January Session, 2015
House of Representatives, April 8, 2015
The Committee on Energy and Technology reported through REP. REED of the 102nd Dist., Chairperson of the Committee on the part of the House, that the bill ought to pass.
Be it enacted by the Senate and House of Representatives in General Assembly convened:
Section 1. Section 16-245ff of the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage):
(a) As used in this section and section 16-245gg, as amended by this act:
(1) "Performance-based incentive" means an incentive paid out on a per kilowatt-hour basis.
(2) "Expected performance-based buydown" means an incentive paid out as a one-time upfront incentive based on expected system performance.
(3) "Qualifying residential solar photovoltaic system" means a solar photovoltaic project that receives funding from the Connecticut Green Bank, is certified by the authority as a Class I renewable energy source, as defined in subdivision (20) of subsection (a) of section 16-1, emits no pollutants, is less than twenty kilowatts in size, is located on the customer-side of the revenue meter of one-to-four family homes and serves the distribution system of an electric distribution company.
(4) "Solar home renewable energy credit" means a renewable energy credit created by the production of one megawatt hour of electricity generated by one or more qualifying residential solar photovoltaic systems with an approved incentive from the Connecticut Green Bank on or after January 1, 2015.
[(a)] (b) The Connecticut Green Bank established pursuant to section 16-245n shall structure and implement a residential solar investment program established pursuant to this section, which shall result in a minimum of [thirty] three hundred megawatts of new residential solar photovoltaic installations located in this state on or before December 31, 2022, the [annual] procurement and cost of which shall be determined by the bank [and the cost of which shall not exceed one-third of the total surcharge collected annually pursuant to said] in accordance with this section. [16-245n.]
[(b)] (c) The Connecticut Green Bank shall offer direct financial incentives, in the form of performance-based incentives or expected performance-based buydowns, for the purchase or lease of qualifying residential solar photovoltaic systems. [For the purposes of this section, "performance-based incentives" means incentives paid out on a per kilowatt-hour basis, and "expected performance-based buydowns" means incentives paid out as a one-time upfront incentive based on expected system performance.] The bank shall consider willingness to pay studies and verified solar photovoltaic system characteristics, such as operational efficiency, size, location, shading and orientation, when determining the type and amount of incentive. [Notwithstanding the provisions of subdivision (1) of subsection (h) of section 16-244c, the amount of renewable energy produced from Class I renewable energy sources receiving tariff payments or included in utility rates under this section shall be applied to reduce the electric distribution company's Class I renewable energy source portfolio standard. Customers who receive expected performance-based buydowns under this section shall not be eligible for a credit pursuant to section 16-243h.]
[(c)] (d) [Beginning with the comprehensive plan covering the period from July 1, 2011, to June 30, 2013, the] The Connecticut Green Bank shall develop and publish [in each such plan] on its Internet web site a proposed schedule for the offering of performance-based incentives or expected performance-based buydowns over the duration of any such solar incentive program. Such schedule shall: (1) Provide for a series of solar capacity blocks the combined total of which shall be a minimum of [thirty] three hundred megawatts and projected incentive levels for each such block; (2) provide incentives that are sufficient to [meet reasonable payback expectations of] provide the residential consumer with a competitive electricity price, taking into consideration the estimated cost of residential solar installations, the value of the energy offset by the system, the cost of financing the system, and the availability and estimated value of other incentives, including, but not limited to, federal and state tax incentives and revenues from the sale of solar home renewable energy credits; (3) provide incentives that decline over time and will foster the sustained, orderly development of a state-based solar industry; (4) automatically adjust to the next block once the board has issued reservations for financial incentives provided pursuant to this section from the board fully committing the target solar capacity and available incentives in that block; and (5) provide comparable economic incentives for the purchase or lease of qualifying residential solar photovoltaic systems. The [bank] Connecticut Green Bank may retain the services of a third-party entity with expertise in the area of solar energy program design to assist in the development of the incentive schedule or schedules. [The Department of Energy and Environmental Protection shall review and approve such schedule.] Nothing in this subsection shall restrict the [bank] Connecticut Green Bank from modifying the approved incentive schedule [before the issuance of its next comprehensive plan] to account for changes in federal or state law or regulation or developments in the solar market when such changes would affect the expected return on investment for a typical residential solar photovoltaic system by twenty per cent or more.
[(d)] (e) The Connecticut Green Bank shall establish and periodically update program guidelines, including, but not limited to, requirements for systems and program participants related to: (1) Eligibility criteria; (2) standards for deployment of energy efficient equipment or building practices as a condition for receiving incentive funding; (3) procedures to provide reasonable assurance that such reservations are made and incentives are paid out only to qualifying residential solar photovoltaic systems demonstrating a high likelihood of being installed and operated as indicated in application materials; and (4) reasonable protocols for the measurement and verification of energy production.
[(e)] (f) The Connecticut Green Bank shall maintain on its Internet web site the schedule of incentives, solar capacity remaining in the current block and available funding and incentive estimators.
[(f)] (g) Funding for the residential performance-based incentive program and expected performance-based buydowns [shall be apportioned from] (1) may include up to one-third of the moneys collected annually under the surcharge specified in section 16-245n; [, provided such apportionment shall not exceed one-third of the total surcharge collected annually,] (2) may include revenue from the solar home renewable energy credit program; and (3) may be supplemented by federal funding as may become available.
[(g)] (h) The Connecticut Green Bank shall identify barriers to the development of a permanent Connecticut-based solar workforce and shall make provision for comprehensive training, accreditation and certification programs through institutions and individuals accredited and certified to national standards.
(i) The Public Utilities Regulatory Authority shall provide an additional incentive of up to five per cent of the then-applicable incentive provided pursuant to this section for the use of major system components manufactured or assembled in Connecticut, and another additional incentive of up to five per cent of the then-applicable incentive provided pursuant to this section for the use of major system components manufactured or assembled in a distressed municipality, as defined in section 32-9p, or a targeted investment community, as defined in section 32-222.
[(h)] (j) On or before January 1,  2017, and every two years thereafter for the duration of the program, the Connecticut Green Bank shall report to the joint standing committee of the General Assembly having cognizance of matters relating to energy on progress toward the goals identified in subsection [(a)] (b) of this section.
Sec. 2. Section 16-245gg of the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage):
[The Public Utilities Regulatory Authority shall provide an additional incentive of up to five per cent of the then-applicable incentive provided pursuant to section 16-245ff for the use of major system components manufactured or assembled in Connecticut, and another additional incentive of up to five per cent of the then-applicable incentive provided pursuant to section 16-245ff for the use of major system components manufactured or assembled in a distressed municipality, as defined in section 32-9p, or a targeted investment community, as defined in section 32-222.]
(a) Not later than one hundred eighty days after July 1, 2015, the Connecticut Green Bank shall negotiate and develop a master purchase agreement with each electric distribution company. Each such agreement shall have a term of fifteen years, and require the electric distribution company to purchase solar home renewable energy credits produced by qualifying residential solar photovoltaic systems.
(b) Solar home renewable energy credits shall be owned by the Connecticut Green Bank, until transferred to an electric distribution company pursuant to a master purchase agreement in accordance with subsection (a) of this section. A solar home renewable energy credit shall have an effective life covering the year of its production and the following calendar year. The obligation of the electric distribution companies to purchase solar home renewable energy credits pursuant to the master purchase agreement shall be apportioned to electric distribution companies based on their respective distribution system loads at the commencement of the master purchase agreement period, as determined by the authority.
(c) Notwithstanding subdivision (1) of subsection (h) of section 16-244c, an electric distribution company may retire the solar home renewable energy credits it procures through the master purchase agreement to satisfy its obligation pursuant to section 16-245a.
(d) To develop a master purchase agreement, the Connecticut Green Bank and an electric distribution company shall negotiate in good faith the final terms of the draft master purchase agreement. Thirty days after the date negotiations commence, either the Connecticut Green Bank or an electric distribution company may initiate a docket proceeding before the Public Utilities Regulatory Authority to resolve any outstanding issues pertaining to the master purchase agreement.
(e) Upon completion of negotiations on a master purchase agreement the Connecticut Green Bank and the electric distribution company shall not later than January 1, 2016, jointly file, with the authority, an application for approval of the agreement by the authority. No such master purchase agreement may become effective without approval of the authority. The authority shall hold an uncontested case, in accordance with the provisions of chapter 54, to approve, reject or modify an application for approval of the master purchase agreement.
(f) The purchase price of solar home renewable energy credits shall be determined by the Connecticut Green Bank and shall not exceed the lesser of the price of small zero-emission renewable energy credit projects for the preceding year or the alternative compliance payment pursuant to subsection (k) of section 16-245.
(g) Electric distribution companies shall be entitled to recover reasonable costs and fees prudently incurred while complying with the master purchase agreement through a reconciling component of electric rates as determined by the authority. Nothing in this section shall preclude the resale or other disposition of energy or associated renewable energy credits purchased by an electric distribution company, provided the electric distribution company shall net the cost of payments made to projects under the master purchase agreement against the proceeds of the sale of energy or renewable energy credits and the difference shall be credited or charged to electric distribution company customers through a reconciling component of electric rates as determined by the authority that is nonbypassable when switching electric suppliers.
This act shall take effect as follows and shall amend the following sections:
The following Fiscal Impact Statement and Bill Analysis are prepared for the benefit of the members of the General Assembly, solely for purposes of information, summarization and explanation and do not represent the intent of the General Assembly or either chamber thereof for any purpose. In general, fiscal impacts are based upon a variety of informational sources, including the analyst's professional knowledge. Whenever applicable, agency data is consulted as part of the analysis, however final products do not necessarily reflect an assessment from any specific department.
OFA Fiscal Note
The bill expands the Connecticut Green Bank's residential solar investment program. The Connecticut Green Bank is a quasi-public state agency which does not currently receive state funding. The program is not estimated to have a fiscal impact to the state or municipalities as ratepayers.
The Out Years
OLR Bill Analysis
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.
Energy and Technology Committee