PA 15-107—sSB 1078

Energy and Technology Committee

AN ACT CONCERNING AFFORDABLE AND RELIABLE ENERGY

SUMMARY: This act allows the Department of Energy and Environmental Protection (DEEP) commissioner, in consultation with others, to solicit proposals from providers of energy and energy-related products and services and direct the electric companies to (1) enter into long-term agreements with these providers, subject to the Public Utility Regulatory Authority's (PURA) review and approval and (2) recover related costs and credit certain revenues, through a component of ratepayer electric bills. It specifies three categories for solicitations:

1. demand response measures and smaller renewable energy sources;

2. larger renewable energy sources and hydropower; and

3. natural gas resources.

It also allows the commissioner to seek proposals for energy storage, Class II renewable energy sources (see BACKGROUND), and existing hydropower in certain circumstances.

The act allows the commissioner to hire consultants to help evaluate proposals. If he finds proposals to be in the ratepayers' best interests, he may select one or more of them and direct the electric companies to enter into long-term contracts with energy providers. The act allows DEEP to recover from ratepayers certain costs associated with consultants and other reasonable costs associated with its solicitation and evaluation of proposals.

The act limits (1) all contract terms to 20 years; (2) selected proposals for demand response, renewable resources, and hydropower, in the aggregate, to 10% of the total load served by the state's electric companies; and (3) the total aggregate capacity of selected contracts.

EFFECTIVE DATE: Upon passage

RESOURCE TYPES

The act allows the DEEP commissioner to solicit proposals for multiple long-term contracts to (1) secure cost effective resources to provide more reliable electric service for the state's electric ratepayers and (2) meet goals and policies established in the state's integrated resources plan (IRP) and comprehensive energy strategy (CES). It establishes three categories and specifies the types of proposals that the commissioner must solicit in each category.

Demand Response Measures and Small Renewable Sources

For solicitations for demand response measures and smaller renewable resources, the commissioner must seek proposals for (1) Class I renewable energy sources (e. g. , solar or wind power) and Class III source projects (e. g. , combined heat and power) with a capacity between two and 20 megawatts and (2) passive demand response measures capable of reducing electric demand by at least one megawatt, including energy efficiency, load management, and the state's conservation and load management programs. The act requires electric companies to consult with the Energy Conservation Management Board (i. e. , the Energy Efficiency Board) to assess the feasibility of submitting a proposal for passive demand response measures that are in addition to existing and projected demand reductions obtained through the conservation and load management programs.

The act allows the commissioner to also seek proposals for energy storage systems of up to 20 megawatts. Under the act, “an energy storage system” is any commercially available technology capable of absorbing energy and storing it for a period of time before dispatching it. It must be capable of:

1. using mechanical, chemical, or thermal processes to store electricity generated at one time for use at a later time;

2. storing thermal energy for direct use for heating or cooling at a later time, avoiding the need to use electricity;

3. using mechanical, chemical, or thermal processes to store electricity generated from renewable energy sources for use at a later time; or

4. using mechanical, chemical, or thermal processes to capture waste electricity generated from mechanical processes and store it for delivery at a later time.

Large Renewable Energy Sources and Hydropower

For solicitations for large renewable energy sources and hydropower, the commissioner must seek proposals for (1) Class I renewable energy sources with capacity of at least 20 megawatts and (2) verifiable large-scale hydropower. These proposals must include associated transmission (i. e. , use of high-voltage lines to carry electricity from where it is generated to local substations).

The act also allows him to seek proposals for energy storage systems of at least 20 megawatts. He may also seek proposals for Class II renewable energy sources and certain existing hydropower resources to balance the delivery of Class I renewable energy sources (which may be intermittent) and improve the economic viability of such proposals. Existing hydropower resources used for this purpose must not be considered large-scale, Class I, or Class II. Class II renewable energy sources and hydropower resources must be interconnected to associated transmission and either be (1) located in the control area of the regional independent system operator (generally, New England) or (2) imported from an adjacent regional independent system operator's control area.

Natural Gas Resources

For natural gas resources, the commissioner must solicit proposals for:

1. interstate natural gas transportation capacity,

2. liquefied natural gas,

3. liquefied natural gas storage,

4. natural gas storage, or

5. any combination of such resources.

Such proposals must provide incremental capacity, gas, or storage with a firm delivery capability to transport natural gas to natural gas-fired generating facilities located in the control area of the regional independent system operator.

SOLICITATION PROCESS

Issuance and Evaluation

DEEP must consult with (1) PURA's procurement manager, (2) the Office of Consumer Council, and (3) the attorney general when soliciting proposals and evaluating any proposals it receives. It may issue solicitations on behalf of Connecticut alone or in coordination with other New England states.

The commissioner must base the evaluation on factors including:

1. reliability improvements to the electric system, including during peak demand;

2. whether the proposal's benefits outweigh the cost to ratepayers;

3. fuel diversity;

4. the extent to which the proposal meets requirements to reduce greenhouse gas emissions and improve air quality, including the state's renewable portfolio standard;

5. the ratepayers' best interests; and

6. alignment with IRP and CES policy goals, including environmental impact.

DEEP (1) must compare a proposal's costs and benefits to those of other resources eligible to respond to DEEP's solicitations authorized under the act and (2) may also consider economic benefits to the state.

The act allows the commissioner to hire consultants with expertise in (1) quantitative modeling of electric and gas markets and (2) physical gas and electric system modeling, as applicable, to assist with solicitations, including proposal evaluation. Under the act, DEEP may recover reasonable costs of up to $1. 5 million associated with solicitation and evaluation process through the non-bypassable federally mandated congestion charge, even if DEEP selects no proposals. Federally mandated congestion charges are generally collected on electricity bills to cover certain costs approved by the Federal Energy Regulatory Commission (FERC) and other costs approved by PURA. Customers must pay non-bypassable charges regardless of whether they choose a retail energy supplier, as these charges are considered reliability related.

Selection and Approval

If the commissioner finds proposals authorized by the act to be in ratepayers' best interests, he may select one or more proposals and direct the electric companies to enter into long-term contracts with the selected providers. Under the act, the contracts may be for:

1. passive demand response measures,

2. electricity,

3. electric capacity,

4. environmental attributes,

5. interstate natural gas transportation capacity,

6. liquefied natural gas,

7. liquefied natural gas storage,

8. natural gas storage,

9. energy storage, or

10. any combination of such measures.

The act limits the total aggregate capacity of the selected contracts to 375 million cubic feet per day of natural gas capacity or the equivalent megawatts of any combination of electricity and electric demand reduction. (The conversion rate of cubic feet per day to megawatts is unclear. ) The act also limits selected proposals for demand response, renewable resources, and hydropower, in the aggregate, to 10% of the total load served by the state's electric companies.

Under the act, PURA must review and approve any agreement entered into as a result of a proposal. Electric companies must file an application with PURA for approval of any agreement, and PURA must approve it if it is cost effective and in electric ratepayers' best interests. If PURA does not issue a decision within 90 days, the agreement is deemed approved.

The electric companies must recover certain costs from ratepayers and credit ratepayers for certain revenue. Specifically, they must, through a fully reconciling component of electric rates for all the electric company's customers, (1) recover net costs on a timely basis, including costs incurred under the agreement and reasonable costs incurred in connection with the agreement, and (2) credit customers for any net revenue from the sale of products purchased in accordance with long-term contracts authorized by the act. The act allows the electric companies to contract with a gas supply manager to sell natural gas products procured as a result of long-term contracts into the wholesale energy markets at the best available rates and in compliance with FERC regulations.

RENEWABLE ENERGY CERTIFICATES

The act allows electric companies to sell any renewable energy certificates (REC) for any Class I renewable energy sources or Class III sources procured through solicitations authorized by the act to suppliers or other electric companies in the New England Power Pool Generation Information System renewable energy credit market so that these suppliers or companies may meet the state's renewable portfolio requirement. The electric company must credit the revenue of any REC sales to its customers. The act also allows the electric companies to retain such RECs to meet renewable portfolio requirements. The act requires the electric companies to choose whether to sell or retain RECs based on the best interests of the company's ratepayers.

BACKGROUND

Class II Renewable Energy Sources

By law, Class II renewable energy sources include energy derived from (1) trash-to-energy facilities, (2) certain biomass facilities, and (3) certain hydropower facilities not included as Class I resources and with a capacity of up to five megawatts (CGS 16-1(a)(21)).

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