September 30, 2015 IMPLEMENTATION OF THE SHARED CLEAN ENERGY FACILITIES PILOT PROGRAM PURSUANT TO PUBLIC ACT

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1 Bureau of Energy and Technology 10 Franklin Square New Britain, CT Affirmative Action/Equal Policy Opportunity Employer September 30, 2015 IMPLEMENTATION OF THE SHARED CLEAN ENERGY FACILITIES PILOT PROGRAM PURSUANT TO PUBLIC ACT NOTICE OF PROCEEDING, TECHNICAL MEETING, AND OPPORTUNITY FOR PUBLIC COMMENT Pursuant to Public Act , An Act Establishing a Shared Clean Energy Facility Pilot Program, the Department of Energy and Environmental Protection (DEEP) has initiated the above referenced proceeding to implement the provisions of Public Act , as outlined in the attached. By way of this Notice, DEEP will conduct a transcribed technical meeting on Wednesday October 21, 2015, at 9:00 AM EDT, in the Gina McCarthy Room at DEEP s Hartford Office, Seventy-Nine Elm Street, Hartford, Connecticut to discuss implementation of Public Act Please RSVP to DEEP.EnergyBureau@ct.gov by Monday, October 19, 2015, if you plan to attend and/or present oral comment at the meeting. To acquire copies of the transcript, please contact BCT Reporting LLC at (860) or bctreporting1@gmail.com. By way of this Notice, DEEP will be accepting public comment on the attached document until Thursday October 29, 2015, by 4:00 PM EDT. Written comments may be filed electronically on DEEP s website or submitted to DEEP.EnergyBureau@ct.gov. All materials submitted by stakeholders in this proceeding will be posted on the DEEP website. Any questions can be directed to Debra Morrell at (860) and/or via at DEEP.EnergyBureau@ct.gov. The Connecticut Department of Energy and Environmental Protection is an Affirmative Action and Equal Opportunity Employer that is committed to complying with the Americans with Disabilities Act. To request an accommodation, contact us at (860) or deep.accommodations@ct.gov. 1

2 September 30, 2015 DEPARTMENT OF ENERGY AND ENVIRONMENTAL PROTECTION Implementation of the Shared Clean Energy Facilities Pilot Program Pursuant to Public Act NOTICE OF PROCEEDING, TECHNICAL MEETING, AND OPPORTUNITY FOR PUBLIC COMMENT The Department of Energy and Environmental Protection ( DEEP ) initiates this proceeding to implement Public Act , An Act Establishing a Shared Clean Energy Facility Pilot Program ( the Act ). This notice serves to provide stakeholders with: (1) discussion of legal authorizations and requirements of the Act; (2) policy objectives of the program; (3) potential subscriber models for a shared clean energy facility; (4) an opportunity to comment on preliminary issues related to implementation; and (5) additional useful resources related to the program. BACKGROUND LEGAL BACKGROUND In the 2015 session of the Connecticut General Assembly, the legislature passed the Act. The Act requires DEEP to establish a two-year pilot program to support the development of shared clean energy facilities. A shared clean energy facility ( SCEF ) is defined in subsection (a)(1) of the Act as: a Class I renewable energy source 1, as defined in section 16-1 of the general statutes, that 1 Section 16-1(a)(20) of the Connecticut General Statutes defines a class I renewable energy source as follows:

3 (A) is served by an electric distribution company, as defined in section 16-1 of the general statutes, (B) is within the same electric distribution company service territory as the individual billing meters for subscriptions, (C) has a nameplate capacity rating of four megawatts or less, and (D) has at least two subscribers. DEEP is required by the Act to develop and issue a request for proposals ( RFP ) on or before January 1, 2016, from subscriber organizations seeking to develop a SCEF. A subscriber organization is defined in subsection (a)(5) of the Act as: any for-profit or not-for-profit entity permitted by Connecticut law that (A) owns or operates one or more shared clean energy facilities for the benefit of the subscribers, or (B) contracts with a third-party entity to build, own or operate one or more shared clean energy facilities. The Act requires DEEP to select a proposal or proposals that: (1) do not exceed a nameplate capacity rating of two megawatts in the service territory of The United Illuminating Company, and (2) do not exceed a nameplate capacity rating of four megawatts in the service territory of Eversource Energy. Finally, the Act requires the Department to establish: (1) a billing credit for a subscriber of a SCEF, and (2) consumer protections for a subscriber and potential subscriber of a (A) electricity derived from (i) solar power, (ii) wind power, (iii) a fuel cell, (iv) geothermal, (v) landfill methane gas, anaerobic digestion or other biogas derived from biological sources, (vi) thermal electric direct energy conversion from a certified Class I renewable energy source, (vii) ocean thermal power, (viii) wave or tidal power, (ix) low emission advanced renewable energy conversion technologies, (x) a run-ofthe-river hydropower facility that began operation after July 1, 2003, and has a generating capacity of not more than thirty megawatts, provided a facility that applies for certification under this clause after January 1, 2013, shall not be based on a new dam or a dam identified by the commissioner as a candidate for removal, and shall meet applicable state and federal requirements, including applicable site-specific standards for water quality and fish passage, or (xi) a biomass facility that uses sustainable biomass fuel and has an average emission rate of equal to or less than.075 pounds of nitrogen oxides per million BTU of heat input for the previous calendar quarter, except that energy derived from a biomass facility with a capacity of less than five hundred kilowatts that began construction before July 1, 2003, may be considered a Class I renewable energy source, or (B) any electrical generation, including distributed generation, generated from a Class I renewable energy source, provided, on and after January 1, 2014, any megawatt hours of electricity from a renewable energy source described under this subparagraph that are claimed or counted by a load-serving entity, province or state toward compliance with renewable portfolio standards or renewable energy policy goals in another province or state, other than the state of Connecticut, shall not be eligible for compliance with the renewable portfolio standards established pursuant to section a. 3

4 SCEF, including but not limited to, disclosures made when selling or reselling a subscription. A subscriber is defined in subsection (a)(4) of the Act as: an in-state retail end user of an electric distribution company who (A) has contracted for a subscription, and (B) has identified an individual billing meter to which the subscription shall be attributed. Any facility selected by DEEP to be part of the SCEF pilot program must submit a report 2 to the Energy and Technology Committee of the Connecticut General Assembly not later than one year after being selected by DEEP and annually for two years thereafter. Such report must include, but not be limited to, the status of the SCEF. PROGRAM DESIGN POLICY OBJECTIVES FOR RFP CRITERIA AND EVALUATION In designing an effective pilot program for SCEFs, it is important to clarify the specific policy objectives that a SCEF is intended to achieve. These policy objectives should inform the eligibility and evaluation criteria for the SCEF RFP, and can help to guide evaluation of the pilot program s success (i.e., in the report(s) due to the General Assembly after project selection). To that end, it is instructive to review the various public policy objectives, benefits, and implementation issues highlighted in the recent discussions of SCEFs in Connecticut. During the 2014 session of the Connecticut General Assembly, the Energy and Technology Committee considered, but did not recommend for vote by the General Assembly, two bills relating to SCEFs: one for full scale implementation of a SCEF program 3 and one for a threeyear pilot program for two SCEFs. 4 On September 18, 2014, the Energy and Technology Committee of the Connecticut General Assembly requested the Connecticut Academy of Science and Engineering ( CASE ) to prepare a study on the issues related to developing and using SCEFs in Connecticut. On March 5, 2015, CASE released a final report that analyzed Connecticut s energy policy goals and SCEF program models in other states and made recommendations for implementing such a program in Connecticut. 5 In March 2015, DEEP released a final draft of its 2014 Integrated Resources Plan ( IRP ) and recommended supporting the deployment of additional Class I renewable energy sources. As part of that goal, DEEP 2 Such report must be submitted in accordance with section 11-4a of the Connecticut General Statutes. 3 Raised H.B. 5412, An Act Concerning Shared Clean Energy Facilities (2014). 4 S.B. 353, An Act Concerning the Development of Class I Renewable Energy Source Projects, as amended by Substitute Senate Bill No. 353 (2014). 5 Connecticut Academy of Science and Engineering, Shared Clean Energy Facilities (Mar. 2015), available at [hereinafter CASE Report ]. 4

5 recommended establishing a transparent, competitive request for proposals process to select projects that benefit all Connecticut ratepayers along with an implementation framework that includes all necessary consumer protections. 6 Finally, in the 2015 session of the Connecticut General Assembly, the Energy and Technology Committee again considered two bills relating to SCEFs: one bill initially proposed an unlimited statewide program 7 and a second bill proposed a SCEF pilot limited to two facilities. 8 In preparation for the implementation of the Act, DEEP has reviewed the findings, comments, and testimony submitted on SCEFs in the proceedings above. It is helpful to clarify the policy objectives of this pilot program in order to consider the extent to which SCEFs are the best (or sole) means available to achieve the relevant objectives, in comparison to existing state programs. For example, Connecticut has many policies to support projects that increase clean energy generation, diversify the supply mix, and reduce greenhouse gases. Under Connecticut s Renewable Portfolio Standard, the state will source 27% of its electricity needs from renewable sources by Further, the state is pursuing programs to support grid-scale renewables pursuant to Public Acts and , and programs to support smaller-scale or behind-themeter renewables such as the LREC/ZREC program, the Connecticut Green Bank s Residential Solar Incentive Program, Project 150, and procurements pursuant to Section 127 of Public Act Some of these programs support in-state renewable generation, and thereby can advance clean energy job creation and economic development in Connecticut. These programs also provide access to clean energy to the extent that they increase the percentage of renewables in the generation supply mix (through Connecticut s Renewable Portfolio Standard) serving all Connecticut customers including low-income customers and customers who cannot site solar generation on their home or office. Finally, other programs are available that can help customers achieve electric bill savings, including the state s energy efficiency programs and a newly announced premium incentive and more accessible financing through the Connecticut Green Bank for rooftop solar PV for low-income homes. SCEFs, however, are uniquely positioned to provide families and businesses access to clean energy, including billing credits from a clean energy facility, where shade, site concerns, rental status, and other circumstances may otherwise be a barrier. From reviewing the record in the above-mentioned proceedings, DEEP has identified several policy objectives for the SCEF pilot program, including expanding clean energy deployment, promoting equitable participation, optimizing siting of distributed clean energy facilities, and achieving economic objectives and minimizing the cost to ratepayers. These objectives are discussed below. 6 Connecticut Department of Energy and Environmental Protection, 2014 Integrated Resources Plan for Connecticut 113 (Mar. 17, 2015), available at 7 Raised S.B. 928, An Act Concerning Shared Clean Energy Facilities (2015). 8 Raised H.B. 6940, An Act Establishing a Shared Clean Energy Facility Pilot Program (2015). 5

6 1. Support Clean Energy Objectives Stakeholders in the above-referenced proceedings cited several clean energy objectives that can be met through SCEFs, including increasing clean energy generation and diversifying the energy supply mix; reducing greenhouse gas emissions and improving air quality; and furthering renewable energy goals, including the state s Renewable Portfolio Standards. DEEP notes that while SCEFs in other jurisdictions have been focused specifically on solar generation, the Act does not limit eligibility to solar all Class I renewable energy sources are eligible to participate in the pilot program RFP. 2. Increase Access to Clean Energy for Low to Moderate Income Customers Many commenters, including those offering testimony on S.B. 928, recommended that SCEFs be targeted to low- or moderate-income families to ensure more equitable access to clean energy in Connecticut. The Acadia Center, for example, recommended several design features to ensure that SCEF benefits and SCEF subscriptions are targeted to low- and moderate-income residents and/or that SCEFs are sited in low- or moderate-income communities. 9 Other commenters emphasized the ability of SCEFs to increase access to clean energy for homeowners who do not have homes suitable to site for clean distributed energy. The CASE report noted that only 25% of U.S. residential units are suitable for solar rooftop installation, for reasons that include sitespecific factors such as unsuitable rooftop orientation, shaded property, or because they are rental properties. 10 In testimony on S.B. 928, some highlighted that SCEF subscriptions are more practical for customers who cannot make a long-term commitment, noting that the average American moves every five years. The definition of subscriber under the Act does not limit eligibility to low- or moderateincome customers, to customers whose homes or buildings are not otherwise suitable for clean energy development, or to specific customer classes (e.g. residential). 11 However, the Act does give DEEP discretion in developing evaluation criteria for proposal selection. In developing the RFP, DEEP proposes to give additional weight in qualitative evaluation to proposals focused on low- and moderate-income residential subscribers. DEEP welcomes comment on this approach. 9 Acadia Center, Testimony befor the Energy & Technology Committee Supporting S.B. 928, An Act Concerning Shared Clean Energy Facilities 5 (Mar. 2015), available at %20Acadia%20Center-TMY.PDF. 10 CASE Report, supra note 5, at Under the Act, a subscriber is defined as: an in-state retail end user of an electric distribution company who (A) has contracted for a subscription, and (B) has identified an individual billing meter to which the subscription shall be attributed Public Act (a)(4). 6

7 3. Optimize Siting Objectives The CASE report highlights the opportunity to site SCEFs on brownfields, capped landfills, and other such sites in order to optimize the positive re-use of sites with limited alternative uses. 12 Other stakeholders emphasized that SCEFs can provide grid design and improvements that move toward decentralization to foster resiliency and security, offer locational benefits, defer or avoid distribution system upgrades, and avoid system losses. In developing the RFP, DEEP proposes to give additional qualitative evaluation points for proposals that advance positive re-use of sites like brownfields and landfills. DEEP is also interested in approaches to optimize the siting of SCEFs around locations on the distribution system where they can be better integrated, in order to provide greater benefit to the electric system. DEEP welcomes comment on this approach. 4. Support In-State Economic Development Opportunities Many who testified in support of S.B. 928 cited in-state job creation from SCEF development as an important benefit of SCEF programs. Others emphasized tangible economic benefits to SCEF owners and subscribers as an economic benefit of SCEFs. 5. Minimize Cost to Electric Ratepayers Stakeholders raised concerns about customer equity, including but not limited to rate fairness, to all ratepayers (including SCEF subscribers and non-subscribers). DEEP believes that it is important to encourage clean energy development while minimizing the cost to ratepayers and therefore will consider this an important policy objective. OTHER ISSUES FOR RFP DESIGN ROLE OF SCEF DEVELOPERS In order to maximize the benefits to subscribers and to the electric system from deployment of clean energy at the lowest cost to non-participants, DEEP intends to issue an open and competitive solicitation for SCEF developers. Proposals will be evaluated based on the total cost of the project on a cost per kwh basis, as well as policy factors as determined by the Department. The total cost will include all payments made by an electric distribution company ( EDC ) to the developer to recover the cost of the SCEF as well as all credits to subscribers. DEEP proposes to require in the RFP that SCEFs participating in this pilot program may not receive other Connecticut ratepayer-funded incentives of any kind, including Solar Home Renewable Energy Credits ( SHRECs ), ZREC/LREC program incentives or ratepayer supported low-interest 12 Id. at

8 loans. The purpose of this requirement is simply to ensure fair competition between projects and make the full ratepayer cost of this program transparent for evaluation purposes. ROLE OF CONNECTICUT ELECTRIC DISTRIBUTION COMPANIES Currently, EDCs in Connecticut are prohibited from owning generation. Therefore, it is contemplated that EDCs will not be owners/developers of SCEFs. However, EDCs will likely play an important role in purchasing the output, or a portion of the output from the SCEF. In DEEP s proposed approach, such output would include the value (or a portion of the value) of the energy produced, as well as Renewable Energy Certificates ( RECs ) associated with that energy. All RECs will be transferred to the EDCs. Such purchase could be accomplished on a contractual basis, through a power purchase agreement ( PPA ), or through a tariff. DEEP welcomes comment on this approach, as well as on whether payments through a PPA or tariff should be based on a fixed price per kwh, or should be pegged to variable components of retail rates such as generation or distribution charges. Another potential role of the EDCs in a SCEF program would be managing the billing and crediting for SCEF facility owners and subscribers. There are several options available. Under a SCEF-managed crediting system, the EDC could pay the SCEF developer the full bid price for each kwh produced (per the terms of the tariff or PPA), and the developer would be responsible for making any payments to subscribers. The SCEF-managed system may raise some issues related to the tax treatment of credits to subscribers. Ensuring consumer protection for subscribers may also be more complicated under this approach. Alternatively, under an EDCmanaged crediting system, the EDC could pay the SCEF developer a portion of the total bid price per kwh produced and credit subscribers electric bills for a portion of the total bid price. Subscribers would continue to receive an electric bill from their EDC based on their actual usage each month, and credits from SCEF output would appear on the customer s bill. Further information may be needed, or obtained from this pilot, to value and provide for recovery of the utilities administrative costs associated with managing the subscriber billing credit. The Act appears to contemplate an EDC-managed approach, as it authorizes DEEP to establish a billing credit for subscribers to the SCEFs in the pilot program. DEEP is evaluating what procedural mechanism it should utilize to establish the billing credits identified in subsection (c) of the Act and welcomes comment on that mechanism. Any billing credits will be customized to reflect the bids selected in this proceeding. Presumably, DEEP could establish a billing credit that has some of the characteristics of net energy billing, including rolling over credit from generation in excess of consumption to apply to subsequent bills. The Act did not specify that subscribers under this pilot program would be eligible for net metering or virtual net metering programs, the eligbility criteria for which are established in statute. The EDCs will need to recover from all electric ratepayers the costs associated with either the tariff or PPA. These costs would include the value of the energy, RECs, and administrative costs associated with managing the billing credits for SCEF subscribers. DEEP recognizes that the Act 8

9 does not explicitly address the recovery of utility costs associated with SCEF development. Such cost recovery may be reasonably implied in the statute itself, if some form of EDC payment to SCEF developers is necessary above and beyond subscriber agreements to support SCEF development. For an RFP to go forward, however, DEEP will seek clarification from the Public Utility Regulatory Authority ( PURA ) about its expected interpretation of EDC cost recovery under the Act. ROLE OF SUBSCRIBERS The Act does not specify a particular structure for subscriber participation that the SCEF pilot program must utilize. In its evaluation of various structures for the SCEF pilot program, DEEP has identified three potential models for a subscriber to participate in a SCEF. 1. Subscriber Model #1 (Leasing): The first subscriber model allows a subscriber to lease access to the power generated from a portion of a SCEF and the subscriber receives a pro-rata share of the power produced by the leased portion. The agreement between the subscriber and SCEF owner will specify the fixed price and the length of the lease contract. A subscriber can receive a credit for participation either directly through the EDC s billing system or as a credit directly from the SCEF. The complexity in the Federal Tax arena may require third party ownership. Federal Tax credits have specific requirements for length of ownership. 2. Subscriber Model #2 (Power Purchase) The second subscriber model allows a subscriber to enter into a power purchase agreement with the SCEF developer. In other words, the subscriber agrees to buy a specific number of kilowatt hours per month at a fixed rate from the SCEF owner for a specified length of time. A subscriber can receive a credit for participation either directly through the EDC s billing system or as a credit directly from the SCEF. It is the goal of the SCEF developer to contract enough power purchase agreements with subscribers to finance and maintain the project. 3. Subscriber Model #3 (Value-Based): The third model would require subscribers to buy a specified percentage of their energy usage from a SCEF, up to the full capacity of the facility. Unlike the second subscriber model, all costs associated with the SCEF, including the distribution costs, are paid for by the subscribers. The facility and EDC would work closely to administer the program. Some considerations for developers to keep in mind include, but are not limited to, the required contracting with the EDCs for purchasing the generation, the zoning/permitting of the site, the ownership of RECs, maintenance of the site, and property taxes. 9

10 CONSUMER PROTECTIONS DEEP is working through consumer protections a SCEF must agree to in order to participate in the pilot program, as mandated by the Act. For example, a SCEF will be required to submit compliance filings to DEEP on the customers subscribed to the facility, the facility output, and the credits delivered to subscribers. Additionally, DEEP will establish procedures for a SCEF to follow when a subscriber wants to leave the program. DEEP welcomes comment on consumer protections that should be included. TIMELINE FOR IMPLEMENTATION AND OPPORTUNITIES FOR STAKEHOLDER PARTICIPATION As an initial step in the implementation of the Act, DEEP will conduct a technical meeting to discuss specific issues related to developing and issuing the request for proposals. By this Notice, DEEP is inviting public participation as detailed below. TECHNICAL MEETING A technical meeting will be held on Wednesday October 21, 2015, at 9:00 AM EDT in the Gina McCarthy Room at DEEP s Hartford Office, Seventy-Nine Elm Street, Hartford, Connecticut. DEEP may continue the technical meeting on additional dates as deemed necessary. Please RSVP to DEEP.EnergyBureau@ct.gov with SCEF Technical Meeting Attendance in the subject line of the at least two days prior to the scheduled date if you plan on attending and/or participating in the scheduled technical meeting listed above. Please specify whether you wish to present oral comments. PUBLIC COMMENT Additionally, DEEP is seeking public comment on the issues discussed in this Notice, and particularly the questions highlighted below in this subsection. Written comments may be filed electronically on DEEP s website or submitted to DEEP.EnergyBureau@ct.gov with SCEF Technical Meeting Comments in the subject line of the on or before Thursday October 29, 2015 by 4:00 p.m. EDT. All materials submitted by stakeholders in this proceeding will be posted on the DEEP website. Any questions can be directed to Debra Morrell at (860) and/or via at DEEP.EnergyBureau@ct.gov. 1. Is the role of subscribers outlined in this notice appropriate for the SCEF pilot program? a. Should the program be limited to subscriber organizations that do not receive any other ratepayer-funded incentives 2. Is the role of the EDCs outline in this notice appropriate for the SCEF pilot program? a. Should the EDCs be required to purchase the output, or a portion of the output, from a SCEF through a PPA? Through a tariff? b. If so, should such payments be based on a fixed price? A variable price? 10

11 3. If the crediting is managed by the SCEF, does this present any tax implications for subscribers? 4. Is clarification from PURA necessary to ensure the EDCs can recover the administrative costs and power purchase costs, either through a PPA or tariff, associated with the SCEF program? 5. Are the potential Subscriber Models outlined in this notice appropriate for the SCEF pilot program? a. How should the different potential Subscriber Models administratively function? b. Should DEEP consider additional potential Subscriber Models for the SCEF pilot program? 6. The definition of subscriber in the Act does not limit participation to low- or moderateincome residents, renters, customers located within a certain geographical proximity to the SCEF, or even to residential customers per se. Should DEEP adopt any SCEF program design features (such as criteria for a quantitative evaluation of proposals in the SCEF RFP) that would target SCEF participation to such customers and/or locations, or prioritize RFP bids that target such customers and/or locations? 7. The definition of SCEF in the Act does not limit siting of SCEFs to low- or moderateincome communities; brownfields, landfills, or other such locations; or to locations on the distribution grid where they can provide enhanced value to the electric system. Should DEEP adopt any SCEF program design features (such as criteria for a quantitative evaluation of proposals in the SCEF RFP) that would give preference to SCEFs in such locations, and would such preference be allowable under the Act? 8. Should the RFP set a minimum or maximum size for: a. A SCEF? b. The amount of energy a subscriber may sign up for with the SCEF? c. The minimum or maximum number of subscribers a SCEF must have? 9. Should subscribers be required to receive an energy audit prior to participating in the SCEF program, as recommended by CASE? 10. What consumer protections should be required for the program? To ensure that you receive updates about further opportunities for stakeholder engagement, please request to be added to the service list through Debra Morrell at (860) and/or via at DEEP.EnergyBureau@ct.gov. The Connecticut Department of Energy and Environmental Protection is an Affirmative Action and Equal Opportunity Employer that is committed to complying with the Americans with Disabilities Act. To request an accommodation contact us at (860) or deep.accommodations@ct.gov. Requests for accommodations must be made at least two weeks prior to any agency hearing, program or event. 11

12 ADDITIONAL RESOURCES Connecticut Academy of Science and Engineering, Shared Clean Energy Facilities (Mar. 2015), available at Interstate Renewable Energy Council, Model Rules for Shared Renewable Energy Programs (2013), available at Michigan Energy Office, A Guidebook for Community Solar Programs in Michigan Communities, (Feb. 2014), available at 7.pdf. National Renewable Energy Laboratory, A Guide to Community Shared Solar: Utility, Private, and Nonprofit Project Development (May 2012), available at 12