Connecticut’s Energy Future Removing Barriers to Promote Energy Sustainability: Public Policy and Financing December 2, 2004 Legislative Office Building Hartford, CT Daniel L Sosland, Executive Director

December 2, 2004Environment Northeast2  Non-profit environmental research and advocacy organization with staff of legal and policy experts located in Hartford, New Haven and Maine  Advocated for Energy Conservation and Clean Energy Funds; RPS, Green Power Choice; member of the Energy Conservation Management Board; active in numerous DPUC proceedings and at the General Assembly

December 2, 2004Environment Northeast3 Factors Driving Connecticut Energy Policies Key Drivers Key Drivers  Congestion in Southwest Connecticut  Energy Prices  Environmental Issues Air Quality Air Quality Climate Change Goals Climate Change Goals Key Priorities: Key Priorities:  Energy Efficiency Funds Electric, Gas and Oil  Remove Barriers to Advance Efficiency Utility Rate Reform  Advanced Building Design  Distributed Generation

December 2, 2004Environment Northeast4 Connecticut is Making Significant Progress Promoting Sustainable Energy Policies Inadequate Energy Conservation Fund – missing key savings and key customers Inadequate Energy Conservation Fund – missing key savings and key customers No renewable investment fund No renewable investment fund Interconnect engineering standards obstacle Interconnect engineering standards obstacle Building Code in need of updating Building Code in need of updating Efficiency Standards need updating Efficiency Standards need updating No green power market No green power market –No Renewable Portfolio Standard –No Green Offer –No Efficiency Offer Conservation Fund increased in 2000 and producing large cost effective savings Conservation Fund increased in 2000 and producing large cost effective savings Clean Energy Fund exists Clean Energy Fund exists Uniform interconnect standards adopted Uniform interconnect standards adopted Building energy code updated Building energy code updated Efficiency standards bill enacted Efficiency standards bill enacted Green power offer pending Green power offer pending Efficiency offer pending Efficiency offer pending Renewable Portfolio Standard kicking in Renewable Portfolio Standard kicking in Project 100: Installing Renewable Energy in Connecticut Project 100: Installing Renewable Energy in Connecticut

December 2, 2004Environment Northeast5 Good Public Policy Can Promote Solutions: Connecticut’s Conservation Fund A Nationally Significant Success Story Cumulative summer peak load savings of 630 MW that would otherwise hit the lines-- 10% of state’s installed generating capacity Cumulative summer peak load savings of 630 MW that would otherwise hit the lines-- 10% of state’s installed generating capacity Energy efficiency resources are achieved at costs from $.02 to $.05 per lifetime kWh saved Energy efficiency resources are achieved at costs from $.02 to $.05 per lifetime kWh saved Significant environmental benefits in avoided emissions Significant environmental benefits in avoided emissions Since 2000, producing net benefits of approximately $ 1.4 billion dollars in avoided energy costs over life of the conservation investments Since 2000, producing net benefits of approximately $ 1.4 billion dollars in avoided energy costs over life of the conservation investments Significant Public Input and Oversight – A Model for Good Policy Development Significant Public Input and Oversight – A Model for Good Policy Development

December 2, 2004Environment Northeast6 Impact of Fund: Making Connecticut More Efficient and Reducing Consumer Costs  Current programs if fully funded avoid over 60MW annually  Reduces state’s annual growth in capacity demand from 1.7% to 0.6%: 80% reduction

December 2, 2004Environment Northeast7 Efficiency Impact: Reducing Market Prices to Consumers 115 MW in energy efficiency load reductions avoided about $6.7 million in additional costs (06/07/99)

December 2, 2004Environment Northeast8 We Can Do More: Achieve Level or Reduced Growth in Demand

December 2, 2004Environment Northeast9 Connecticut Demand Growth: The Need for Policy Action Sources and Projected Growth in Demand and Resulting Increases in CT Carbon Emissions (MMTC) Category % Increase Electric power % - 220% Mobility % Residential % Industrial % Commercial % State total % - 81% 2050 Target2.83 MMTC(75%)

December 2, 2004Environment Northeast10 Sustainable Energy Policies: Where To Next? Natural Gas: Increase Efficient Use Natural Gas: Increase Efficient Use Home heating oil efficiency Home heating oil efficiency Remove barriers to additional cost- effective energy efficiency Remove barriers to additional cost- effective energy efficiency  Reform Outdated Utility Rate Design that Discourages Conservation and Promotes Inefficient Sales Pursue Advanced Building Energy standards Pursue Advanced Building Energy standards Protect the Conservation and Clean Energy Funds from further raids Protect the Conservation and Clean Energy Funds from further raids

December 2, 2004Environment Northeast11 Natural Gas and Oil Conservation  Natural Gas: Why Promote Conservation  Natural gas use increasing – Connecticut becoming more dependent on natural gas for powerplant generation  Provide benefits to natural gas customers that are only available now to electric customers  Studies show natural gas conservation is highly effective way to reduce electricity and gas prices by reducing marginal demand  A modest fund of 3% of gas utility revenues would provide substantial economic, consumer and environmental benefits

December 2, 2004Environment Northeast12 Connecticut Needs to Promote Gas Efficiency to All Customers States with Natural Gas Conservation Projects in Green

December 2, 2004Environment Northeast13 Natural Gas Conservation Reduces Gas Prices

December 2, 2004Environment Northeast14 Oil Conservation Connecticut consumes around 1 billion gallons of distillate oil annually at cost of over $1.3 billion Connecticut consumes around 1 billion gallons of distillate oil annually at cost of over $1.3 billion Oil consumption is nearly equivalent to natural gas on btu basis Oil consumption is nearly equivalent to natural gas on btu basis Substantial savings to consumers with the creation of a modest fuel oil efficiency program Substantial savings to consumers with the creation of a modest fuel oil efficiency program  Provide oil customers efficiency options Upgrade boilers Upgrade boilers Perform thermal insulation Perform thermal insulation  Modest fund would save 6 million gallons a year at benefit to cost ratio likely greater than 3.0  Joint Fuel Programs  Whole Building Treatment: Thermal, Electric, Gas End Uses  Avoids Equity issue of electric ratepayers funding measures that save gas and oil

December 2, 2004Environment Northeast15 Utility Rate Design: Remove Disincentives to Use Fuels Efficiently Current electric and gas utility rates provide increased profits as sales volumes increase Current electric and gas utility rates provide increased profits as sales volumes increase Result is a disincentive to promote efficient use of fuels Result is a disincentive to promote efficient use of fuels Remove this barrier by reforming revenue collection methods Remove this barrier by reforming revenue collection methods  Utilize an adjustment mechanism to make utilities indifferent to sales  Examine performance based ratemaking

December 2, 2004Environment Northeast16 Tax Incentives and Leading By Example  Tax incentives to promote renewable energy, DG and CHP are important  Key example: Federal wind tax credit supports wind development  State: examine the effectiveness of approaches such as sales tax exemptions for renewables, impact of property tax exemption for renewables and cogeneration  State procurement policies: green purchases, building design standards

December 2, 2004Environment Northeast17 Further Information Environment Northeast 28 Grand Street, Hartford, CT Whitney Avenue, New Haven, CT