House, No. 3335

By J. James Marzilli
Telecommunications, Utilties and Energy

Status
03/01/2007– Joint Committee on Telecommunications, Utilities and Energy

History
01/10/2007– H Filed
01/10/2007– H Referred to Joint Committee on Telecommunications, Utilities and Energy

AN ACT TO INCREASE THE EFFICIENCY OF ELECTRIC, NATURAL GAS, HEATING
OIL, AND COMBINED HEAT AND POWER FACILITIES.

Be it enacted by the Senate and House of Representatives in General Court
assembled, and by the authority of the same, as follows:

SECTION 1. Chapter 25 of General Laws is hereby amended by adding, after
section 21, the following sections:

Section 22. Energy Resources Procurement Board

(a) There is established an Energy Resources Procurement Board
which shall consist of representatives appointed by the Governor of (i)
a state-wide manufacturing association, (ii) a state-wide business
association, (iii) a chamber of commerce, (iv) residential customers,
(v) low income customers, (vi) an environmental organization
knowledgeable in energy efficiency and energy procurement programs,
(vii) the Division of Energy Resources, (viii) the Department of
Environmental Protection, (ix) and the Attorney General.
Representatives of the Department of Telecommunications and Energy
and of each of the electric and natural gas distribution companies shall
be non-voting, ex-officio members of the board. The board may retain
expert consultants provided such consultants may not have any
contractual relationship with an electric or natural gas distribution
company or electricity or natural gas provider. The board shall
annually submit to the Department of Telecommunications and Energy
a proposal regarding the level of funding required for the discharge of
its duties, which proposal shall be approved by the department either assubmitted or as modified by the department.

Section 23. Comprehensive Electric Resources Procurement Plan

(a) The electric distribution companies, in coordination with the board,
shall develop a comprehensive plan for the procurement of electric
energy resources, including, but not limited to, conventional and
renewable generating facilities, energy efficiency, load management,
demand response, combined heat and power facilities, and distributed
generation, to meet the projected requirements of their customers in a
manner which minimizes the cost of such resources to customers over
time consistent with the state's environmental goals and standards. On
or before October 1, 2007, and every three years thereafter, the
companies will submit to the board an assessment of (i) the energy and
capacity requirements of the customers for each of the next ten years,
(ii) the impact of current and projected environmental standards,
including, but not limited to, those related to greenhouse gas emissions
and the federal Clean Air Act goals, and how different resources could
assist in achieving those standards and goals, (iii) energy security and
economic risks associated with potential energy resources, and (iv) the
estimated lifetime cost and availability of potential energy resources.
The board will review the assessment and provide comments to the
companies within two months thereafter.

(b) Based on the assessment and the comments of the board, the
electric distribution companies shall submit proposed comprehensive
electric resources procurement plan(s) to the board within three months
after receiving the comments of the Board. Resource needs shall first
be met through all available energy efficiency and demand reduction
resources that are cost effective, reliable and feasible. The plan shall
specify (i) the total amount of energy and capacity resources that are
needed to meet the requirements of all customers, (ii) the extent to
which demand side measures, including efficiency, conservation,
demand response, and load management can cost-effectively meet these
needs, (iii) needs for generating capacity and transmission and
distribution improvements, (iv) how the development of said resources
will reduce and stabilize the costs of electricity to consumers and (v)
the manner in which each of the proposed resources should be
procured, including the optimal contract periods for various resources
(vi) the manner in which the plan will further air quality goals and
reduce greenhouse gas emissions. The plan shall consider: (a)
approaches to maximize the impact of demand side measures, (b) the
extent to which generation needs can be met by renewable and combined heat and power facilities and by the impact of regional market incentives, (c) types and locations for generation that would optimize the generation portfolio within the state, (d) fuel types,
diversity, availability, firmness of supply, and security and
environmental impacts thereof, including impacts on meeting the
state's greenhouse gas emission goals; (e) reliability, peak load and
energy forecasts, system contingencies, and existing resource
availabilities; (f) import limitations and the appropriate reliance on such
imports; (g) the costs and benefits of options for the ownership of
energy resources, including ownership by an electric distribution
company, (h) if it is in the best interest of customers, how new
resources could be integrated into the standard service provided
pursuant to Chapter 25 of the general laws; and (i) the impact of the
electric resources procurement plan on the costs of electric customers,
including, but not limited to, effects on capacity and energy costs, rate
stability, and affordability for low-income customers. The electric
resources procurement plan shall include a summary of the savings
secured by the plan for electric customers.

(c) The proposed electric resources procurement plan shall be
reviewed by the board and approved as submitted or as modified by the
board within four months after receipt. The companies shall provide
any additional information requested by the board which is relevant to
the consideration of the electric resources procurement plan. The board
shall submit the approved plan, together with a statement of any
unresolved issues to the Department of Telecommunications and
Energy. The department shall consider the plan in an uncontested
docket and shall provide an opportunity for interested parties to submit
comments regarding the plan. Not later than one hundred twenty days
after submission of the plan, the department shall approve or modify
and approve the plan.

Section 24. Implementation of Comprehensive Electric Resources
Procurement Plan

(a) The department shall implement the electric resources procurement
plan by (i) issuing requests for proposals to meet specified electric
energy resource needs set forth in the plan or by directing the Division
of Energy Resources or the electric distribution companies to issue
such requests for proposals, (ii) directing the electric distribution
companies to incorporate additional demand-side measures set forth in
the plan into the comprehensive conservation and load management
plan prepared pursuant to Sec. 1.7 of this act for review by the Energy

Efficiency Board, (iii) directing the distribution companies to submit
proposals for specific transmission, distribution or generating facility
improvements or projects set forth in the plan, or (iv) taking other
actions within its authority to implement the electric resources
procurement plan.

(b) If the department determines to implement provisions of the plan
by issuing one or more requests for proposals, it shall conduct a
contested case proceeding to develop and issue the request. The
department shall publish requests for proposals under this section in
one or more newspapers or periodicals, as selected by the department
and shall post such request for proposals on its web site. The
department may retain the services of a third-party entity with
experience in the area of energy procurement to oversee the
development of the requests for proposals and to assist the department
in its approval of proposals pursuant to this section. The department
may require the electric distribution companies to enter into contracts
with entities whose proposals are approved by the department. The
provisions of such contracts shall be consistent with the electric
resources procurement plan and shall be approved by the department.

(c) The electric distribution companies shall provide quarterly
implementation reports to the Board commencing two and half months
after the approval of the electric resources procurement plan by the
department. Such quarterly reports shall include: description of the
extent to which the implementation of the plan is meeting the elements
specified in the plan as required by Section 1.3 (b) of this act and a
summary of the savings secured by the implementation thus far of the
plan for electric customers. The quarterly reports shall also include the
targets for each electric energy resource included in the plan approved
by the department and the achieved percentages to date for each electric
energy resource including the achieved percentages for efficiency,
distributed generation, demand response, combined heat and power and
renewables. The electric distribution companies shall provide annual
implementation reports commencing one year after the approval of the
electric resources procurement plan by the department that include all
the same elements as the quarterly reports to the department, the board,
and General Assembly.

(d) Effective January 1, 2008, until the comprehensive electric
procurement plan is implemented by the department, the electric
distribution companies shall include all available energy efficiency and
demand reduction resources that are cost effective, reliable and feasible in a comprehensive conservation and load management plan prepared pursuant to Sec. 7 of this act for review by the Energy Conservation Board.

(e) All costs associated with the development and implementation of
the electric plan which are not otherwise directly allocable shall be
recoverable through electric distribution rates.

(f) The limitation on the assessment of additional charges relative to
energy efficiency programs contained in Chapter 25, Sec. 19 of the
General Laws shall not apply to charges required to implement the
comprehensive electric procurement plan.

Section 25. Comprehensive Natural Gas Resources Procurement Plan

(a) The natural gas distribution companies, in coordination with the
Energy Resources Procurement Board, shall develop a comprehensive
plan for the procurement of natural gas energy resources, including, but
not limited to, conventional supply and storage contracts, energy
efficiency, load management, and combined heat and power facilities to
meet the projected requirements of their customers in a manner which
minimizes the cost of such resources to customers over time consistent
with the state's environmental goals and standards. On or before
October 1, 2008, and every three years thereafter, the companies will
submit to the board an assessment of (i) the volumetric natural gas and
capacity requirements of the customers for each of the next ten years,
(ii) the impact of current and projected environmental standards,
including, but not limited to, those related to greenhouse gas emissions
and the federal Clean Air Act goals, and how different resources could
assist in achieving those standards and goals, (iii) energy security and
economic risks associated with potential energy resources, and (iv) the
estimated lifetime cost and availability of potential energy resources.
The board will review the assessment and provide comments to the
companies within two months thereafter.

(b) Based on the assessment and the comments of the board, the
natural gas distribution companies shall submit a proposed
comprehensive natural gas resources procurement plan to the board
within three months after receiving the comments of the Board.
Resource needs shall first be met through all available energy
efficiency and demand reduction resources that are cost effective,
reliable and feasible. The plan shall specify (i) the total amount of
volumetric natural gas and capacity resources that are needed to meet the requirements of all customers, (ii) the extent to which demand side measures, including efficiency, conservation, and load management can cost-effectively meet these needs, (iii) needs for transmission and
distribution improvements, (iv) how the development of said resources
will reduce and stabilize the costs of natural gas consumers; (v) the
manner in which each of the proposed resources should be procured,
including the optimal contract periods for various resources and (vi) the
manner in which the plan will further air quality goals and reduce
greenhouse gas emissions. The plan shall consider: (a) approaches to
maximizing the impact of demand side measures, (b) reliability, peak
demand and energy forecasts, system contingencies, and existing
resource availabilities; (c) pipeline and other supply limitations; and (d)
the impact of the natural gas resources procurement plan on the costs of
natural gas customers, including, but not limited to, effects on
volumetric and capacity costs, rate stability, and affordability for low-
income customers. The natural gas resources procurement plan shall
include a summary of the savings secured by the plan for natural gas
customers.

(c) The proposed natural gas resources procurement plan shall be
reviewed by the board and approved as submitted or as modified by the
board within four months after receipt. The companies shall provide
any additional information requested by the board which is relevant to
the consideration of the natural gas resources procurement plan. The
board shall submit the approved plan, together with a statement of any
unresolved issues to the Department of Telecommunications and
Energy. The department shall consider the plan in an uncontested
docket and shall provide an opportunity for interested parties to submit
comments regarding the plan. Not later than one hundred twenty days
after submission of the plan, the department shall approve or modify
and approve the plan.

Section 26. Implementation of the Comprehensive Natural Gas Resources Procurement Plan

(a) The department shall implement the natural gas resources
procurement plan by (i) issuing requests for proposals to meet specified
natural gas energy resource needs set forth in the plan or by directing
the Division of Energy Resources or the natural gas distribution
companies to issue such requests for proposals, (ii) directing the natural
gas distribution companies to incorporate additional demand-side
measures set forth in the plan into the comprehensive conservation and
load management plan prepared pursuant to Sec. 1.7 of this act for review by the Energy Efficiency Board, (iii) directing the distribution companies to submit proposals for specific transmission, distribution or generating facility improvements or projects set forth in the plan, or (iv) taking other actions within its authority to implement the natural gas resources procurement plan.

(b) If the department determines to implement provisions of the plan
by issuing one or more requests for proposals, it shall conduct a
contested case proceeding to develop and issue the request. The
department shall publish requests for proposals under this section in
one or more newspapers or periodicals, as selected by the department
and shall post such request for proposals on its web site. The
department may require the natural gas distribution companies to enter
into contracts with entities whose proposals are approved by the
department. The provisions of such contracts shall be consistent with
the natural gas resources procurement plan and shall be approved by
the department.

(c) The natural gas distribution companies shall provide quarterly
implementation reports to the Board commencing two and half months
after the approval of the natural gas resources procurement plan by the
department. Such quarterly reports shall include: description of the
extent to which the implementation of the plan is meeting the elements
specified in the plan as required by Section 1.4 (b) of this act and a
summary of the savings secured by the implementation thus far of the
plan for electric customers. The quarterly reports shall also include the
targets for each natural gas energy resource included in the plan
approved by the department and the achieved percentages to date for
each natural gas energy resource including but not limited to efficiency
and load management. The natural gas distribution companies shall
provide annual implementation reports commencing one year after the
approval of the natural gas resources procurement plan by the
department that include all the same elements as the quarterly reports to
the department, the board, and the Massachusetts General Court.

(d) Effective January 1, 2008, until the comprehensive natural gas
procurement plan is implemented by the department, the natural gas
distribution companies shall include all available energy efficiency and
demand reduction resources that are cost effective, reliable and feasible
in a comprehensive conservation and load management plan prepared
pursuant to Sec. 1.7 of this act for review by the Energy Efficiency
Board, provided that funding for such energy efficiency and demand
reduction resources shall be not less than 20 mills per therm for all consumers of natural gas in the commonwealth.

(e) All costs associated with the development and implementation of
the natural gas plan which are not otherwise directly allocable shall be
recoverable through natural gas distribution rates.

Section 27. Aligning Utility Incentives with Reducing Consumer Costs
and Increased Energy Efficiency

(a) The department shall ensure that estimates of sales or demand
elasticity do not result in material over or under collections by
distribution, transmission, and gas companies organized and doing
business in the commonwealth pursuant to the provisions of this
chapter. On or after the issuance of a final decision in a proceeding on
amendments to rate schedules for any electric or natural gas company,
but not later than January 1, 2009, any purchased natural gas
adjustment clause or energy adjustment clause approved by the
department for such company shall include a provision that requires the
electric or natural gas company to charge or reimburse customers for
any under-recovery or over-recovery of overhead and fixed costs due
solely to the deviation of actual retail sales of electricity or natural gas
from projected retail sales of electricity or natural gas.

(b) On or before July 1, 2008, the department shall conduct an
uncontested docket to establish a performance based incentive plan
which allows for additional compensation for each electric and natural
gas distribution company based on the level of success in mitigating
and reducing the cost and variability of electric and natural gas services
for customers through implementation of the electric and natural gas
procurement plans and shall provide an opportunity for interested
parties to submit comments regarding the plan.

Section 28. Energy Efficiency Program Oversight

(a) The Division of Energy Resources shall appoint and convene an
Energy Efficiency Board which shall include representatives of: (i) a
state-wide manufacturing association, (ii) a state-wide business
association, (iii) a chamber of commerce, (iv) a heating oil industry
representative (v) residential customers, (vi) low income customers,
(vii) an environmental organization knowledgeable in energy efficiency
and energy procurement programs, (viii) the Division of Energy
Resources, (ix) the Department of Environmental Protection, (x) and
the Attorney General. Representatives of the Department of

Telecommunications and Energy and of each of the electric and natural
gas distribution companies shall be non-voting, ex-officio members of
the board.

(b)(1) The Energy Efficiency Board shall advise and assist the electric
and natural gas distribution companies in the development and
implementation of comprehensive plans, which plans shall be approved
by the Department of Telecommunications and Energy, to implement
cost-effective energy efficiency programs and market transformation
initiatives. The plan shall be consistent with the comprehensive
procurement plans approved by the Energy Resources Procurement
Board pursuant to sections 1.2 and 1.4 of this act at the time of
submission to the department. Each program contained in the plan
shall be either accepted or rejected by the Energy Efficiency Board
prior to submission to the department for approval. The Energy
Efficiency Board shall, as part of its review, examine opportunities to
offer joint programs providing similar efficiency measures that save
more than one fuel resource or otherwise to coordinate programs
targeted at saving ore than one fuel resource. Any costs for joint
programs shall be allocated equitably among the efficiency programs.

(2) Programs included in the plan developed under subdivision (1) of
this section shall be screened through cost-effectiveness testing which
compares the value and payback period of program benefits to program
costs to ensure that programs are designed to obtain energy savings and
system benefits whose value is greater than the costs of the programs.
Program cost-effectiveness shall be reviewed annually, or otherwise as
is practicable. If a program is determined to fail the cost-effectiveness
test as part of the review process, it shall either be modified to meet the
test or shall be terminated. On or before March 1, 2008, and annually
thereafter, the board shall provide a report to the Massachusetts House
and Senate Ways and Means Committees that documents expenditures
and fund balances and evaluates the cost-effectiveness of such
programs conducted in the preceding year.

(3) Programs included in the plan developed under subdivision (1) of
subsection (d) of this section may include, but not be limited to: (A)
conservation and load management programs, including programs that
benefit low-income individuals; (B) research, development and
commercialization of products or processes which are more energy-
efficient than those generally available; (C) development of markets for
such products and processes; (D) support for energy use assessment,
real-time monitoring systems, engineering studies and services related

to new construction or major building renovation; (E) the design,
manufacture, commercialization and purchase of energy-efficient
appliances and heating, air conditioning and lighting devices; (F)
program planning and evaluation; (G) joint fuel efficiency initiatives
programs targeted at reducing consumption of more than one fuel
resource; and (H) public education regarding efficiency. Such support
may be by direct funding, manufacturers' rebates, sale price and loan
subsidies, leases and promotional and educational activities. The plan
shall also provide for expenditures by the Energy Efficiency Board for
the retention of expert consultants and reasonable administrative costs
provided such consultants shall not be employed by, or have any
contractual relationship with, an electric or natural gas distribution
company. Such costs shall not exceed five per cent of the total costs of
the plans.

Section 29. Heating Oil Use

(a) The Energy Efficiency Board shall develop programs to provide
energy efficiency services for home heating oil consumers. The
programs shall be developed with advice and input from heating oil
dealers and service technicians. The Board shall ensure that input is
solicited from heating oil dealers and service technicians located in
different regions of the state.

(b) The Board will issue a request for proposals and select a program
administrator(s) to develop and implement programs for cost effective
heating and fuel oil efficiency. The elements of the plan, approval
process, and implementation will be consistent with Section 1.7 of this
act.

(c) A not for profit corporation shall be created, the Fuel Oil Efficiency
Trust, with a board comprised of 5 representatives elected from the
membership of the Board by the Board to collect and administer
monies for heating and fuel oil conservation. Upon approval of an efficiency plan by the Board, the Fuel Oil Efficiency Trust shall pay the approved amount to the program administrator.

(d) The state shall impose a one cent per gallon tax on the sale of
number 2 fuel oil (fuel and heating oil, use in electric generation and
transportation exempt) at the wholesale level which shall be paid to the
Fuel Oil Efficiency Trust. The state will create a corresponding one
cent per gallon tax credit for wholesale distributors of fuel oil when they contribute one cent per gallon on the sale of number 2 fuel oil tothe Fuel Oil Efficiency Trust.

Section 30. Combined Heat and Power

(a) The Department of Telecommunications and Energy shall develop a
program utilizing incentives, competitive contracts, or a portfolio
standard, after a review of the most cost-effective mechanisms, to
increase the generation of electricity from combined heat and power
systems in the state.

(b) Eligible combined heat and power systems shall be new, operational
after January 1, 2007, and achieve an efficiency of seventy five percent
or greater on an annual basis, with annual reporting to the Department.

(c) The program or policies developed by the Department shall supply
one percent of the states total electric supply in 2010, and increase by
one percent per year to six percent in 2015. The Department and the
Division of Energy Resources shall assess the potential to increase the
combined heat and power target in the years beyond 2015 and the
Department shall have the authority to increase the percentages at any
time if it is in the state's economic and environmental interest to do so.
The programs or policies shall be funded through electric distribution
rates.

SECTION 2. Chapter 164 of General Laws, section 1E(a) is hereby amended by
inserting "success in mitigating and reducing the cost and variability of electric
and natural gas services for customers through implementation of the electric
and natural gas procurement plans, effective delivery of energy efficiency and
demand side management," after the words "satisfaction services outages."