OLR Bill Analysis

sSB 570 (File 611, as amended by Senate "A")*

AN ACT CONCERNING ELECTRIC FIXED BILL FEES AND GRID MODERNIZATION.

SUMMARY:

This bill makes numerous unrelated changes to the energy statutes. Among other things, it:

1. limits the fixed customer charge that each electric distribution company (EDC) (e.g., Eversource and United Illuminating) can seek in its next rate case by restricting the charge to recovering certain fixed costs;

2. requires the Department of Energy and Environmental Protection (DEEP) to study and recommend ways to transform the EDCs' business model for supporting distributed energy resources (DER) in ways that meet certain requirements;

3. allows EDCs to propose pilot programs to build, own, or operate certain grid-side system enhancements (e.g., energy storage systems);

4. requires DEEP to determine the net value that certain clean energy and energy efficient power generators provide and recommend changes to electric ratemaking mechanisms that would incorporate that value;

5. allows DEEP to require EDCs to submit a plan for procuring active demand response resources to reduce charges (e.g., paying customers to reduce usage during peak demand times);

6. requires the Public Utilities Regulatory Authority (PURA) to issue registration numbers to certain Class I renewable energy sources (e.g., solar or wind powered generators);

7. expands the microgrid grant program to fund certain power generation systems;

8. allows agricultural virtual net metering customers to lease their net metering facilities;

9. allows municipalities to abate property taxes for certain natural gas expansion projects and Class I renewable energy sources;

10. requires the Low-Income Energy Advisory Board to study ways to improve energy efficiency and heating assistance programs;

11. allows PURA commissioners to privately discuss matters before PURA without invoking certain requirements under the Freedom of Information Act;

12. requires the DEEP commissioner to administer a federally-funded weatherization assistance program;

13. requires the Department of Administrative Services commissioner to work with the DEEP commissioner, rather than the Office of Policy and Management secretary, when contracting for the state's electric generation services (15, effective upon passage);

14. authorizes the DEEP commissioner to represent the state's energy policy interests before appropriate federal agencies, including supporting or opposing transmission projects to meet public policy needs before the Federal Energy Regulatory Commission (16, effective upon passage);

15. requires PURA to implement time of day rates for electric vehicles;

16. eliminates a requirement for PURA to recommend just and reasonable rates for retail electricity supplier customers who begin paying a month-to-month rate after their fixed-rate contract expired;

17. expands the State Agency Energy Efficiency or Renewable Energy Technology Test Program; and

18. allows certain municipal electric companies to return half of a nonresidential customer's security deposit under certain circumstances.

*Senate Amendment “A” replaces the original bill (File 611), which (1) capped EDC fixed fees at $10, (2) required DEEP to determine the net value of DERs, and (3) allowed EDCs to own or operate energy storage devices.

EFFECTIVE DATE: July 1, 2015, unless otherwise noted.

1 – LIMITED RESIDENTIAL FIXED CHARGE

The next time an EDC files a request to amend its rates, the bill requires PURA to adjust the company's residential fixed charge so that it only recovers the fixed costs and operation and maintenance expenses directly related to metering, billing, service connections, and providing customer service. Under the bill, a “residential fixed charge” is any fixed fee charged to residential electric customers, including a (1) fixed charge for distribution basic service, (2) distribution customer service charge, (3) customer charge, or (4) basic service fee that is separate and distinct from any per kilowatt-hour distribution charge. The bill exempts rates for residential electric heating services from the fixed charge limit.

The bill prohibits PURA, when determining an EDC's new residential fixed charges, from causing a cost-shift to other rate classes.

2-3, DISTRIBUTED ENERGY RESOURCES AND “UTILITY 2.0” STUDY

The bill requires DEEP, by October 1, 2016, to issue a study and recommendations for regulatory, legislative, and policy mechanisms needed to transform the EDC business model and related constructs for supporting and deploying distributed energy resources (DERs). The recommendations must increase system-wide efficiencies in integrating more DERs and ensure that the EDCs are appropriately incentivized in a way that increases:

1. customer choice;

2. net benefits to the electric system, ratepayers, and society, including avoided electric generation and transmission costs;

3. deployment of cost-effective DERs;

4. system reliability and resiliency; and

5. the reduction of greenhouses gas emission and other pollutants.

DEEP can issue the study and recommendations as part of its Comprehensive Energy Strategy (CES) or in a separate proceeding that allows for public review and comment consistent with the process used to develop the CES.

Under the bill, a “distributed energy resource” is a:

1. customer-side or grid-side distributed resource that generates electricity from a Class I renewable energy source or Class III source (e.g., certain combined heat and power systems);

2. customer-side distributed resource that reduces demand for electricity through conservation and load management (e.g., programs that pay customers to reduce their usage during times of peak demand);

3. energy storage system located on the customer-side of the meter or connected to the distribution system; or

4. microgrid.

By law, unchanged by the bill, a “customer-side distributed resource” is (1) an electricity generator that can generate up to 65 megawatts (MW) on a retail end user's premises or (2) a retail end user's electric demand reduction through conservation and load management. A “grid-side distributed resource” is an electricity generator that can generate up to 65 MW and is connected to the electric transmission or distribution system, including units used primarily to generate electricity to meet peak demand.

2 & 4 – EDC PROPOSALS FOR GRID-SIDE SYSTEM ENHANCEMENTS

The bill allows EDCs to submit proposals to DEEP for a pilot program to build, own, or operate grid-side system enhancements, including energy storage systems, to demonstrate and investigate how DERs can be reliably and efficiently integrated into the electric distribution system in a way that maximizes the value they provide to the electric grid, electric ratepayers, and the public. The proposal must complement and enhance (1) the programs, products, and incentives available through the Connecticut Green Bank and the Connecticut Energy Efficiency Fund, (2) DEEP's Z-REC and L-REC programs, and (3) other similar programs that support DER deployment.

Under the bill, “grid-side system enhancements” are investments in distribution system infrastructure, technology, and systems designed to enable DER deployment and allow for grid management and system balancing. They include energy storage systems, distribution system automation and controls, intelligent field systems, advanced distribution system metering, communication, and systems that enable two-way power flow.

DEEP must evaluate the proposals and may approve them if they show how (1) grid-side system enhancements can be reliably and cost-effectively integrated into the electric distribution system and (2) they maximize the value provided to ratepayers. Any proposal DEEP approves must also be reviewed and approved by PURA. PURA must approve a proposal if it concludes that investing in the enhancement is reasonable, prudent, and provides value to ratepayers.

The bill allows the EDCs to enter into joint ownership agreements, partnerships, or other contractual agreements for services with private entities to carry out the proposals. Until its next rate case, an EDC must recover its costs for the proposals from all of its customers through a fully reconciling component of all EDC customers' electric rates. At the next rate case, the costs must be recoverable through the company's base distribution rates (i.e., they are incorporated into the company's regular distribution rates).

DEEP must evaluate the approved proposals and submit a report to the Energy and Technology Committee by January 1, 2017. The report must evaluate the performance, costs, and benefits associated with grid-side system enhancements procured under the bill.

5 – CLASS I & III VALUATION PROCEEDING

The bill requires the DEEP commissioner, after July 1, 2015, to open an uncontested proceeding or proceedings to (1) determine the net value that any customer-side Class I renewable energy source or Class III source provides to the electric grid, ratepayers, and the public and (2) recommend any changes to ratemaking mechanisms and other programs that support Class I or III sources that would credit their owners for their net value. (An “uncontested” proceeding is one which, among other things, cannot be appealed to the Superior Court under the Uniform Administrative Procedure Act.)

In determining a Class I or III source's value, the commissioner must consider the costs and benefits associated with (1) energy; (2) generation capacity; (3) distribution and transmission system impacts, including line loss savings; (4) price suppression; (5) quantifiable environmental attributes; (6) reliability and resiliency; and (7) fuel price volatility reduction benefits. He must also consider how much the rate design for crediting Class I or III sources allows their owners to avoid contributing to the combined public benefits charge that funds programs to support those sources.

Meetings

The bill also requires the DEEP commissioner to hold various meetings and meet certain procedural steps before and during the proceeding. It requires him to convene a public scoping meeting with interested stakeholders to determine (1) the types of Class I and Class III sources to evaluate in the proceeding, (2) the proceeding's scope, and (3) any other issues the commissioner deems relevant. Within 30 days after the public scoping meeting, the commissioner must conduct at least one public meeting and one technical meeting where technical personnel must be available to answer questions.

The commissioner must publish a notice of any public, scoping, or technical meeting at least 15 days in advance. The notice must include the meeting's date, time, location, and the time period for public comment. The testimony, public comments, and exhibits made at the proceeding and meetings must be transcribed and made available on DEEP's website.

Proposed Recommendations

The bill requires the commissioner to make proposed recommendations available for public comment within 60 days after the public or technical meeting, whichever is later. The recommendations must be available for at least 30 days after they are issued. The commissioner must fully consider all oral and written public comments on the proposed valuation methodology for Class I or III sources before issuing a final valuation methodology.

Final Valuation and EDC Tariffs

Once the proceeding concludes, the bill requires the commissioner to (1) establish a final valuation methodology, including provisions for how the methodology must be updated over time to account for changed market conditions and (2) recommend any changes to ratemaking mechanisms and other programs supporting Class I or Class III sources that would credit their owners for their net value. The bill allows the commissioner to update the final valuation methodology as needed to reflect changed market conditions.

Within six months after the proceeding, the commissioner must submit a report on the valuation methodology and recommendations to the Energy and Technology Committee.

6 – DEMAND RESPONSE RESOURCE PLAN

The bill allows the DEEP commissioner to direct each EDC to submit an active demand response resource plan for procuring active demand response resources that can reduce generation service charges or other electric service charges through tariffs (e.g., paying customers to reduce usage during peak demand times so that peak generation charges are reduced for all customers). DEEP must review each plan and can approve, modify, or reject it. If DEEP approves a plan, the EDC must apply to PURA for a tariff under it. DEEP can require each EDC to submit additional plans as need to reduce generation service charges. Each EDC's costs of complying with these requirements must be recoverable through a fully reconciling electric rate component for all EDC customers.

The bill requires DEEP, by July 1, 2017, to submit a report on the approved plans to the Energy and Technology Committee.

7 – CLASS I REGISTRATION NUMBERS

The bill requires PURA to issue registration numbers to electric generators that are eligible Class I renewable energy sources that derive their electricity from solar or wind power or a fuel cell. The facility's owner must register with PURA using a self-certification process that PURA prescribes. Under the bill, willfully making a false self-certification is a class D felony, punishable by up to five years in prison, a fine of up to $5,000, or both. The owner must also sign a statement under oath that the owner complied with the requirements and criteria for issuing a Class I registration number. PURA may revoke a registration for failure to comply.

8 – MICROGRIDS

The bill expands the purposes for which loans from DEEP's Microgrid Grant and Loan Pilot Program can be used. By law, a “microgrid” is a group of interconnected electricity users and generators that (1) is within clearly defined boundaries that acts as a single controllable entity in respect to the larger grid and (2) can operate as either a part of the grid or independent of it (e.g., a fuel cell that powers a hospital but can also power a nearby municipal center during a power outage).

Current law limits grants and loans from the program to paying for a microgrid's design, engineering, and interconnection infrastructure costs. The bill also allows the program to provide matching funds or low interest loans for a microgrid's new generation, energy storage systems, or both. Any new generation funded through the program must be a Class I renewable energy source, Class III energy source, or a gas micro-turbine with an energy efficiency factor of at least 40.

9, 11 – VIRTUAL NET METERING

In general, virtual net metering allows certain customers with virtual net metering facilities (e.g., solar panels) to (1) receive billing credits for any excess electricity their facility produces and (2) assign any excess billing credits to reduce the electric costs at other designated meters. Current law allows virtual net metering customers to aggregate all of the electric meters billable to them. The bill requires such aggregated meters to be located on the same parcel or property as the customer's virtual net metering facility.

The bill also broadens eligibility for virtual net metering by allowing agricultural customers that lease or have a long-term contract for an agricultural virtual net metering facility to participate. Current law limits participation to agricultural customers who own a system.

10 – NATURAL GAS EXPANSION PROPERTY TAX ABATEMENT

The bill allows municipalities, by a vote of their legislative bodies or, if the legislative body is a town meeting, their boards of selectmen, to abate up to 100% of a gas company's annual personal property taxes to facilitate natural gas expansion projects. The municipality can abate the taxes for up to 25 tax years. The gas company must include the abatement when calculating the hurdle rate for gas expansion projects within the municipality.

In general, when a gas company seeks to expand its distribution system, the “hurdle rate” refers to the amount of projected new distribution revenues needed over a 25-year period to pay for the expansion. If the expansion will not pay for itself in this period, the new customers served by the expansion must pay for the shortfall through an additional contribution-in-aid-of-construction (CIAC) charge. (Presumably, including a property tax abatement in a hurdle rate calculation will lower the hurdle rate and thus decrease the (1) likelihood that new customers must pay a CIAC or (2) amount of the CIAC, if applicable.)

EFFECTIVE DATE: July 1, 2015 and applicable to assessment years commencing on or after October 1, 2015.

12 – HEATING ASSISTANCE PROGRAMS

The bill requires the Low-Income Energy Advisory Board to recommend ways to improve the implementation of heating assistance programs, particularly those created to benefit low-income households, by coordinating and optimizing existing energy efficiency and assistance programs. The recommendations must consider:

1. how DEEP, the Department of Social Services, community action agencies, EDCs, and municipal electric companies can securely share (a) heating assistance program applicant data on customer energy usage levels, past participation, and eligibility for energy assistance and efficiency programs, and (b) other data relevant to improving coordination between the programs and their administrators;

2. current energy assistance and efficiency programs' costs and benefits and how to maximize customer benefits through their participation in any combination of the programs;

3. how to streamline the program's application process and possibly develop joint electronic applications;

4. how to make the programs more accessible and feasible for renters, including how to best secure landlord permission; and

5. coordinating efforts to best improve boiler and furnace replacement programs.

The board must report its recommendations to the Appropriations, Energy and Technology, and Human Services committees by January 1, 2016.

EFFECTIVE DATE: October 1, 2015

13 – PURA QUORUM

The bill allows PURA commissioners to privately confer or communicate with each other about matters before PURA without invoking the Freedom of Information Act's (FOIA) requirements for public meetings.

By law, these requirements are invoked whenever a quorum of a public agency discusses a matter before it. However, because PURA has only three commissioners, any discussion between two commissioners about a matter could be considered a quorum and thus invoke various FOIA requirements. The bill exempts any conference or communication between PURA commissioners from being considered a meeting under FOIA if it does not occur before the public at a hearing or proceeding.

EFFECTIVE DATE: Upon passage

14 – WEATHERIZATION PROGRAM

The bill requires the DEEP commissioner to administer a federally-funded weatherization assistance program (which he does under current practice). The program must provide, within available appropriations, weatherization assistance in accordance with the provisions of the state plan implementing the federal weatherization and fuel assistance programs.

EFFECTIVE DATE: Upon passage

17 – CLASS I PROPERTY TAX ABATEMENT

The law requires the DEEP commissioner, under certain conditions, to solicit proposals from Class I renewable energy sources built on or after January 1, 2013. If a proposal meets certain conditions, the commissioner can require an EDC to enter into a PURA-approved power purchase agreement with the proposal's Class I facility.

For assessment years starting on and after October 1, 2015, the bill allows municipalities to abate up to 100% of the property taxes due for any tax year for any Class I renewable energy source subject to one of these power purchase agreements. The abatement (1) cannot be for longer than the power purchase agreement's term and (2) must be approved by vote of the municipality's legislative body, or if the legislative body is a town meeting, by a vote of its board of selectmen.

EFFECTIVE DATE: Upon passage

18-21 – ELECTRIC VEHICLES

The bill requires PURA to implement electric vehicle (EV) time of day rates for residential electric customers by June 1, 2016. Under the bill, an EV is one which (1) is powered by electricity stored in batteries or generated on-board the vehicle and (2) complies with federal safety requirements for driving on limited access highways. Time of day rates are an electric utility rate class designed to reflect the cost of providing electricity at different times of the day (e.g., rates are higher at 3pm and lower at 2am).

The bill requires each EDC to integrate EV charging load projections into its distribution planning. The projections must include available information on the number of EVs registered in the state and changes in their projected sales. Starting by January 1, 2016, each EDC must annually publish on its website information explaining how it incorporated its EV charging load projections in its distribution planning.

It also requires the state's integrated resource plan (IRP) to (1) analyze the potential for EVs to provide energy storage and other services to the electric grid and (2) ensure the grid is prepared to support increased EV charging based on projected EV sales. By law, DEEP, in consultation with the EDCs, develops the IRP every two years by reviewing the state's energy capacity and needs and developing a plan for procuring various energy resources (CGS 16a-3a).

EFFECTIVE DATE: October 1, 2015

22 – PURA STUDY ON EXPIRING RETAIL SUPPLIER CONTRACTS

SB 573, as amended and passed by the General Assembly, among other things, requires PURA to develop recommendations and guidance about what generation service rate increases are just and reasonable for residential customers who allow a fixed contract with a retail electricity supplier to expire and begin paying the supplier a month-to-month rate. The bill instead requires PURA's recommendations and guidance to be about what changes customers in these circumstances experience regarding their rates and the terms and conditions of their service.

EFFECTIVE DATE: Upon passage

23 – TEST BED PROGRAM

Under current law, the State Agency Energy Efficiency or Renewable Energy Technology Test Program allows the DEEP commissioner to direct state agencies to test technologies, products, or processes (“test subjects”) that (1) he finds would promote energy conservation, efficiency, or renewable energy technology and (2) meet certain other standards. Acquisitions under the testing program are not considered purchases under the state procurement law and are thus exempt from certain competitive bidding requirements.

The bill requires the commissioner to administer pilot test programs at state agencies for test subjects that meet the program's criteria and fulfill its purposes. Applicants interested in participating in the programs must submit an application to the commissioner on forms he prescribes. The bill requires the commissioner to (1) review an application for sufficiency within 30 days and (2) determine whether the application meets the program's requirements within 90 days after receiving the application.

The bill also allows another agency's commissioner to request the DEEP commissioner's approval to test a test subject that the other commissioner identifies (1) on his or her own or (2) as a test subject that has been procured, installed, and tested in a municipality and meets the program's requirements. The DEEP commissioner must evaluate the test subject and approve or disapprove the other commissioner's request within 30 days after receiving it. An agency that is directed or approved to test a test subject must use it in its operations on a trial basis as prescribed by the DEEP commissioner.

EFFECTIVE DATE: October 1, 2015

24 – MUNICIPAL UTILITY SECURITY DEPOSITS

The bill allows customers of municipal gas or electric utility companies to pay their required security deposits by cash, letter of credit, or surety bond.

It also allows municipal electric companies that are members of a municipal electric energy cooperative to return half of a nonresidential customer's security deposit if the customer's account remains in good standing for two years. (Currently, Wallingford's electric company is the only one of the state's six municipal electric companies that is not a member of the Connecticut Municipal Electric Energy Cooperative.)

EFFECTIVE DATE: October 1, 2015

COMMITTEE ACTION

Energy and Technology Committee

Joint Favorable Substitute

Yea

21

Nay

2

(03/24/2015)