OLR Bill Analysis

HB 7036

AN ACT PROMOTING THE USE OF FUEL CELLS FOR ELECTRIC DISTRIBUTION SYSTEM BENEFITS AND RELIABILITY.

SUMMARY

This bill allows electric distribution companies (EDCs, i.e., Eversource and United Illuminating), under certain conditions, to (1) build, own, and operate new fuel cell generation; (2) enter into power purchase agreements (PPAs) negotiated with people to build, own, and operate new fuel cell generation; and (3) provide financial incentives to install fuel cell-powered combined heat and power systems. The total nameplate (generating) capacity rating of these fuel cell projects cannot exceed 10 megawatts in the aggregate.

The bill requires the Public Utilities Regulatory Authority's (PURA) approval for an EDC's plans to acquire new fuel cell generation and any proposals subsequently received under an approved plan. PURA may approve the proposals if they meet certain criteria, such as serving ratepayers' long-term interests and cost effectively avoiding or deferring distribution system costs.

The bill also requires the net costs EDCs incur under the plan and proposals to be recovered from their ratepayers.

EFFECTIVE DATE: July 1, 2017

EDC FUEL CELL PLANS

The bill allows EDCs to submit to PURA one or more plans to acquire new fuel cell electricity generation that begins operating on or after July 1, 2017. The plans must use a competitive process to provide distribution system benefits, including (1) avoiding or deferring distribution capacity upgrades and (2) enhancing distribution system reliability, including voltage or frequency improvements. Plans must also give preference to proposals that efficiently use existing sites and supply infrastructure. (The bill does not specify a timeline or procedure for PURA to review and approve the plans.)

FUEL CELL PROPOSALS

Once PURA approves a plan, the bill allows an EDC to submit to PURA (1) one or more proposals to build, own, and operate new fuel cell generation; (2) proposed PPAs negotiated with people to build, own, and operate new fuel cell generation; or (3) proposals to provide financial incentives to install fuel cell-powered combined heat and power systems consistent with the state's Comprehensive Energy Strategy.

An EDC proposal to build, own, and operate a fuel cell must include the EDC's full projected costs and demonstrate that the facility is not supported in any form of cross subsidization by affiliated entities.

PURA must evaluate the proposals in a way that is consistent with its statutory principles for regulating utilities and setting rates. It may approve a proposal if it finds that it (1) was developed in a way that was consistent with the PURA-approved acquisition plan, (2) serves ratepayers' long-term interests, and (3) cost-effectively avoids or defers distribution system costs.

COST RECOVERY

The bill requires an EDC to recover the costs it incurs under the approved plan and proposals from all of its customers. It must do this through a fully reconciling rate component for all EDC customers, until its next rate case, after which the costs and investments must be recovered through the EDC's base distribution rates.

The bill allows an EDC to resell or dispose of any energy products, capacity, and associated environmental attributes (i.e., renewable energy credits) it purchases (presumably under an approved proposal). But, if it does so, it must net the proceeds from the sale or disposal against the cost of payments made to projects under any long-term contracts entered into under the bill's PPA provision. (It is unclear if the requirement to net proceeds would also apply to the costs of building and operating a fuel cell or providing fuel cell incentives.) The difference must be credited or charged to the EDC's customers through a reconciling rate component PURA determines. This rate component must be non-bypassable when switching electric suppliers.

The bill allows an EDC to use any energy products, capacity, and environmental attributes produced by a facility (presumably under an approved proposal) to meet the needs of its standard service customers. An EDC may also keep any renewable energy certificates issued by the New England Power Pool Generation Information System for any Class I renewable energy source acquired under the bill to meet its Renewable Portfolio Standard (RPS) requirements. (The RPS requires EDCs and electric suppliers to obtain a portion of their power from certain renewable energy sources.)

BACKGROUND

Related Bills

SB 106, reported favorably by the Energy and Technology Committee, allows EDCs to (1) enter into PPAs negotiated with people to build, own, and operate new fuel cell generation and (2) provide financial incentives for installing fuel cell-powered combined heat and power systems.

COMMITTEE ACTION

Energy and Technology Committee

Joint Favorable

Yea

24

Nay

0

(03/21/2017)