OLR Research Report

August 1, 2008




By: Kevin E. McCarthy, Principal Analyst

You wanted to know the status of sections 1, 2, and 116 of PA 07-242, dealing with an energy efficient replacement furnace rebate program and heating oil conservation programs.


Sections 1 and 2 of the act authorize $5 million in bonding annually for a new program to provide rebates of up to $500 to people who replace their furnaces with energy-efficient ones. The bonds for this program have not been allocated, and the program is currently not operational. But, Governor Rell has proposed placing a $5 million allocation for the program on the Bond Commission's next agenda. Assuming the Bond Commission approves the agenda, the program will start operating this August.

Section 116 of the act establishes a Fuel Oil Conservation Board and a mechanism to fund oil conservation programs. The board is in the process of hiring an executive director and developing the programs. The board hopes to begin operating programs later this year.


Act's Provisions

Sections 1 and 2 require the Office of Policy and Management (OPM) secretary to provide a rebate of up to $500 between July 1, 2007 and July 1, 2017 for the purchase and installation of certain replacement home heating equipment. The rebate is available for equipment installed in residential structures containing up to four dwelling units. Replacement gas furnaces must be Energy Star-rated and oil and propane equipment must be at least 84% efficient. The act caps the total amount of rebates at $5 million annually.

Prior law authorized the issuance of up to $5 million in bonds for low interest energy efficiency loans. The act, instead, makes this an annual authorization and allows the proceeds to be used for the rebate program as well as the loan program.

The Energy Conservation Management Board (ECMB) must report to the Energy and Technology Committee on the cost-effectiveness of the rebate program by January 1, 2009.

Implementation Status

While the legislature has authorized bonds to fund the program, the State Bond Commission has not yet allocated bonds to do so. Governor Rell has announced plans to place $5 million in bonding for the program on the Bond Commission's August 4, 2008 agenda. If approved, OPM staff anticipate that the rebates will be available starting soon thereafter. OPM has developed a rebate application form, which is undergoing legal review. OPM staff anticipate that OPM will set up a toll-free number by early August for people to call to request the form. They also anticipate that OPM soon will place information about the program on its website, OPM has also maintained a database of the people who have already contacted the agency regarding the rebate program (approximately 250 people) and will contact them regarding the program once the bond funding is made available.


Act's Provisions

The act establishes a 13-member Fuel Oil Conservation Board and requires it to organize itself as a 501(c)(3) nonprofit organization. It requires the board to issue a request for proposals (RFP) to choose an entity to administer oil conservation programs. By November 1, 2007, the board must contract with this entity for up to three years. It can renew the contract or issue a new RFP.

The act required the program administrator to submit a comprehensive oil conservation plan to the ECMB for its approval by March 1, 2008 for the rest of 2008. In subsequent years, the administrator must submit a plan for the next calendar year by October 1 to both the ECMB and the Fuel Oil Conservation Board for their approval. The Fuel Oil Conservation Board must assist the administrator with plan development and implementation. The act imposes cost-effectiveness and other requirements on programs in the plan that parallel those in existing law for electric and natural gas conservation plans.

Under the act, funding for the oil conservation programs comes from the excess in revenue from the petroleum products gross receipts tax sales above the 2006 revenue, subject to a $10 million annual cap. (PA 07-1, June Special Session, reduced the limit to $5 million per year starting in FY 09; PA 08-2, June Special Session, made $2.5 million of the funding for FY 08 available immediately rather than in October 2008.) The money goes into a separate non-lapsing General Fund account. The Fuel Oil Conservation Board must authorize specific amounts from the account for grants, which must be awarded twice a year. Any money in the account at the end of the fiscal year reverts to the General Fund.

PA 08-2, June 11 Special Session makes several changes in these provisions. It (1) modifies the board's membership, (2) places the board within the state comptroller's office for administrative purposes only, and (3) requires the fuel oil conservation account to be within the Restricted Grant Fund rather than the General Fund. It also eliminates a provision that requires the comptroller to deposit the money in the account before the General Fund accounts are closed each fiscal year. Instead, it allows the comptroller to deposit up to $2.5 million into the account upon the act's passage, and requires any remaining amount due the account for FY 08 to be deposited as determined by the comptroller at the close of the fiscal year, but no later than October 1, 2008.

Implementation Status

Most of the appointments to the Fuel Oil Conservation Board were made shortly after the passage of PA 07-242 and the board has met regularly. However, the act did not specify where the board would be located administratively and the board has not met several of the act's deadlines. The board has applied for, but not yet received, 501(c)(3) nonprofit status. The board did not issue its RFP to choose a program administrator until 2008; it hopes to make its selection at its August 7, 2008 meeting. While the board has worked on a draft comprehensive oil conservation plan, it has not submitted the plan to the ECMB for its approval. Board members hope to begin implementing conservation programs, including a replacement oil furnace program, later this year.