or more must comply with energy efficiency building standards adopted by OPM, per PA 06-187. This bill increases the standards and extends them to renovation projects at state facilities and state-funded school and housing projects costing $2.0 million or more. 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 (ASHRAE2), 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) .

Section 13 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 and associated other expenses of $2, 500 annually.

Section 18 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.

Section 19 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 5 would assist in this process as well.

Section 21 of the bill 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 to offset the loss of taxable property.

Section 22 of the bill 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 million3 in FY 09 and FY 10.

Sections 23-38 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.

Sections 39, 40 require DPUC to issue a final decision on interconnection standards between electric utilities and non-utility generators. The additional Engineer position described under Section 6 would assist the agency with this technical task.

Section 41 expands the potential use of the Renewable Energy Investment Fund (Fund) . The approximate monthly ratepayer contributions to the Fund are $1.9 million and the unrestricted net asset balance as of 4/30/07 is $81.4 million.

Section 45, 46, 47 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 5 would assist in this process, as well

Section 48 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.

Sections 50, 51 of the bill require, rather than allow, municipalities to exempt Class I renewable resources 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 would 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 to offset the loss of taxable property.

Section 54 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. Although this section allows DPUC to retain outside consultants, two Lead Rate Specialists required for provisions in Section 5 would assist in this process, and no consultant is anticipated.

Section 55 requires DPUC to consider the integrated resource plan devised by the electric 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.

Section 56, 58 requires DPUC to issue new RFP's based on results of the integrated resources plan and requires the agency to consider the plan in an uncontested docket. DPUC must then implement the plan. If suitable proposals are not received by DPUC from utility companies, DPUC must conduct a needs assessment as a contested case, and may issue a new RFP to electric companies. It also requires DPUC to review the recovery of various charges in an annual contested rate case. In order to accomplish these tasks, DPUC would require the use of the Engineer position as discussed under Section 5.

Section 60 requires the Department of Public Utility Control to implement a voluntary rate program to add a fourth tier to the rates, which would be a surcharge on peak rates applicable on high-demand peak days. The affect this may have on the state or municipalities as ratepayers cannot be determined at this time.

Section 66 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 72 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. This surcharge could affect the state and municipalities as ratepayers, the extent of which cannot be determined at this time.

Section 73 requires DPUC to initiate a contested case to design a cost-effective revenue adjustment mechanism to account for the link between sales and the recovery rates for electric distribution companies. The extent to which this affects the state and municipalities as ratepayers cannot be determined at this time.

Section 77 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 program4.

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 79 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.

Sections 80-82 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 appliances5 that meet the federal Energy Star standard

13, 000, 000

-

     

Total

$21, 000, 000

$8, 000, 000

Section 83 requires DPUC to begin a contested case to examine if long-term contracts should be used to procure renewable energy certificates. The two Lead Rate Specialists required for provisions in Section 5 would assist in this process.

Section 84 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 85 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.

Sections 87, 93 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. 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.

Sections 88, 89 bar certain municipalities from condemning or restricting the operation of any existing energy facility that DPUC has determined to be a critical component of the state's power structure, under certain circumstances. The extent to which any particular municipality and state electric rates could be affected by this change is unknown at this time.

Section 96 directs Operation Fuel to establish a one-time clean slate program to target low income people with high utility bill arrearages of more than 24 months and less than $1, 000, and provide grants based on income and arrearage amount. 

Section 97 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 would 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 102 requires each electric distribution company to submit an application to DPUC to implement mandatory peak, shoulder and off-peak time of use rates for commercial or industrial customers (other than schools and municipal buildings) with a certain rate of electricity demand and to offer optional interruptible or load response rates for those customers of a certain demand level. The affect this may have on the state and municipalities as ratepayers cannot be determined at this time.

Section 103 requires DPUC to direct an electric distribution company to negotiate long-term contracts for the electric output of certain electric generation projects. DPUC may only approve those contracts that the agency finds would reduce and stabilize the cost of electricity to ratepayers. The extent to which this reduces rates for the state and municipalities as ratepayers cannot be determined at this time.

Section 104, 105 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, and a website. The bill does not specify how this campaign would be funded.

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. Any affect this may have on the state and municipalities as ratepayers, cannot be determined at this time.

Section 106 requires DPUC to determine a procedure for various electric entities to notify retail customers of any capacity deficiency situation with the intent that a voluntary reduction of electricity usage will occur. The electric companies' costs for this program are to be recoverable as Federally Mandated Congestion Charges (FMCC) . The affect this would have on the state and municipalities as ratepayers cannot be determined at this time.

Section 110 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 would result in millions of dollars (currently estimated at $20.0 to $50.0 million)  being raised for consumer benefits, including energy efficiency programs.  The extent to which this program affects the state and municipalities as ratepayers is unknown at this time.  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 112 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. This section 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. 

Section 114 appropriates $2.5 million to OPM in FY 07 to implement the “clean-slate” program as described under Section 113. It also appropriates $1.75 million to OPM in FY 07 to expand Operation Fuel, and appropriates $750, 000 to OPM in FY 07 for Operation Fuel's infrastructure, technology support, and case management services.

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

Section 501 requires the Department of Public Utility Control (DPUC) to conduct a more detailed and frequent supply procurement process than currently exists. An Attorney III, at a salary of $88, 619 plus fringe benefits, and a Lead Rate Specialist, at a salary of $77, 607 plus fringe benefits would be required to carry out this provision. Outside consultants may also be required. It is anticipated that consulting services at the front-end design phase of the procurement plan would be approximately $400, 000-$500, 000 and ongoing consultant costs would be approximately $200, 000-$300, 000 annually. These consultant costs would be paid through the Consumer Counsel and Public Utility Control fund, which is funded by ratepayers.

Section 502 requires DPUC to consider the integrated resource plan devised by the electric 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.

Section 503, 504 requires DPUC to issue new RFP's based on results of the integrated resources plan and requires the agency to consider the plan in an uncontested docket. DPUC must then implement the plan. If suitable proposals are not received by DPUC from utility companies, DPUC must conduct a needs assessment as a contested case, and may issue a new RFP to electric companies. It also requires DPUC to review the recovery of various charges in an annual contested rate case. In order to accomplish these tasks, DPUC would require two Lead Rate Specialists at a salary of $77, 607 each, plus fringe benefits.

Section 508 requires DPUC to direct an electric distribution company to negotiate long-term contracts for the electric output of certain electric generation projects. DPUC may only approve those contracts that the agency finds would reduce and stabilize the cost of electricity to ratepayers.

Section 510 establishes the Connecticut electric efficiency partnership program. 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. Projects funded under these provisions would not exceed $60.0 million in total annual investments, with no more than $5.0 million of annual ratepayer funding received by any individual electric efficiency partner.

DPUC would fund the ratepayers' portion of costs associated with deploying certain technologies by entering into a contractual financing agreement with the Connecticut Development Authority which would be recoverable through the systems benefit charge.

Section 514 requires each electric distribution company to submit an application to DPUC to implement mandatory peak, shoulder and off-peak time of use rates for commercial or industrial customers (other than schools and municipal buildings) with a certain rate of electricity demand and to offer optional interruptible or load response rates for those customers of a certain demand level.

Section 515 requires DPUC to initiate a contested case to design a cost-effective revenue adjustment mechanism to account for the link between sales and the recovery rates for electric distribution companies.

Section 516 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 would result in millions of dollars (currently estimated at $20.0 to $50.0 million)  being raised for consumer benefits, including energy efficiency programs.  The extent to which this program affects the state and municipalities as ratepayers is unknown at this time.  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.

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 The standards are contained in the 2004 edition of the ASHRAE standard 90.1.

3 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.

4 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.

5 This estimate includes refrigerators, cloths washers, air conditioners, and dishwashers.