OLR Bill Analysis

HB 6838

AN ACT CONCERNING THE ENCOURAGEMENT OF LOCAL ECONOMIC DEVELOPMENT AND ACCESS TO RESIDENTIAL RENEWABLE ENERGY.

SUMMARY:

This bill expands the Connecticut Green Bank's residential solar investment program by, among other things:

1. requiring it to provide 300 megawatts (MW), instead of 30 MW, of new residential solar photovoltaic (PV) installations by the end of 2022;

2. creating solar home renewable energy credits (SHRECs) which are owned by the Green Bank and generated when certain residential PV systems produce electricity;

3. requiring the electric distribution companies (EDCs, i.e., Eversource and United Illuminating) to purchase SHRECs from the Green Bank under a master purchase agreement negotiated between each EDC and the Green Bank;

4. expanding the program's funding sources to include proceeds from the Green Bank's sale of SHRECs to the EDCs; and

5. allowing the EDCs to recover their costs for purchasing the SHRECs through a reconciling (adjustable) component of their electric rates, as determined by the Public Utilities Regulatory Authority (PURA).

The bill also makes several minor, technical, and conforming changes.

EFFECTIVE DATE: Upon passage

THE RESIDENTIAL SOLAR INVESTMENT PROGRAM

By law, the Green Bank's residential solar investment program offers financial incentives for purchasing or leasing certain residential solar PV systems. The incentives are either (1) performance-based incentives that are paid out on a per kilowatt-hour (kWh) basis for the electricity the system produces or (2) expected performance-based buy downs that are a one-time upfront payment based on the system's expected performance.

Current law provides these incentives for “qualifying residential solar PV systems.” The bill specifies that these systems are solar PV projects that (1) receive funding from the Green Bank, (2) are certified by PURA as a Class I renewable energy source, (3) emit no pollutants, (4) generate less than 20 kilowatts, (5) are on the customer-side of a one- to-four-family home's revenue meter, and (6) serve an EDC's distribution system.

The law allows the Green Bank to fund the program with up to one-third of the funds annually collected through the charge on electric bills that supports the Clean Energy Fund, plus any available federal funding. The bill allows the bank to also fund the program with the revenue it receives from the sale of SHRECs, which the bill creates.

Current law requires the renewable energy produced from a program's PV systems to be applied toward the EDCs' renewable portfolio standard requirements (RPS, a requirement to use a certain portion of renewable energy) if it receives tariff payments or is included in utility rates. The bill eliminates this requirement and instead allows EDCs to retire the SHRECS they must purchase under the bill to satisfy its RPS requirements. (The bill eliminates, upon passage, the requirement for electricity generated by the program's PV systems to count toward the EDCs' RPS; however, the EDCs will not be able to use the SHRECs for their RPS requirement until after the master purchasing agreement is implemented and they begin purchasing them from the Green Bank.)

The bill also eliminates a provision in current law that prohibits customers who receive the program's performance-based buy down from receiving net metering credits (i.e. billing credits that allow a customer to “run their meter backwards” based on how much excess electricity their PV system generates).

The bill requires the Green Bank to publish a proposed schedule for offering program incentives on its website, instead of in its biannual comprehensive plan. It also eliminates a requirement for the Department of Energy and Environmental Protection to review and approve the schedule. Current law requires the incentives to meet a consumer's reasonable payback expectations. The bill instead requires the incentives to provide the consumer with a competitive electricity price and adds the cost of financing the system to the various other factors the bank must consider when setting the incentives (e.g., the value of energy offset by the system and the availability and value of other incentives).

The bill also extends, from January 1, 2016 to January 1, 2017, the deadline for the Green Bank's next biannually required report to the Energy Committee on the program's progress.

SOLAR HOME RENEWABLE ENERGY CREDITS

The bill creates SHRECs, which are renewable energy credits created for each megawatt hour of electricity produced by qualifying residential solar PV systems that receive approved incentives from the Green Bank on or after January 1, 2015. A SHREC has an effective life that covers the year it was produced and the next calendar year. It is owned by the Green Bank until it is transferred to an EDC under the master purchase agreement. The Green Bank must determine the purchase price for SHRECs, which cannot exceed the lesser of (1) the preceding year's price for small Z-RECs (a similar renewable energy credit produced by certain zero-emission facilities) or (2) the RPS alternative compliance payment (the 5.5 cents/kWh penalty for failing to meet RPS requirements).

Master Purchase Agreement

The bill requires the Green Bank, within 180 days after July 1, 2015, to negotiate and develop a 15-year master purchase agreement with each EDC that requires the EDC to purchase the bank's SCHRECs. Each EDC's obligation to purchase SHRECs must be apportioned based on its distribution system's demand for electricity, as determined by PURA, when the agreement begins.

The bill requires the Green Bank and EDCs to negotiate in good faith to develop the agreement. If there are any outstanding issues 30 days after the negotiations start, either party may initiate a docket with PURA to resolve the issues. Once the negotiations are complete, the Green Bank and EDCs must, by January 1, 2016, jointly file the agreement for approval by PURA. PURA must hold an uncontested case to approve, reject, or modify the agreement, which cannot become effective without PURA's approval. (The bill does not specify what criteria PURA must use to approve, reject, or modify an agreement.)

EDC Cost Recovery

The bill allows the EDCs to recover the reasonable costs and fees they prudently incurred while complying with the master service agreement through a PURA-determined reconciling component of their electric rates. The EDCs can resell or dispose of the energy or credits they purchased under the agreement, but the proceeds from the sale must be netted against their costs for complying with the agreement. The difference must be credited or charged to the EDC's customers through a PURA-determined reconciling component of their electric rates that cannot be bypassed by switching electric suppliers.

COMMITTEE ACTION

Energy and Technology Committee

Joint Favorable

Yea

15

Nay

8

(03/24/2015)