December 2, 2004 Legislative Office Building Hartford, CT

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

2. Environment Northeast • 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 Environment Northeast

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

4. Inadequate Energy Conservation Fund – missing key savings and key customers No renewable investment fund Interconnect engineering standards obstacle Building Code in need of updating Efficiency Standards need updating 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 Clean Energy Fund exists Uniform interconnect standards adopted Building energy code updated Efficiency standards bill enacted Green power offer pending Efficiency offer pending Renewable Portfolio Standard kicking in Project 100: Installing Renewable Energy in Connecticut Connecticut is Making Significant Progress Promoting Sustainable Energy Policies1998 2004 Environment Northeast

5. 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 • Energy efficiency resources are achieved at costs from $.02 to $.05 per lifetime kWh saved • 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 • Significant Public Input and Oversight – A Model for Good Policy Development Environment Northeast

6. 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 Environment Northeast

7. 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) Environment Northeast

8. We Can Do More: Achieve Level or Reduced Growth in Demand Environment Northeast

9. Connecticut Demand Growth:The Need for Policy Action Sources and Projected Growth in Demand and Resulting Increases in CT Carbon Emissions (MMTC) Category 2000 2050 % Increase Electric power 2.54 3.78 - 8.04 50% - 220% Mobility 4.14 6.67 61% Residential 2.21 2.21 0% Industrial 1.50 1.88 25% Commercial 1.06 1.06 0% State total 11.33 16.21 - 20.47 43% - 81% 2050 Target 2.83 MMTC (75%) Environment Northeast

10. Sustainable Energy Policies: Where To Next? • Natural Gas: Increase Efficient Use • Home heating oil 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 • Protect the Conservation and Clean Energy Funds from further raids Environment Northeast

11. 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 Environment Northeast

12. Connecticut Needs to Promote Gas Efficiency to All Customers States with Natural Gas Conservation Projects in Green Environment Northeast

13. Natural Gas Conservation Reduces Gas Prices Environment Northeast

14. Oil Conservation • 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 • Substantial savings to consumers with the creation of a modest fuel oil efficiency program • Provide oil customers efficiency options • Upgrade boilers • 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 Environment Northeast

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

16. 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 Environment Northeast

17. Further Information Environment Northeast http://www.env-ne.org/Sustainable_Connecticut.htm 28 Grand Street, Hartford, CT 06106 860-246-7121 101 Whitney Avenue, New Haven, CT 06510 203-495-8224 Environment Northeast