AN ACT CONCERNING THE ELECTRIC CONTRACT PROCUREMENT PROCESS.

This bill requires each electric company to file a plan with the Department of Public Utility Control (DPUC) by July 1, 2010, to change the way it procures power for its standard-service customers (small- and medium-size customers who have not chosen a competitive supplier). It gives the companies additional options to procure this power.

The bill requires DPUC to direct the companies to seek proposals to renegotiate outstanding service supply contracts. If a company receives proposals and renegotiates contracts, DPUC must conduct a contested case (quasi-judicial) proceeding to determine whether reopening the contracts has resulted in lower prices for consumers. The bill does not (1) require suppliers under contracts to submit proposals or (2) abrogate existing contracts.

The bill requires each electric company to apply for any federal economic recovery funds Connecticut receives under any federal economic stimulus recovery legislation passed in 2008 or 2009 for energy purposes for any qualified project. Any money the companies receive must be used to offset costs to customers. By February 1, 2010, each company must report to the Energy and Technology Committee on the federal economic recovery funds applied for and received, if applicable.

*House Amendment “A” (1) adds the option of the companies managing the power supply portfolio, (2) explicitly states that (a) suppliers under existing contracts are not required to submit proposals and (b) the bill does not abrogate existing contracts, and (3) makes a technical change.

Under the bill, each company must develop a procurement plan that moves from relying entirely on full requirements generation service contracts for standard service supply to a procurement process in which the company manages a portfolio of electric generation supply resources by January 1, 2012. (Full requirements contracts cover the company's entire demand at all times, as distinct from buying individual components, such as the power needed to meet peak demand. )

Each company must develop the portfolio in a way that mitigates the variation of the price of the service it offers by blending short- and mid-term market purchases at prevailing market prices with long-term purchases at prices aligned with the cost of producing electricity.

Under the bill, the plan must specify how the companies will purchase power for standard service. The companies may procure supply contracts in a way similar to how they do so under current law. Alternatively, they may:

1. procure individual electric supply components, such as base load, intermediate, and peaking energy resources, capacity, and other power supply services, using requests for proposals, bilateral contracts outside of the request for proposals process and the regional power market;

2. procure physical and financial hedges to manage prices, including mechanisms such as tolling arrangements (an example of a tolling arrangement is an agreement in which a party is paid for fuel used at a generating facility with energy generated at the facility rather than cash), and financial transmission rights. (Participants in the regional wholesale electric market can bid for financial transmission rights to receive a share of fees charged in connection with congestion on the transmission system); or

3. manage the power supply portfolio with purchases and sales of energy and other products on a real-time basis in the spot market, to balance purchases with load (demand), and to optimize supply for the benefit of customers.

The plan must describe how a company will, over time, move to its new supply aggregation role and manage the power supply portfolio on a real-time basis to optimize supply for customers' benefit. DPUC must set standard service rates in accordance with current law, provided the rates must be adjusted to actual revenue and expenses twice per year, with any over or under recovery being included in either the current period or subsequent standard service rate, as determined by DPUC. A company may recover reasonable costs it incurs to provide such service in its rates.

In approving the plan, DPUC, in consultation with the Office of Consumer Counsel, must retain a consultant with expertise in energy procurement. The costs associated with retaining the consultant must be included in the cost of electric generation services.

Yea

Nay

(03/17/2009)