Connecticut

Summary Connecticut's electric distribution companies (Connecticut Light and Power and United Illuminating Company), natural gas investor-owned utilities (Connecticut Natural Gas Corporation, Southern Connecticut Gas Company, and Yankee Gas Services Company), and municipal electric companies provide portfolios of energy efficiency programs to their customers.   The Energy Conservation Management Board (ECMB), which is appointed by the Department of Public Utility Control (DPUC), is responsible for approving the natural gas and electric distribution companies’ plans. Both electric and natural gas programs are required by legislation (cited in the Links section below). The ECMB administers the Connecticut Energy Efficiency Fund (CEEF), which is primarily supported by monthly charges on customers' bills.  The utilities administer the energy efficiency programs. The utilities and contractors hired by the utilities implement the programs. In 2007, the Connecticut legislature enacted a law that builds on the state's strong record of electric energy efficiency program accomplishments to take these programs to a higher level of savings and success. Public Act 07-242, An Act Concerning Electricity and Energy Efficiency, places new requirements for energy efficiency and establishes new regulatory mechanisms, such as electric and natural gas decoupling, to support achievement of these goals. The Act requires the electric distribution utilities to procure all cost-effective energy efficiency as their first-priority resource. Connecticut has performance incentives in place to encourage and reward the electric and natural gas utilities for successfully reaching performance targets. Connecticut also has established overall energy efficiency resource standards to drive programs to higher levels of savings. According to the Energy Information Administration, Connecticut utilities spent $95.7 million on energy efficiency in 2007, saving 371,899 MWh.

Electric distribution utilities, natural gas companies, and municipal electric utilities are required by Connecticut statute to provide "conservation and load management" (C&LM) programs for their customers. The Energy Conservation Management Board works with the utilities to develop their energy efficiency plans. The natural gas and electric distribution companies’ plans are subject to review and approval by the Department of Public Utility Control. All programs included in the plans are required to pass a benefit-cost test. The DPUC oversees the electric distribution utility and natural gas utility programs. The ECMB, appointed by the DPUC, administers the Connecticut Energy Efficiency Fund.  The utilities administer the energy efficiency programs. The utilities and contractors hired by the utilities implement the programs.
 
Each year, the ECMB meets to review and approve the energy efficiency program plans. These are formal, uncontested hearings. Board consultants work with the utilities on developing their plans. The utilities set goals (savings and other program metrics) for program results in conjunction with these hearings.
 
The ECMB and the CEEF were established in 1998 through the state’s electric utility restructuring legislation, Public Act 98–28, An Act Concerning Energy Independence, Connecticut General Statute §16-245m. The 1998 Act required electric companies to offer efficiency programs. CEEF expenditures for electric efficiency programs have steadily grown through the years. In 2007, electric energy efficiency expenditures were approximately $98.2 million.
 
In 2005, Public Act 05-1, An Act Concerning Energy Independence (Connecticut General Statute §16-32f  and Connecticut General Statute §7-233y), required the investor-owned natural gas companies to submit energy efficiency program plans to the DPUC and required the municipal electric companies and the Connecticut Fuel Oil Conservation Board to work with the ECMB to develop energy efficiency programs for their customers. 2008 natural gas efficiency program expenditures were approximately $5.6 million.
 
According to the Energy Information Administration, Connecticut utilities reported efficiency program savings of 371,899 MWh in 2007, 1.35% of retail sales.

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Connecticut’s electric energy efficiency programs are supported by a monthly system benefits charge (approximately 0.3 cents/kWh for “conservation and load management”) on customers' electric bills.  This charge is listed as a separate line item with several other public benefits fees.  Electric Connecticut Energy Efficiency Fund programs are also funded through the ISO-New England Forward Capacity Market (FCM).  Demand savings resulting from CEEF programs were enrolled into the FCM as other demand resources (ODR) capacity. This produced $2.5 million in revenues for program funding in 2007.  CEEF will also be supplemented with funds from Class III Renewable Energy Credits (REC) for energy efficiency and the Regional Greenhouse Gas Initiative (RGGI). Total expenditures on electric energy efficiency programs (not including load management) in 2007 were $98.2 million. According to the Energy Information Administration, Connecticut utilities spent $95.7 million on energy efficiency in 2007, 2.22% of total spending.

Natural gas energy efficiency programs are supported by a monthly charge established in the companies’ plans plus funding based on the difference between the imposed tax and the approved tax (described in PA 07-242, section 115b). The amount collected by the excess gross receipts tax is not allowed to exceed $10 million.  Total expenditures on natural gas energy efficiency programs in 2008 were $5.6 million.

Municipal electric utilities are required to create a fund to support energy efficiency and renewable energy programs. This fund is supported by a surcharge of 0.1 cents/kWh on and after January 1, 2006. The surcharge will increase by 0.03 cents per year to a maximum of 0.22 cents/kWh on January 1, 2010.

The ECMB is required to submit annual reports to the legislature. These reports include expenditures, fund balances, and benefit-cost analyses for the previous year’s programs. Administrative costs are limited to 5% of the total revenue collected. As a result of the 2007 Act Concerning Electricity and Energy Efficiency, utility program budgets for energy efficiency are likely to increase significantly to meet the requirements of this bill.

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Connecticut established a renewable portfolio standard (RPS) several years ago and expanded it in 2005.  Specifically, in June 2005, the Connecticut legislature adopted legislation that adds new “Class III” requirements covering energy efficiency and combined heat and power plants (CHP).  Under the new Class III requirements, electricity suppliers must meet 1% of their demand through using efficiency and CHP by 2007 and 4% by 2010. The targets increase by 1%/year.  Distribution utilities and other power distributors are responsible for meeting the goals.  Existing energy efficiency programs can be used to help meet the goals, starting in 2006.  Third-party providers can also earn savings certificates and sell these to power providers that have Class III obligations.  Under the legislation, certificate values can range between $0.01 and $0.031 per kWh of savings.  

The 2007 Electricity and Energy Efficiency Act (H.B. 7432) strengthened these requirements through enacting complementary policies, including policies covering energy savings from waste heat recovery. These policies support achievement of greater levels of energy efficiency in Connecticut. Utility programs are responding accordingly and plan to achieve 1.5% savings (of total sales) each year.

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Connecticut's 2007 Electricity and Energy Efficiency Act (CT Public Act No. 07-242) requires the Department of Public Utility Control to order the state's electric and natural gas distribution companies to decouple distribution revenues from the volume of natural gas or electricity sales through one or more of three strategies: (1) a mechanism that adjusts actual distribution revenues to equal allowed distribution revenues, (2) rate design changes that increase the amount of revenue recovered through fixed distribution charges, and/or (3) a sales adjustment clause. Currently, United Illuminating uses a full decoupling mechanism, adjusted annually.       

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During annual hearings, the Energy Conservation Management Board (ECMB) reviews the past year’s results relative to the established goals and determines a performance incentive for the distribution utilities for achieving or exceeding the goals. The incentive, referred to as a “management fee,” can be from 1 to 8% of the program costs before taxes. The threshold for earning the minimum incentive (2%) is 70% of the goal. At 100% of the goal, the incentive would be 5%. At 130% of goals, it would be 8%. Program costs are recovered through rates.

Anticipated incentives are built into the annual budgets.  Over the course of several dockets, the DPUC has affirmed the value of the incentive. The expenditures used to calculate the incentive may include administrative and overhead costs, but not ECMB costs and incentive costs.  

Connecticut has had some type of utility performance incentives for DSM since 1988. The exact mechanism has changed over time.

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Prior to passage of the 2007 Electric and Energy Efficiency Act, utilities were not required to submit integrated resource plans in Connecticut's restructured utility markets. With passage of this act, however, this picture changed significantly. The act requires electric distribution companies to review the state's energy and capacity resource assessment and develop a comprehensive plan for procurement of energy resources, considering a full array of supply and demand resources. The act requires resource selection and procurement to be done so as to minimize the costs and to maximize consumer benefits consistent with the state's environmental goals.  The distribution companies must submit annual assessments of energy and capacity requirements for the next three, five, and ten years, as well as plans to "eliminate growth in electric demand" and to achieve other demand-side and environmental objectives. Resource needs are first to be met through "all available energy efficiency resources that are cost-effective, reliable and feasible." (Conn. Gen. Stat. §16a-3a (2007)).

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• Connecticut Electricity and Energy Efficiency Act of 2007

• Connecticut Energy Efficiency Fund

• Connecticut State Incentives for Renewables and Efficiency

• State of Connecticut Department of Public Utility Control

• Energy Conservation Management Board (ECMB)

• Connecticut General Statute §16-245m

• Connecticut General Statute §16-32f

• Connecticut General Statute §7-233y

• Public Act 05-1
  

Last Updated 11/11/2009

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