March 5, 2008
SUMMARY OF AAC ENERGY RELIEF AND ASSISTANCE
By: Kevin E. McCarthy, Principal Analyst
You asked for a section by section summary of HB 5819, An Act Concerning Energy Relief and Assistance.
The bill creates the Connecticut Energy Authority and specifies its goals and governance. The goals are to (1) procure least-cost supply-side and demand-side resources through a competitive procurement processes to meet the electricity needs of all retail customers who choose to be served by the authority; (2) build and operate generation facilities; and (3) sell electricity at cost to electric companies, municipal electric utilities, and cooperatives.
The authority is governed by a seven member board of directors. The directors are (1) one representative of the environmental community, (2) the secretary of the Office of Policy and Management, (3) the commissioner of Environmental Protection, (4) the Consumer Counsel, and (5) one person appointed each by the governor, speaker of the House, and president pro tempore of the Senate. The board must elect a chairperson, who appoints a president to supervise the administration of the authority. The authority is not a state agency.
The bill requires the authority, by January 1, 2009, to issue a request for proposals to procure long-term electric contracts. Once the contracts are procured, the authority can transfer ownership of the power to the electric companies (apparently it cannot transfer title to municipal utilities). Ratepayers must pay the administrative costs of the contracts through non-bypassable charges.
The bill specifies how the board must conduct the authority's business and establishes reporting requirements. It requires the board to hold its first meeting by October, 2008. It makes the authority's records available to the public and requires the Auditors of Public Accounts to audit the authority in the same way it audits state agencies.
The bill requires that various documents, including the board's schedules, minutes, annual operation plans, reports, studies, contracts for lobbyists and attorneys, and audits, be made available on the Internet, except for information exempt from disclosure under the Freedom of Information Act.
The bill specifies the authority's powers. These include hiring staff and consultants; entering into contracts; buying and leasing property; and adopting procedures (equivalent to state agency regulations).
By law, the electric companies must provide “standard service” to small and medium size customers who do not choose a competitive supplier. The bill requires the Department of Public Utility Control (DPUC) to set the price for this service annually rather than quarterly. But it allows DPUC to set the price up to twice per year if it determines that this is in customers' best interest.
The bill requires the electric companies, by August 1, 2008, to file with DPUC a proposal to set principles and standards on how they will enter into bilateral contracts to provide standard service. DPUC, in consultation with the Office of Consumer Counsel, must approve, modify, or reject the proposals in a contested case (a quasi-judicial proceeding). The companies cannot negotiate for bilateral contracts before DPUC approves the principles and standards.
The bill establishes new procedures for the electric companies to use to reduce the amount of volatility in the price of standard service. It requires the companies to submit a plan to DPUC for this purpose, subject to its approval. The plan can require the companies to procure power directly from generators and enter into financial or physical hedges, among other things. Once DPUC approves the plan, the companies can manage power procurement on a real-time basis (under current practice, they go on the wholesale market once per quarter). The bill also includes provisions to make information regarding the procurement process more widely available. The bill requires (1) the electric companies to enter into contracts with the DPUC-approved bidders and (2) DPUC to approve or reject the contracts within seven days, with the option of extending this period by seven days with the consent of all of the parties.
Under current law, DPUC can require the companies to provide a “green option” to their customers, in which the proportion of power coming from renewable resources exceeds the amount required by law. (Both companies currently offer these options.) The bill requires DPUC to order the companies to offer these options. It also requires DPUC to order the companies to offer an option where participating customers actually buy renewable power (under current practice, participating customers buy “renewable energy credits,” which are sold separately from the power itself).
By law, the companies must provide “provider of last resort service” to their large customers who do not choose a competitive supplier. DPUC sets the price for this service monthly. The bill allows DPUC to modify how often it sets this price.
Current law requires the companies to enter into long-term contracts with renewable resources generators for specified amounts of capacity. The bill requires DPUC to approve these contracts within 30 days after they are filed with the department, with the possibility of extending this deadline by another 30 days. Under the bill, if DPUC does not issue a decision within 60 days, the contract is considered approved.
The bill requires DPUC to issue a request for proposals for various measures to meet the state's electric needs. These include conservation, load management (altering when electricity is used), and new and renovated generation.
The bill specifies the information that bidders must include in their proposals. Both electric companies and non-utilities can submit proposals. Proposals for generation must be made on a cost of service basis. This means that the owner of a project selected by DPUC would be paid a rate that covered its capital and operating costs, plus a DPUC-set rate of return on its investments, rather than the rate set in the wholesale market. Proposals by non-utilities must include a draft contract under which they would transfer both the generating capacity of their facilities and the power they produce to the electric companies (there are separate wholesale markets for power and capacity). DPUC can retain consultants to help determine whether cost estimates submitted by electric companies are reasonable. All proposals must be made available for public review six months after DPUC approval or rejection.
DPUC must evaluate the proposals and can approve one or more of them. It must evaluate them based on an analysis of their expected costs and benefits, consistency with environmental sustainability, reduction and stabilization of electric rates, the promotion of fuel diversity, and the reduction or overall minimization of increases in greenhouse gas emissions. DPUC can only approve proposals that have expected benefits in excess of expected costs and are in the best long-term interest of customers in the state. The electric companies must enter into contracts with non-utilities selected by DPUC. The contracts are subject to DPUC approval and must have terms that mitigate the long-term risk assumed by customers.
Approved projects are eligible for expedited siting approval by the Connecticut Siting Council.