SECTION 1Chapter 25 of the General Laws is hereby amended in section 19, by adding at the end thereof: Beginning on March 1, 2007, and for a period of 10 years thereafter, the department is authorized and directed to require a mandatory charge per therm for all consumers of natural gas in the commonwealth, to fund energy efficiency activities including, but not limited to, demand-side management programs. Said charge shall be in the amount of 30 mills ($0.03) per therm for calendar years 2007 through 2016, inclusive; provided, however, that in authorizing such programs the department shall ensure that they are delivered in a cost-effective manner utilizing competitive procurement processes to the fullest extent practicable. At least 20 per cent of the amount expended for residential demand-side management programs by each distribution company in any year, and in no event less than the amount funded by a charge of 3 mills per therm, shall be spent on comprehensive low-income residential demand-side management and education programs. The low-income residential demand-side management and education programs shall be implemented through the low-income weatherization and fuel assistance program network and shall be coordinated with all electric utility companies in the commonwealth with the objective of standardizing implementation. On January 1, 2016, the division of energy resources shall, in order to determine if energy investments shall continue beyond calendar year 2016, review then-current market barriers, experience with competitive markets, and related environmental and economic goals. If said division determines that the continued operation of the programs delivers cost-effective, energy efficiency services, said division shall file, with the clerk of the house of representatives of the general court, legislation to extend for a time certain the authorization contained herein for such a charge to fund energy efficiency activities.
SECTION 2. Chapter 25 of General Laws is hereby amended by adding, after section 21, the following sections:
ENERGY RESOURCES PROCUREMENT BOARD
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 as submitted 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 Sec. XXX 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. 28 of this chapter 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 24 (b) of this chapter 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. 28 of this chapter for review by the Energy Efficiency 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. 28 of this chapter 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 26 (b) of this chapter 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 hat 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. 28 of this chapter 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 undercollections by distribution, transmission, and gas companies organized and doing business in the commonwealth pursuant to the provisions of this chapter, and that such companies are compensated in a manner that eliminates the extent to which the financial success of the companies is directly linked to increased sales to end use customers or is threatened by decreases in sales. 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) a representative of the Community Action Programs, (xi) 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 23 and 25 of this chapter 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. Minimum Energy Efficiency and Demand Response Resource Standard.
Every retail electric supplier shall provide a minimum percentage of kilowatt-hours sales to end-use customers in the commonwealth from new energy efficiency and demand reduction resources according to the following schedule: (i) an additional 1 per cent of sales by December 31, 2008; (ii) an additional 1 per cent of sales every year thereafter until December 31, 2018, or a date determined by the Department of Telecommunications and Energy in consultation with the Division of Energy Resources and the Energy Resources Procurement Board, whichever is later. This requirement for a minimum percentage of new energy efficiency and demand reduction resources is intended to establish a minimum procurement of these new resources, and shall not relieve any retail electric supplier from the obligation to procure all energy efficiency and demand reduction resources that are cost effective, reliable and feasible pursuant to the requirements of this chapter, including sections 23 and 24 herein. For the purposes of this section, new energy efficiency and demand reduction resources shall be those energy efficiency and demand response resources that were not procured at any time prior to December 31, 2006.
Section 30. Fuel Oil Efficiency
(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 Chapter 25, Section 28.
(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 to the Fuel Oil Efficiency Trust.
Section 31. Increased supply from 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 3: Section 1E, subsection (a) of Chapter 164 is hereby amended by adding after the word “outages”, the following new text:-
“ successful implementation of the electric and natural gas resources cost procurement plans, effective delivery of energy efficiency and demand side management,”
SECTION 4: Section 1E, subsection (a) of Chapter 164 is hereby amended by adding after the phrase “customer satisfaction”, the following :- “,”