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| 5 | 5 | | LCO No. 2199 1 of 9 |
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| 6 | 6 | | |
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| 7 | 7 | | General Assembly Raised Bill No. 5350 |
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| 8 | 8 | | February Session, 2020 |
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| 9 | 9 | | LCO No. 2199 |
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| 10 | 10 | | |
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| 11 | 11 | | |
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| 12 | 12 | | Referred to Committee on ENERGY AND TECHNOLOGY |
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| 13 | 13 | | |
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| 14 | 14 | | |
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| 15 | 15 | | Introduced by: |
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| 16 | 16 | | (ET) |
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| 17 | 17 | | |
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| 18 | 18 | | |
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| 19 | 19 | | |
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| 20 | 20 | | |
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| 21 | 21 | | AN ACT CONCERNING NA TURAL GAS INFRASTRUC TURE. |
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| 22 | 22 | | Be it enacted by the Senate and House of Representatives in General |
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| 23 | 23 | | Assembly convened: |
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| 24 | 24 | | |
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| 25 | 25 | | Section 1. (NEW) (Effective October 1, 2020) (a) For purposes of this 1 |
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| 26 | 26 | | section, "anaerobic digestion facility" means a facility that obtained a 2 |
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| 27 | 27 | | permit pursuant to section 22a-208a of the general statutes and produces 3 |
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| 28 | 28 | | by-products that provide biogas derived from the decomposition of 4 |
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| 29 | 29 | | farm-generated organic waste or source-separated organic material. 5 |
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| 30 | 30 | | (b) The Commissioner of Energy and Environmental Protection, in 6 |
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| 31 | 31 | | consultation with the Office of Consumer Counsel, and the Attorney 7 |
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| 32 | 32 | | General, may solicit proposals, in one solicitation or multiple 8 |
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| 33 | 33 | | solicitations, from anaerobic digestion facilities that will make biogas of 9 |
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| 34 | 34 | | a quality suitable for injection into the natural gas distribution system 10 |
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| 35 | 35 | | in the state. The commissioner may select proposals from such 11 |
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| 36 | 36 | | anaerobic digestion facilities that do not exceed by-product that is 12 |
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| 37 | 37 | | generated by three hundred thousand tons of organic waste annually. 13 |
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| 38 | 38 | | (c) In making a selection of such proposals, the commissioner shall 14 |
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| 39 | 39 | | consider factors including, but not limited to, (1) whether the proposal 15 Raised Bill No. 5350 |
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| 40 | 40 | | |
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| 41 | 41 | | |
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| 42 | 42 | | |
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| 43 | 43 | | LCO No. 2199 2 of 9 |
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| 44 | 44 | | |
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| 45 | 45 | | is in the best interest of natural gas ratepayers; (2) whether the proposal 16 |
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| 46 | 46 | | promotes the policy goals outlined in the state-wide solid waste 17 |
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| 47 | 47 | | management plan developed pursuant to section 22a-241a of the general 18 |
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| 48 | 48 | | statutes; (3) any positive impacts on the state's economic development, 19 |
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| 49 | 49 | | including any positive impacts on the state's agricultural industry; (4) 20 |
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| 50 | 50 | | whether the proposal is consistent with the requirements to reduce 21 |
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| 51 | 51 | | greenhouse gas emissions in accordance with section 22a-200a of the 22 |
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| 52 | 52 | | general statutes; (5) the characteristics of a relevant facility that produces 23 |
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| 53 | 53 | | renewable natural gas, including whether the proposed gas 24 |
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| 54 | 54 | | conditioning system or systems and the biogas complies with the 25 |
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| 55 | 55 | | interconnection standards developed in accordance with section 18 of 26 |
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| 56 | 56 | | public act 19-35; and (6) whether the proposal promotes natural gas 27 |
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| 57 | 57 | | distribution system benefits. 28 |
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| 58 | 58 | | (d) The commissioner may direct the gas companies, as defined in 29 |
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| 59 | 59 | | section 16-1 of the general statutes, to enter into gas purchase 30 |
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| 60 | 60 | | agreements for biogas suppliers selected pursuant to this section for 31 |
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| 61 | 61 | | periods of not more than twenty years on behalf of all customers of the 32 |
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| 62 | 62 | | state's gas companies. 33 |
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| 63 | 63 | | (e) Any gas purchase agreement entered into pursuant to this section 34 |
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| 64 | 64 | | shall be subject to review and approval by the Public Utilities 35 |
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| 65 | 65 | | Regulatory Authority. Such review shall be completed not later than one 36 |
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| 66 | 66 | | hundred twenty days after the date such agreement is filed with the 37 |
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| 67 | 67 | | authority. The authority shall review and approve such gas purchase 38 |
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| 68 | 68 | | agreement if it meets the solicitation proposal criteria pursuant to this 39 |
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| 69 | 69 | | section. 40 |
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| 70 | 70 | | (f) (1) The reasonable costs incurred by the gas companies in 41 |
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| 71 | 71 | | negotiating and executing such gas purchase agreements and the net 42 |
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| 72 | 72 | | costs for the supply of biogas under any such gas purchase agreement 43 |
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| 73 | 73 | | shall be recovered from all customers of such company through the 44 |
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| 74 | 74 | | purchased gas adjustment clause pursuant to section 16-19b of the 45 |
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| 75 | 75 | | general statutes. Any net revenue from the sale of products purchased 46 |
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| 76 | 76 | | in accordance with the gas purchase agreement entered into pursuant 47 |
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| 77 | 77 | | to this section shall be credited to customers through the same fully 48 Raised Bill No. 5350 |
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| 78 | 78 | | |
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| 79 | 79 | | |
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| 80 | 80 | | |
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| 81 | 81 | | LCO No. 2199 3 of 9 |
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| 82 | 82 | | |
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| 83 | 83 | | reconciling rate component for all customers of the contracting gas 49 |
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| 84 | 84 | | company. Any such net costs or net revenues, as applicable, of any such 50 |
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| 85 | 85 | | gas purchase agreement shall be apportioned in proportion to the 51 |
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| 86 | 86 | | revenues of each contracting gas company as reported to the authority 52 |
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| 87 | 87 | | pursuant to section 16-49 of the general statutes for the most recent fiscal 53 |
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| 88 | 88 | | year. 54 |
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| 89 | 89 | | (2) The gas companies shall recover any costs incurred related to 55 |
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| 90 | 90 | | constructing, operating and maintaining the infrastructure arising from 56 |
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| 91 | 91 | | such gas purchase agreement from the biogas supplier through a 57 |
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| 92 | 92 | | contribution in aid of construction, or other provision, of the gas 58 |
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| 93 | 93 | | purchase agreement. Any incurred costs not recoverable from the 59 |
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| 94 | 94 | | biogas supplier shall be identified and approved by the authority at the 60 |
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| 95 | 95 | | time the authority approves any such gas purchase agreement. Such 61 |
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| 96 | 96 | | incurred costs shall be recovered in any existing rate tracking 62 |
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| 97 | 97 | | mechanism for the recovery of natural gas infrastructure investments, 63 |
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| 98 | 98 | | or, if no mechanism currently exists, a newly established rate tracking 64 |
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| 99 | 99 | | mechanism established by the authority. 65 |
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| 100 | 100 | | (g) A gas company may elect to (1) use any renewable natural gas 66 |
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| 101 | 101 | | procured under this section to meet the needs of its customers, or (2) sell 67 |
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| 102 | 102 | | any such renewable natural gas into applicable markets or through 68 |
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| 103 | 103 | | bilateral contracts with third parties with the net benefits or costs 69 |
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| 104 | 104 | | reflected in the purchased gas adjustment clause pursuant to section 16-70 |
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| 105 | 105 | | 19b of the general statutes. 71 |
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| 106 | 106 | | (h) The commissioner may retain consultants to assist in 72 |
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| 107 | 107 | | implementing this section, including, but not limited to, the evaluation 73 |
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| 108 | 108 | | of proposals submitted pursuant to this section. All reasonable costs 74 |
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| 109 | 109 | | associated with the commissioner's solicitation and review of proposals 75 |
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| 110 | 110 | | pursuant to this section shall be recoverable through the same fully 76 |
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| 111 | 111 | | reconciling rate component for all customers of the gas companies. Such 77 |
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| 112 | 112 | | costs shall be recoverable even if the commissioner does not select any 78 |
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| 113 | 113 | | solicitation proposals pursuant to this section. 79 |
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| 114 | 114 | | (i) (1) Any dispute arising from a contract that is approved by the 80 Raised Bill No. 5350 |
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| 115 | 115 | | |
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| 116 | 116 | | |
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| 117 | 117 | | |
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| 118 | 118 | | LCO No. 2199 4 of 9 |
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| 119 | 119 | | |
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| 120 | 120 | | authority pursuant to this section shall be brought to the authority. A 81 |
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| 121 | 121 | | party may petition the authority for a declaratory ruling or make an 82 |
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| 122 | 122 | | application for review pursuant to this subsection. Notwithstanding 83 |
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| 123 | 123 | | subsection (a) of section 4-176 of the general statutes, the authority may 84 |
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| 124 | 124 | | not on its own motion initiate a proceeding to review a contract entered 85 |
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| 125 | 125 | | into pursuant to this subsection. 86 |
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| 126 | 126 | | (2) The authority shall review any contract dispute brought pursuant 87 |
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| 127 | 127 | | to subdivision (1) of this subsection. The authority shall decide any such 88 |
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| 128 | 128 | | contract dispute by issuing a declaratory ruling or a final decision in a 89 |
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| 129 | 129 | | contested case proceeding, and may order legal and equitable remedies. 90 |
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| 130 | 130 | | Any party to the contract shall have the right to appeal to the Superior 91 |
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| 131 | 131 | | Court from any such declaratory ruling or final decision issued 92 |
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| 132 | 132 | | pursuant to this section. 93 |
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| 133 | 133 | | Sec. 2. Section 16-34a of the general statutes is amended by adding 94 |
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| 134 | 134 | | subsections (c) and (d) as follows (Effective October 1, 2020): 95 |
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| 135 | 135 | | (NEW) (c) On or before January 1, 2021, the Public Utilities 96 |
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| 136 | 136 | | Regulatory Authority shall reopen or initiate a docket for the sole 97 |
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| 137 | 137 | | purpose of evaluating whether a gas company should accelerate its 98 |
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| 138 | 138 | | existing schedule for the repair and replacement of aging infrastructure 99 |
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| 139 | 139 | | in order to mitigate, among other things, methane emissions and issue 100 |
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| 140 | 140 | | orders consistent with such evaluation. All costs a gas company 101 |
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| 141 | 141 | | prudently incurs to comply with any such order shall be timely 102 |
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| 142 | 142 | | recovered from all customers of such gas company through the existing 103 |
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| 143 | 143 | | Distribution Integrity Management Program cost recovery and 104 |
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| 144 | 144 | | reconciliation mechanisms, or through the successor program. 105 |
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| 145 | 145 | | (NEW) (d) In reviewing the natural gas infrastructure expansion plan 106 |
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| 146 | 146 | | pursuant to subsection (c) of this section, in order to protect the interests 107 |
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| 147 | 147 | | of ratepayers and ensure revenue recovery for gas companies, and 108 |
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| 148 | 148 | | consistent with the recommendations of the Comprehensive Energy 109 |
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| 149 | 149 | | Strategy, the authority shall, in accordance with section 16-19oo, (1) 110 |
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| 150 | 150 | | establish a hurdle rate utilizing up to a twenty-five-year payback period 111 |
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| 151 | 151 | | to compare the revenue requirement of connecting new customers to the 112 Raised Bill No. 5350 |
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| 152 | 152 | | |
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| 153 | 153 | | |
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| 154 | 154 | | |
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| 155 | 155 | | LCO No. 2199 5 of 9 |
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| 156 | 156 | | |
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| 157 | 157 | | gas distribution system to determine the level of new business capital 113 |
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| 158 | 158 | | expenditures that will be recoverable through rates, provided the 114 |
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| 159 | 159 | | authority shall develop a methodology that reasonably accounts for 115 |
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| 160 | 160 | | revenues that would be collected from new customers who signaled an 116 |
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| 161 | 161 | | intention to switch to natural gas over a period of at least three years 117 |
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| 162 | 162 | | within a common geographic location, (2) establish a new rate for new 118 |
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| 163 | 163 | | customers added pursuant to the natural gas infrastructure expansion 119 |
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| 164 | 164 | | plan to offset incremental costs of expanding natural gas infrastructure 120 |
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| 165 | 165 | | pursuant to such plan, (3) establish a rate mechanism for the gas 121 |
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| 166 | 166 | | companies to recover prudent investments made pursuant to the 122 |
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| 167 | 167 | | approved natural gas infrastructure expansion plan in a timely manner 123 |
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| 168 | 168 | | outside of a rate proceeding, provided such mechanism shall take into 124 |
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| 169 | 169 | | consideration the additional revenues that gas companies will generate 125 |
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| 170 | 170 | | through the implementation of such plan, and (4) notwithstanding the 126 |
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| 171 | 171 | | provisions of section 16-19b, effective for the period of the natural gas 127 |
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| 172 | 172 | | expansion plan, (A) assign at least half of the nonfirm margin credit to 128 |
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| 173 | 173 | | offset the rate base of the gas companies, and (B) assign the lesser of (i) 129 |
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| 174 | 174 | | an amount equal to half of the nonfirm margin credit, or (ii) an amount 130 |
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| 175 | 175 | | equal to fifteen million dollars from the nonfirm margin credit annually 131 |
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| 176 | 176 | | for all gas companies in the aggregate, apportioned to each gas company 132 |
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| 177 | 177 | | in proportion to revenues of the existing and new capacity contracted 133 |
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| 178 | 178 | | for by each gas company, to offset expansion costs, including, but not 134 |
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| 179 | 179 | | limited to, the costs of adding new state, municipal, commercial and 135 |
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| 180 | 180 | | industrial customers. 136 |
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| 181 | 181 | | Sec. 3. (NEW) (Effective October 1, 2020) (a) On and after the effective 137 |
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| 182 | 182 | | date of each gas company's first rate case, in which a final decision is 138 |
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| 183 | 183 | | issued by the Public Utilities Regulatory Authority after July 1, 2021, for 139 |
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| 184 | 184 | | each new contract executed between a construction contractor and a gas 140 |
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| 185 | 185 | | company in which the construction contractor agrees to engage in the 141 |
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| 186 | 186 | | replacement of the gas company's natural gas distribution infrastructure 142 |
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| 187 | 187 | | within the state pursuant to the gas company's Distribution Integrity 143 |
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| 188 | 188 | | Management Program, as required pursuant to 49 CFR 192.1015 and as 144 |
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| 189 | 189 | | approved by the authority, the construction contractor shall pay not less 145 |
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| 190 | 190 | | than the prevailing rate of wage, as described in section 31-53 of the 146 Raised Bill No. 5350 |
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| 191 | 191 | | |
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| 192 | 192 | | |
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| 193 | 193 | | |
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| 194 | 194 | | LCO No. 2199 6 of 9 |
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| 195 | 195 | | |
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| 196 | 196 | | general statutes, to individuals who perform construction activities with 147 |
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| 197 | 197 | | respect to such replacement. 148 |
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| 198 | 198 | | (b) (1) Not later than fifteen months after the effective date described 149 |
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| 199 | 199 | | in subsection (a) of this section, each gas company shall file a report with 150 |
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| 200 | 200 | | the authority detailing the impact that the prevailing wage provisions 151 |
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| 201 | 201 | | of subsection (a) of this section have on: 152 |
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| 202 | 202 | | (A) The cost of the replacement of gas companies' natural gas 153 |
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| 203 | 203 | | distribution infrastructure in the state; 154 |
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| 204 | 204 | | (B) The forecasted or actual rates charged to customers of gas 155 |
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| 205 | 205 | | companies in the state; 156 |
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| 206 | 206 | | (C) The number of qualified individuals available to perform the 157 |
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| 207 | 207 | | replacement of gas companies' natural gas distribution infrastructure in 158 |
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| 208 | 208 | | the state, including any shortage of the availability of such qualified 159 |
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| 209 | 209 | | individuals and any impact on the scheduling or timing for the 160 |
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| 210 | 210 | | performance of such replacement; and 161 |
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| 211 | 211 | | (D) The quality, reliability and safety of the replacement of gas 162 |
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| 212 | 212 | | companies' natural gas distribution infrastructure in the state. 163 |
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| 213 | 213 | | (2) Such report shall be based on data from the twelve-month period 164 |
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| 214 | 214 | | after the effective date described in subsection (a) of this section and 165 |
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| 215 | 215 | | shall include recommendations concerning whether the requirements in 166 |
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| 216 | 216 | | subsection (a) of this section that construction contractors pay not less 167 |
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| 217 | 217 | | than the prevailing rate of wage should be amended, and, if so, the 168 |
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| 218 | 218 | | report shall include a description of any such amendments. 169 |
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| 219 | 219 | | Sec. 4. Subsection (d) of section 16a-3j of the general statutes is 170 |
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| 220 | 220 | | repealed and the following is substituted in lieu thereof (Effective October 171 |
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| 221 | 221 | | 1, 2020): 172 |
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| 222 | 222 | | (d) In any solicitation for natural gas resources issued pursuant to this 173 |
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| 223 | 223 | | subsection, the commissioner shall seek proposals for (1) [interstate 174 |
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| 224 | 224 | | natural gas transportation capacity, (2)] liquefied natural gas, [(3)] (2) 175 |
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| 225 | 225 | | liquefied natural gas storage, and [(4)] (3) natural gas storage, or a 176 Raised Bill No. 5350 |
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| 226 | 226 | | |
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| 227 | 227 | | |
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| 228 | 228 | | |
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| 229 | 229 | | LCO No. 2199 7 of 9 |
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| 230 | 230 | | |
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| 231 | 231 | | combination of any such resources, provided such proposals provide 177 |
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| 232 | 232 | | incremental capacity, gas, or storage that has a firm delivery capability 178 |
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| 233 | 233 | | to transport natural gas to natural gas-fired generating facilities located 179 |
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| 234 | 234 | | in the control area of the regional independent system operator. 180 |
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| 235 | 235 | | Proposals under this subsection shall not have a contract term exceeding 181 |
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| 236 | 236 | | a period of twenty years. 182 |
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| 237 | 237 | | Sec. 5. Subsections (g) and (h) of section 16a-3j of the general statutes 183 |
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| 238 | 238 | | are repealed and the following is substituted in lieu thereof (Effective 184 |
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| 239 | 239 | | October 1, 2020): 185 |
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| 240 | 240 | | (g) If the commissioner finds proposals received pursuant to this 186 |
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| 241 | 241 | | section to be in the best interest of electric ratepayers, in accordance with 187 |
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| 242 | 242 | | the provisions of subsection (e) of this section, the commissioner may 188 |
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| 243 | 243 | | select any such proposal or proposals, provided the total capacity of the 189 |
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| 244 | 244 | | resources selected under all solicitations issued pursuant to this section 190 |
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| 245 | 245 | | in the aggregate do not exceed three hundred seventy-five million cubic 191 |
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| 246 | 246 | | feet per day of natural gas capacity, or the equivalent megawatts of 192 |
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| 247 | 247 | | electricity, electric demand reduction or combination thereof. Any 193 |
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| 248 | 248 | | proposals selected pursuant to subsections (b) and (c) of this section 194 |
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| 249 | 249 | | shall not, in the aggregate, exceed ten per cent of the load distributed by 195 |
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| 250 | 250 | | the state's electric distribution companies. The commissioner may, on 196 |
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| 251 | 251 | | behalf of all customers of electric distribution companies, direct the 197 |
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| 252 | 252 | | electric distribution companies to enter into long-term contracts for 198 |
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| 253 | 253 | | passive demand response measures, electricity, electric capacity, 199 |
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| 254 | 254 | | environmental attributes, energy storage, [interstate natural gas 200 |
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| 255 | 255 | | transportation capacity,] liquefied natural gas, liquefied natural gas 201 |
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| 256 | 256 | | storage, and natural gas storage, or any combination thereof, from 202 |
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| 257 | 257 | | proposals submitted pursuant to this section, provided the benefits of 203 |
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| 258 | 258 | | such contracts to customers of electric distribution companies outweigh 204 |
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| 259 | 259 | | the costs to such companies' customers. 205 |
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| 260 | 260 | | (h) Any agreement entered into pursuant to this section shall be 206 |
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| 261 | 261 | | subject to review and approval by the Public Utilities Regulatory 207 |
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| 262 | 262 | | Authority. The electric distribution company shall file an application for 208 |
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| 263 | 263 | | the approval of any such agreement with the authority. The authority 209 Raised Bill No. 5350 |
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| 264 | 264 | | |
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| 265 | 265 | | |
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| 266 | 266 | | |
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| 267 | 267 | | LCO No. 2199 8 of 9 |
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| 268 | 268 | | |
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| 269 | 269 | | shall approve such agreement if it is cost effective and in the best interest 210 |
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| 270 | 270 | | of electric ratepayers. The authority shall issue a decision not later than 211 |
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| 271 | 271 | | ninety days after such filing. If the authority does not issue a decision 212 |
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| 272 | 272 | | within ninety days after such filing, the agreement shall be deemed 213 |
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| 273 | 273 | | approved. The net costs of any such agreement, including costs incurred 214 |
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| 274 | 274 | | by the electric distribution company under the agreement and 215 |
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| 275 | 275 | | reasonable costs incurred by the electric distribution company in 216 |
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| 276 | 276 | | connection with the agreement, shall be recovered on a timely basis 217 |
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| 277 | 277 | | through a fully reconciling component of electric rates for all customers 218 |
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| 278 | 278 | | of the electric distribution company. Any net revenues from the sale of 219 |
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| 279 | 279 | | products purchased in accordance with long-term contracts entered into 220 |
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| 280 | 280 | | pursuant to this section shall be credited to customers through the same 221 |
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| 281 | 281 | | fully reconciling rate component for all customers of the contracting 222 |
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| 282 | 282 | | electric distribution company. For any contract for [interstate natural 223 |
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| 283 | 283 | | gas transportation capacity,] liquefied natural gas, liquefied natural gas 224 |
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| 284 | 284 | | storage or natural gas storage entered into pursuant to this section, the 225 |
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| 285 | 285 | | electric distribution company may contract with a gas supply manager 226 |
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| 286 | 286 | | to sell such [interstate natural gas transportation capacity,] liquefied 227 |
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| 287 | 287 | | natural gas, liquefied natural gas storage or natural gas storage, or a 228 |
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| 288 | 288 | | combination thereof, into the wholesale markets at the best available 229 |
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| 289 | 289 | | price in a manner that meets all applicable requirements pursuant to all 230 |
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| 290 | 290 | | applicable regulations of the Federal Energy Regulatory Commission. 231 |
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| 291 | 291 | | This act shall take effect as follows and shall amend the following |
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| 292 | 292 | | sections: |
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| 293 | 293 | | |
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| 294 | 294 | | Section 1 October 1, 2020 New section |
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| 295 | 295 | | Sec. 2 October 1, 2020 16-34a |
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| 296 | 296 | | Sec. 3 October 1, 2020 New section |
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| 297 | 297 | | Sec. 4 October 1, 2020 16a-3j(d) |
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| 298 | 298 | | Sec. 5 October 1, 2020 16a-3j(g) and (h) |
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| 299 | 299 | | |
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| 300 | 300 | | Statement of Purpose: |
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| 301 | 301 | | To (1) allow the Commissioner of Energy and Environmental Protection |
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| 302 | 302 | | to solicit proposals for the supply of biogas for injection into the natural |
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| 303 | 303 | | gas distribution system in the state, (2) require the Public Utilities |
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| 304 | 304 | | Regulatory Authority to reopen or initiate dockets for the sole purpose |
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| 305 | 305 | | of evaluating whether a gas company should accelerate its existing Raised Bill No. 5350 |
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| 306 | 306 | | |
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| 307 | 307 | | |
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| 308 | 308 | | |
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| 309 | 309 | | LCO No. 2199 9 of 9 |
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| 310 | 310 | | |
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| 311 | 311 | | schedule for the repair and replacement of aging infrastructure, (3) |
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| 312 | 312 | | allow the Public Utilities Regulatory Authority to set rates to protect the |
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| 313 | 313 | | interests of ratepayers and ensure revenue recovery for gas companies, |
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| 314 | 314 | | and (4) require construction contractors to pay not less than the |
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| 315 | 315 | | prevailing rate of wage to individuals who perform construction |
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| 316 | 316 | | activities with respect to the replacement of a gas company's natural gas |
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| 317 | 317 | | distribution infrastructure. |
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| 318 | 318 | | [Proposed deletions are enclosed in brackets. Proposed additions are indicated by underline, except |
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| 319 | 319 | | that when the entire text of a bill or resolution or a section of a bill or resolution is new, it is not |
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| 320 | 320 | | underlined.] |
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| 321 | 321 | | |
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