PA 17-227—HB 6304 (VETOED)

Energy and Technology Committee

Appropriations Committee

AN ACT CONCERNING THE USE OF COMBINED HEAT AND POWER AND DISTRICT HEATING SYSTEMS AND REQUIRING A STUDY OF THE VIABILITY OF NEW DISTRICT HEATING NETWORKS IN THE STATE AS PART OF THE COMPREHENSIVE ENERGY STRATEGY

SUMMARY: This act creates a process through which the electric distribution company that serves Bridgeport (i.e., United Illuminating (UI)) can own and operate a combined heat and power (CHP) system that supplies thermal heat to Bridgeport's district heating company (i.e., the thermal energy transportation company authorized to provide thermal energy in Bridgeport through a district heating system). Under the act, a CHP system is a system that produces, from a single source, electric power and thermal energy that is used in processes that result in an aggregate reduction in electricity use. In general, a district heating system is a network of pipes that carries thermal energy from a central facility to other client buildings. (Thus, under the act, Bridgeport's district heating company would deliver the waste heat generated by UI's CHP system to client buildings connected to the district heating system.)

If UI decides to proceed with such a project, it must follow certain procedures, such as conducting a competitive bidding process to procure a CHP system and submitting a proposal to build the system to the Public Utilities Regulatory Authority (PURA) for review and approval by September 1, 2017.

Once the system is built, the act requires UI to deliver the following benefits generated by the system to the district heating company at no cost: (1) the total thermal energy generated by the unit; (2) all capacity payments received for the unit; and (3) any other attributes, including the environmental attributes (e.g., renewable energy credits (RECs)), associated with the electricity generated by the unit.

Under the act, UI may recover up to the full costs of the system and sell the electricity generated by it, as long as the costs are netted against the net proceeds and credited or charged to UI's ratepayers through the non-bypassable federally mandated congestion charge on their electric bills.

The act also (1) allows a municipality, by vote of its legislative body, to abate all or a portion of the property tax for a property on which the CHP unit is constructed and (2) requires a study on the viability of new district heating networks in the state.

Lastly, the act requires future Comprehensive Energy Strategies (CES) to include a study on the viability of new district heating networks in the state, including recommendations for financing them. By law the commissioner must prepare a CES every three years, with the most recent one due by October 1, 2016. The act's requirement applies beginning with the CES due by October 1, 2019.

EFFECTIVE DATE: Upon passage, except the requirement regarding the CES is effective October 1, 2017.

PROPOSAL AND APPROVAL

The act allows UI to build, own, operate, and maintain a CHP system in Bridgeport that has a nameplate (generating) capacity rating up to 10 megawatts and may include fuel cells. If UI decides to proceed, it must conduct a competitive bidding process to procure a system from a manufacturer. The system must be configured for use with a district heating system and installed at a location that will maximize the efficient use of the system's thermal energy by Bridgeport's district heating company.

In addition, UI must:

1. submit a proposal to PURA to build the system by September 1, 2017;

2. before starting construction, enter into a thermal energy supply agreement with the district heating company, either directly or through the company's parent company, subsidiary, or affiliate, to deliver thermal energy;

3. install and operate a metering system for the system; and

4. ensure that the system achieves commercial operation within 16 months after it enters into the agreement with the district heating company.

PURA must evaluate any proposal it receives and approve it if it finds that the generating unit complies with the above requirements and serves the “long-term interests of ratepayers.” Under the act, this means that the unit's capital cost to ratepayers, as determined by the competitive bidding process' results, do not exceed the capital cost to ratepayers of the PURA-approved UI fuel cell project in Bridgeport. The act prohibits PURA from approving any unit that is cross subsidized in any form by UI–affiliated entities. Under the act, if UI and the district heating company do not come to an agreement within two years after PURA's approval, the approval is deemed rescinded.

COST RECOVERY

The act prohibits UI from recovering more than the full costs of the CHP system, as approved by PURA. UI may sell or dispose of the electricity generated from the system as long as it nets the costs of payments against the proceeds from the sale and credits or charges the difference to its electric ratepayers. The cost calculation must take into account the investment; depreciable life; property taxes, including any abatements or exemptions; operation and maintenance costs; and debt and equity return on investment as determined by PURA. The net cost or revenue must be credited or charged to UI's ratepayers through the non-bypassable federally mandated congestion charge on ratepayer bills.

OTHER REQUIREMENTS

The act requires the district heating company, with UI's assistance, to (1) register the CHP system as a renewable energy source with PURA, (2) register any RECs in the New England Power Pool Generation Information System, and (3) certify how many RECs are generated by the CHP system based on the metering system installed and operated by UI.

It also requires any thermal service supply agreement between a customer and the district heating company or its parent, subsidiary, or affiliate to contain commercial and economic provisions sufficient to meet the customer's thermal energy needs, as mutually agreed to by the parties.

One year after any generating unit becomes operational, and every two years after that, the commissioner (presumably of the Department of Energy and Environmental Protection) must ask the district heating company to provide any data or information he needs to write a report, in accordance with the state's Freedom of Information Act, on the viability of new district heating networks in the state. The company must provide all requested information within 30 days of the request. Within 60 days of receiving the information, the commissioner must provide the report to the Energy and Technology Committee.

BACKGROUND

Related Act

PA 17-144 allows electric distribution companies (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 to build, own, and operate new fuel cell generation; and (3) provide financial incentives to install fuel cell-powered combined heat and power systems.