ENERGY CONSERVATION AND RENEWABLE ENERGY FUNDS

June 6, 2001		2001-R-0515
Energy Conservation and Renewable Energy Funds

By: Kevin E. McCarthy, Principal Analyst

You requested a description of how the Energy Conservation and Load Management (ECLM) and Renewable Energy Investment (REIF) funds can be used. You also wanted to know how much money each of the funds generated and spent last year. This report has been updated by OLR Report 2005-R-0345.

summary

The funds were established by the 1998 act that opened the electric industry to competition. The ECLM Funds of the state’s two electric utilities can be used for a wide variety of activities promoting energy conservation and load management (shifting electricity use to off-peak periods). Pending legislation would further specify how the funds may be spent. The renewable energy fund can be used to promote investment in renewable energy sources such as solar, wind, and fuel cells.

The state’s electric utilities develop plans for the expenditure of the ECLM funds, and with the approval of the Department of Public Utility Control (DPUC), implement these plans. Connecticut Innovations, Inc. (CII), a quasi-public economic development authority, administers the renewable energy fund. The 1998 act establishes advisory boards for the funds.

Each fund is supported by a charge on electric bills. The charge for the ECLM fund is 0.3 cents per kilowatt-hour (kwh). The charge for REIF is currently 0.05 cents per kwh. On July 1, 2002, the charge will increase to .075 cents per kwh and on July 1, 2004, the charge will be 0.1 cents per kwh. The ECLM Fund received and spent approximately $85 million in 2000. The renewable energy fund received about $15 million in 2000 and invested about $900,000. CII is expanding the types of programs supported by the fund to include direct support of renewable energy projects as well as investments in the renewable energy industry.

eclm Fund (CGS § 16-245m)

The law requires DPUC to impose a 0.3 cent per kwh charge on all electric consumers in the state (other than those served by municipal utilities). The money goes into each electric utility’s ECLM Fund. Balances in each utility’s fund are carried over each year.

The utilities must use the fund to implement a plan each must develop for cost-effective conservation and market transformation programs. (The latter seek to increase the energy efficiency of products and processes on the market, for example by working with manufacturers to develop more efficient appliances.) Up to 5% of the revenue collected by the charge can be used for consultants and administrative costs. The plan, which must be approved by DPUC, can include the following types of programs:

1. energy conservation and load management;

2. research, development, and commercialization of more energy-efficient products and processes;

3. development of markets for these products and processes;

4. energy use assessments and engineering studies and services connected with new construction;

5. the design, manufacture, commercialization, and purchase of energy-efficient appliances and devices;

6. program planning and evaluation; and

7. public education.

Proposed programs must be screened for their cost-effectiveness, normally on an annual basis. If a program fails this test, it must be modified or dropped from the plan. The programs can support energy conservation and load management by direct funding, manufacturers’ rebates, loan subsidies, and other measures.

The law requires DPUC to establish a board to advise and help the utilities develop and implement their plans. The board must include representatives of affected states agencies (the Office of Consumer Counsel, the Attorney General, and the Department of Environmental Protection); business and residential consumers; the utilities; and an environmental group. A list of board members is available on DPUC’s website (http://www.state.ct.us/dpuc.)

The board must report annually to the Energy and Technology and Environment committees on program spending, fund balances, and the cost-effectiveness of the programs. According to the board’s 2000 report, available on DPUC’s website, the programs saved approximately 251,865,00 kwh of electricity. The average cost per saved kwh was about 2.3 cents, compared to an average residential cost of electricity of about 11 cents per kwh.

sHB 6175, “An Act Concerning Energy Efficient Lighting Programs,” (File 865), as amended by the House, would bar: (1) a plan from including programs that DPUC determines compete unfairly with private suppliers of energy efficient lighting products, (2) DPUC from approving any proposal that was not approved by the board, and (3) DPUC from disbursing any money from the fund for a proposal or project that does not comply with a DPUC-approved plan.

Renewable energy fund (CGS § 16-245n)

By law, DPUC must impose a charge of 0.05 cents per kwh on all electric consumers in the state (other than those served by municipal utilities). The money goes into the REF administered by CII. The charge will increase to 0.75 cents per kwh on July 1, 2002 and 0.1 cents per kwh on July 1, 2004.

CII can use the money in the fund to implement a plan it develops to promote the development and commercialization of renewable energy resources and related enterprises and to stimulate the demand for and deployment of these resources. These resources include solar, wind, and ocean energy, landfill gas, fuel cells, and certain other technologies. Renewable resources do not include such things as coal, oil, or municipal solid waste.

The law establishes an advisory committee to help CII develop its plan. The committee consists of 12 members, three appointed by CII’s

board, three by the governor, and six by legislative leaders. The appointees must have expertise in specified fields, including renewable resources, environmental protection, business investment, and energy policy.

CII’s website (http://www.ctcleanenergy.com/) describes the fund, which it calls the Clean Energy Fund. In the past, CII has focused on investing in (1) companies that market renewable energy products or services and (2) projects that increase demand for such products and services. CII staff note that they have had difficulty identifying projects in these areas that provide a rate of return acceptable to CII (CII primarily functions as a source of venture capital and had an overall return on equity of 39.7% in 2000). CII staff anticipate that CII will broaden the types of projects CII will fund in the future.

KEM:eh