Energy and Technology Committee

JOINT FAVORABLE REPORT

Bill No.:

SB-1078

Title:

AN ACT CONCERNING AFFORDABLE AND RELIABLE ENERGY.

Vote Date:

3/24/2015

Vote Action:

Joint Favorable Substitute

PH Date:

3/17/2015

File No.:

SPONSORS OF BILL:

Energy and Technology Committee Bill

REASONS FOR BILL:

This bill contains the priorities of the Connecticut Department of Energy and Environmental Protection. It seeks to provide the agency with regulatory tools to procure affordable and reliable electricity through the expansion of natural gas capacity and procurement of additional renewable sources of energy on behalf of the state.

The substitute language for this bill strikes section one and two from the bill, and sub section (a) from subsection three removes the Energy and Technology Committee's role of cognizance over those participating in the RFP bid process. Also in section (b) of subsection four the best interest of ratepayers was added to insure that most appropriate price for the fuel being provided was met.

RESPONSE FROM ADMINISTRATION/AGENCY:

Testimony of Commissioner Rob Klee

Connecticut Department of Energy and Environmental Protection

This proposal, which they strongly support, would: extend the state's authority to direct the electric distribution companies to implement cost-effective active demand response programs within their service area and permit the electric distribution companies (EDCs) to recover the cost of such programs through retail rates; authorize DEEP to procure energy to meet the goals of the IRP; and authorize DEEP to help address the regional infrastructure constraint that is threatening the reliability and affordability of electricity in the New England region, by running a competitive procurement open to a broad range of resources (including LNG and gas pipeline capacity; transmission for large-scale hydropower or Class I renewables; and demand response, energy efficiency, and combined heat and power) that can cost-effectively resolve the New England region's gas infrastructure constraints, up to an amount that is proportional to Connecticut's share of regional electric demand.

NATURE AND SOURCES OF SUPPORT:

None provided

NATURE AND SOURCES OF OPPOSITION:

Testimony of Daniel W. Allegretti

On behalf of Exelon Corporation

Provided testimony in opposition of the bill. They believe that this bill places those decisions squarely in the hands of a state agency and will impose on every electric customer the costs of that agency's decisions for years to come without regard to the needs or preferences of the individual customer. It also lets energy companies, such as gas pipelines, power generators, transmission providers and renewable energy developers, off the hook for the risks but not the returns associated with their investments. This has been shown to lead uneconomic investments and stranded costs that have to be paid for by ratepayers and not investors. The cost of any wrong decisions made by the DEEP will be fully recovered under this bill from Connecticut ratepayers. That has the potential of placing Connecticut at a serious economic disadvantage to other states where investor bear the risks associated with their investments and consumers are free to buy from only the lowest cost providers.

Testimony of Jeff Bishop

On Behalf of Brookfield Renewable Energy Partners

Brookfield Renewable believes one of the best solutions available to meet the identified challenges combines new wind projects with existing hydro, and transporting this clean energy in to New England through new transmission lines. They feel this is the most cost effective way to improve capacity and reduce emissions across New England.

Their concern with this proposal stems from the limitation of wind and hydro participation. They feel the existing language contained in this bill places to much emphasis on large and vintage hydro energy not small hydro and wind combinations.

Testimony of Eric J. Brown

On behalf of Connecticut Business & Industry Association

CBIA is very concerned about the diminution of PURA involvement in the development and implementation of the Integrated Resource and Procurement Plans as envisioned under this bill. At best, section 3 makes the process more cumbersome and confusing. At worst, it takes much of the process away from the entity which conducts the most thorough and transparent analyses of these plans and associated proposals, and the entity most qualified to determine the cost impacts of all the decisions associated with these plans and proposals, and replaces PURA with a legislative committee and a state agency – neither of which have the resources to conduct the same degree of rigorous review nor necessarily be as highly focused on assessing ratepayer impacts. Those impacts, in their view, need to be paramount at this time when Connecticut's competitiveness continues to be threatened by our highest in the continental United States (and in some cases beyond) energy costs.

They also believe that large scale hydo should be omitted from section 4 of the bill.

Testimony of Dorothy Lovett Buckley

Testified in opposition to this bill. She feels that expansion of the natural presents a series of risks including the use of fracked gas as the primary source and has concerns with the potential for methane leaks creating poor air quality and other environmental issues. She believes that the relying on fossil fuels is no longer a viable option for energy production in the state.

Testimony of Dan Dolan

On behalf of New England Power Generators Association (NEPGA)

Testified in opposition to this bill. Specifically, they have concerns with providing the Department of Energy and Environmental Protection (DEEP) with broad authority to enter into long-term contracts and potentially funding natural gas pipeline in the region through Connecticut's electric distribution company (EDC) customers.

As a fuel neutral organization, NEPGA has several concerns with this proposed financing approach. As with any decision to endorse a specific technology with ratepayer financing there are concerns about over-building the system and unintended consequences that may result. As with comments made earlier regarding long-term contracts the history of the energy industry in New England is full of examples where picking winners and losers through a long-term financing arrangement has led to higher costs when certain market fundamentals shifts were not predicted. Further, by underwriting the delivery of additional natural gas, electric consumers will be subsidizing natural gas pipelines in the region to the detriment of technology sources that may be otherwise economic, and thereby undercutting the highly competitive marketplace. Financing natural gas expansion also creates a bias toward gas-fired generation resources, particularly those located near the targeted pipeline for expansion.

Testimony of William E. Dornbos

On behalf of the Acadia Center

Testified in opposition to this bill. They feel that the language of this bill specifically the request for proposal RFP language is not sufficiently grounded in the relevant statutory requirements of Connecticut energy law. They suggest procuring all cost-effective energy would be a better alternative. They go on to explain that the language in section four would allow the DEEP Commissioner to select proposals that meet the state's proportional share of regional energy load of natural gas and believe that this would effective allow the DEEP commissioner to effectively set the electric rates for the entire state through that procurement.

Finally they believe that section five allows the electric distribution companies to pursue cost recovery through electric rate cases for their procurement of new natural gas.

Testimony of Jerry Elmer

On behalf of the Conservation Law Foundation

Testified in opposition to this bill. They oppose the language in the bill that they believe allows subsidizing the expansion of the natural gas pipeline infrastructure utilizing rate payer funding. They believe that this bill re-inserts Connecticut into the gas and electric utility undermining the public policy of deregulation. They believe that already announced gas pipeline expansion projects throughout the region will increase capacity by near 25% without state intervention. They go on to state that during times of peak demand it's not an issue of natural gas capacity but the lack of firm transportation contracts. Finally they believe that the expansion of the pipeline will create a level of greenhouse gas emissions that are inconsistent with Connecticut's global warming strategies that reduce emissions levels to 80% below the 1990 levels by 2050.

Testimony of David Fenn

Testified in opposition to this bill. He wrote to express his concerns that the rate payers would be responsible for the cost of the expansion.

Testimony of Heather Ferris

Testified in opposition to this bill. She states that it is not in the taxpayers interest. She further states that the expanded gas line will use fracked gas and the cost of the expansion will be subsidized by rate payers. She feels his goes against Connecticut's environmental leadership.

Testimony of Stephen Gibelli

On behalf of Eversource Energy

Testified in opposition to this bill. They oppose the language in this bill for a number of reasons they believe that DEEP's costs for the third-party consultant will be recovered from electric distribution companies (“EDC”) through the regulatory assessments they are charged. The problem with that approach is that the regulatory assessment is collected in an electric distribution company's distribution rate. Because Eversource's electric distribution rate will not be changed until December 1, 2017 at the earliest, it has no mechanism through which to recover such unanticipated regulatory assessments that DEEP charges to Eversource in 2015, 2016 and 2017 that exceed the estimate of such assessments that are currently built into its electric distribution rate. For this reason, Eversource requests that Section 3(b)(4) be revised to allow recovery of an EDC's share of DEEP's costs for the third-party consultant through the non-bypassable federally mandated congestion charge.

They also made suggested changes to Section 4 of the bill. This section allows DEEP, the Office of Consumer Counsel, the Attorney General's office, and this committee the ability to go out an issue an RFP to meet the state's resource needs. This is a job that has been done by the utilities. It allows the state to issue an unlimited number of RFPs and order the utilities to enter into contracts which can negatively impact a utility's finances. The utilities have the obligation under law to meet the state's energy needs and we do that. There is no need for this legislation which will only unnecessarily increase costs for customers.

Testimony of Jim Ginnetti

On behalf of Equipower Resources Corp.

Testified in opposition to this bill. They believe the Committee should refocus the legislation to allow Connecticut EDCs to contract for new natural gas pipeline capacity as it is the most impactful way to lower electricity costs for consumers but to reject efforts to enter into long term contracts for provincially owned hydroelectricity, which will significantly increase consumer costs, adversely impact indigenous Connecticut and New England generation including tax revenues and jobs, and harm the competitive electricity markets in New England. They also urge the Committee to ensure that any contracts for pipeline capacity are sized solely based on the need for natural gas to support power generation, with ISO-NE oversight, in order to avoid anti-competitive impacts on the ISO-NE market.

Testimony of Christian Herb

On behalf of Connecticut Energy Marketers Association

Testified in opposition to this bill. They are opposed to these bills primarily because they believe it is another attempt to subsidize privately held corporations like Kinder Morgan through fees paid for by electric ratepayers. They believe this bill allows costs to be passed along to ratepayers with the promise that it will ultimately lower electric rates. They feel that the cost should be absorbed by the corporation responsible for the expansion of the pipeline.

Testimony of John Calandrelli

Submitted testimony in opposition to this bill. He feels that expansion of the natural gas pipeline presents a series of risks including the use of fracked gas as the primary source and has concerns with the potential for methane leaks creating poor air quality and other environmental issues.

Testimony of Amanda Kenyon

Submitted testimony in opposition to this bill. She feels that expansion of the natural gas pipeline presents a series of risks including the use of fracked gas as the primary source and has concerns with the potential for methane leaks creating poor air quality and other environmental issues. She believes that the state should focus on clean energy programs instead of fossil fuel programs.

Testimony of Joshua King

Submitted testimony in opposition to this bill. He believes that this bill will lead to increased ratepayers costs. He also expressed his concerns regarding the environmental impact of the pipeline expansion stating that the environmental impact of natural gas generates a 20% large foot print than coal when extraction efforts are considered.

Testimony of Martha Klein

Submitted testimony in opposition to this bill. She believes that this bill would lead to increased ratepayer costs and a large portion of the gas that the expanded pipeline would bring across the region will be converted to LNG and exported overseas. Finally she believes that expansion is an environmentally destructive project.

Testimony of Miriam Kurland

Submitted testimony in opposition to this bill. She believes that the focus should be on renewable energy not the expansion of natural gas. She also believes that this bill places the cost of the expansion on the ratepayers.

Testimony of Ben Martin

Submitted testimony in opposition to this bill. He believes this bill encourages fracked gas development and allows the gas industry to place the burden of cost on ratepayers. He believes that the focus should be on renewable energy sources, the risks of natural gas expansion exceed the benefits.

Testimony of Rev. David Nelson

Submitted testimony in opposition to this bill. He believes this bill forces the cost of expansion on ratepayers and feels that gas pipeline companies should pay for the expansion and modification themselves.

Testimony of Andrew Olson

Submitted testimony in opposition to this bill. He states that he supports the use of tax incentives to provide for the creation of new industry but once it is in place it is difficult to change. His concern is that the market for natural gas is rapidly inflating and the price of natural gas is expected to exceed that of renewables.

Testimony of Anupam Pertab

Submitted testimony in opposition to this bill. He believes that the expansion of the pipeline will create a health risk for the citizens of Connecticut with children being at the greatest risk.

Testimony of RENEW Northeast Inc.

Submitted testimony in opposition to this bill. While RENEW supports the concept in Section 4 of the bill that gives the Department of Energy and Environmental Protection authority to secure long-term contracts for energy in conjunction with the other states in the region to meet peak winter electricity needs and environmental and Renewable Portfolio Standard (“RPS”) goals. RENEW urges the criteria in section 4(b) of the bill be re-designed around a “renewables first” strategy to maximize the development of the Northeast's own renewable resources while minimizing the need for ratepayers to support new or upgraded natural gas pipeline capacity. Whether Connecticut should support incremental natural gas pipeline capacity, as proposed in sections 4 and 5 of the bill, should be determined only after careful consideration rather than a procurement mandate being placed into law at this time.

Testimony of James Root

Submitted testimony in opposition to this bill. He believes there needs to be a more comprehensive discussion regarding the expansion of the pipeline and Connecticut's energy future before the ratepayer is asked to subsidize the effort.

Testimony of Joseph Rose

On behalf of the Propane Association of New England

Testified in opposition to this bill. Stating that this particular bill proposes authorizing the Commissioner of DEEP who supervises PURA to become a purchasing agent by creating RFP's for long term pipeline transportation capacity. Once these proposals are received, reviewed and are consistent with the policies outlined in the Comprehensive Energy Strategy the Commissioner of DEEP may file an application with PURA for review and approval of the agreement. Again, PURA plays a subordinate role to the Commissioner so there is little chance for checks and balances.

Testimony of Tony Scaraggi

On behalf of GDF SUEZ Gas North America, Inc.

Testified in opposition to this bill. They believe that the energy markets have begun to correct the problem on their own. New, privately owned pipeline capacity is being proposed and constructed to help augment the system without government intervention. The cost of natural gas has not spiked this winter as it had in previous winters. And wholesale electricity costs have fallen over $2 billion year over year for the December to February period. All of this points to robust competitive markets that are adjusting to the current situation. In short, Connecticut does not need additional state subsidized infrastructure. Rather, Connecticut should take steps to maximize the current existing regional infrastructure and support the initiatives proposed by private investors to build the system up appropriately.

Testimony of April Fawn Scheller

Submitted testimony in opposition to this bill. She believes the risk of natural gas both to people's health and the environment exceed the benefits gained through expansion. She also points out that those risk outweigh the cost savings, she believes that the best way to address the increasing demand for energy is through renewable resources.

Testimony of Marge and David Schneider

Submitted testimony in opposition to this bill. They believe that the focus should be on long term low cost clean safe and dependable energy. They believe this bill would lead to increased ratepayer costs and a large portion of the gas that the expanded pipeline would bring across the region will be converted to LNG and exported overseas. They believe that the proposed natural gas pipeline for Connecticut is ill advised and lacks the ability to ensure low cost, clean, safe dependable energy.

Testimony of Carolyn Shaw

Submitted testimony in opposition to this bill. Shee believes that the expansion of the natural gas pipeline would lead to danger to human health and the climate, due to the release of methane gas and the potential for explosion.

Testimony of Jennifer Siskind

Submitted testimony in opposition to this bill. She believes that sections of SB 1078, in particular with regard to new gas pipeline expansions should be changed. She opposes state subsidies, electricity rate-payer and federally mandated congestion charge financing for new gas pipelines.

Reported by: Mark Severance

03/30/15