HB 6764 — AN ACT CONCERNING A SOLAR UNIFORM CAPACITY TAX AND MODIFICATIONS TO THE STATE'S RENEWABLE ENERGY PROGRAMS.

sHB6764LCO /{\\PRDFS1\HCOUSERS\BARRYJN\WS\2023HB-067610 Fileof 20 R02-HB.docx } Substitute Bill No.

3156764 10(6) sHB6764The Fileprogram No.requirements for shared clean energy facilities developed pursuant to subparagraph (C) of subdivision (1) of this subsection shall include, but not be limited to, the following:

315 (6) The program requirements for shared clean energy facilities developed pursuant to subparagraph (C) of subdivision (1) of this subsection shall include, but not be limited to, the following:

(E) The department shall require that (i) not less than twenty per cent of the total capacity of each shared clean energy facility is sold, given or provided to low-income customers, and (ii) not less than sixty per cent of the total capacity of each shared clean energy facility is sold, given or providedLCO to{\\PRDFS1\HCOUSERS\BARRYJN\WS\2023HB-06711 low-incomeof customers,20 moderate-incomeR02-HB.docx customers} orSubstitute sHB6764Bill / File No.

3156764 11provided sHB6764to Filelow-income No.customers, moderate-income customers or low-income service organizations.

315 low-income service organizations.

(D) "Moderate-income customer" means an in-state retail end user of anelectricdistributioncompany whoseincome isbetween sixtyper cent and [one hundred] eighty per cent of the area median income as defined by the United States Department of Housing and Urban Development, adjustedLCO for{\\PRDFS1\HCOUSERS\BARRYJN\WS\2023HB-06712 familyof size.20 R02-HB.docx } Substitute Bill No.

sHB67646764 /adjusted Filefor No.family size.

315(b) 12(1) sHB6764On Fileor No.before July 1, 2020, the authority shall initiate a proceeding to establish (A) tariffs for each electric distribution company pursuant to subdivision (2) of this subsection, (B) a rate for such tariffs, which may be based upon the results of one or more competitive solicitations issued pursuant to subsection (a) of this section, or on the average cost of installing the generation project and a reasonable rate of return that is just, reasonable and adequate, as determined by the authority, and shall be guided by the Comprehensive Energy Strategy prepared pursuant to section 16a-3d, and (C) the period of time that will be used for calculating the net amount of energy produced by a facility and not consumed, provided the authority shall assess whether to incorporate time-of-use rates or other dynamic pricing and such period of time shall be either (i) in real time, (ii) in one day, (iii) in any fraction of a day not to exceed one day, or (iv) in any period of time greater than one day up to and including one month.

315 (b) (1) On or before July 1, 2020, the authority shall initiate a proceeding to establish (A) tariffs for each electric distribution company pursuant to subdivision (2) of this subsection, (B) a rate for such tariffs, which may be based upon the results of one or more competitive solicitations issued pursuant to subsection (a) of this section, or on the average cost of installing the generation project and a reasonable rate of return that is just, reasonable and adequate, as determined by the authority, and shall be guided by the Comprehensive Energy Strategy prepared pursuant to section 16a-3d, and (C) the period of time that will be used for calculating the net amount of energy produced by a facility and not consumed, provided the authority shall assess whether to incorporate time-of-use rates or other dynamic pricing and such period of time shall be either (i) in real time, (ii) in one day, (iii) in any fraction of a day not to exceed one day, or (iv) in any period of time greater than one day up to and including one month.

(2) On and after January 1, 2022, each electric distribution company shall offer the following options to residential customers for the purchase of products generated from a Class I renewable energy source thatLCO is{\\PRDFS1\HCOUSERS\BARRYJN\WS\2023HB-06713 located on a customer's own premises and has a nameplate capacity rating of twenty-five20 kilowattsR02-HB.docx or} lessSubstitute forBill aNo. term not to exceed twenty years:

(A)6764 Athat tariffis forlocated theon purchasea ofcustomer's allown energypremises and renewablehas sHB6764a /nameplate Filecapacity No.rating of twenty-five kilowatts or less for a term not to exceed twenty years:

315(A) 13A sHB6764tariff Filefor No.the purchase of all energy and renewable energy certificates on a cents-per-kilowatt-hour basis;

315 energy certificates on a cents-per-kilowatt-hour basis;

The Public Utilities Regulatory Authority shallLCO initiate{\\PRDFS1\HCOUSERS\BARRYJN\WS\2023HB-06714 an uncontested proceeding to implement the distribution of the20 benefitsR02-HB.docx from} theSubstitute generationBill projectNo. pursuant to this section.

6764 shall initiate an uncontested proceeding to implement the distribution of the benefits from the generation project pursuant to this section.

sHB6764(i) /"Program" Filemeans No.any tariff offered by electric distribution companies pursuant to subsection (a) of this section;

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315 (i) "Program" means any tariff offered by electric distribution companies pursuant to subsection (a) of this section;

[(c) (1) (A)] (B) The aggregate total megawatts available to all customersLCO [utilizing{\\PRDFS1\HCOUSERS\BARRYJN\WS\2023HB-06715 a procurement and tariff offered by electric distribution companies pursuant to subsection (a) of this20 section]R02-HB.docx in} allSubstitute programsBill shall be up to eighty-five megawatts in year one and increase by up to an additional one hundred sixty megawatts per year [in each of the years two through six of such a tariff, provided] on and after sHB6764 / File No.

3156764 15customers sHB6764[utilizing Filea No.procurement and tariff offered by electric distribution companies pursuant to subsection (a) of this section] in all programs shall be up to eighty-five megawatts in year one and increase by up to an additional one hundred sixty megawatts per year [in each of the years two through six of such a tariff, provided] on and after January 1, 2023.

315 January 1, 2023.

Any megawattsLCO not{\\PRDFS1\HCOUSERS\BARRYJN\WS\2023HB-06716 allocatedof in20 anyR02-HB.docx given} yearSubstitute shallBill [roll]No. transfer into the next year's available megawatts, unless the megawatts are reallocated pursuant to subparagraph (D) of this subdivision.

The6764 obligationmegawatts tonot purchaseallocated energyin andany renewablegiven energyyear certificates shall be[roll] apportionedtransfer tointo electricthe distributionnext companiesyear's basedavailable onmegawatts, theirunless respectivethe distributionmegawatts sHB6764are /reallocated Filepursuant No.to subparagraph (D) of this subdivision.

315The 16obligation sHB6764to Filepurchase No.energy and renewable energy certificates shall be apportioned to electric distribution companies based on their respective distribution system loads, as determined by the authority.

315 system loads, as determined by the authority.

[(3)] (e) For any tariff established pursuant to this section, the authority shallexamine howhowto to incorporatethefollowing energy system benefits into the rate established for any such tariff:

[(d)]LCO (f){\\PRDFS1\HCOUSERS\BARRYJN\WS\2023HB-06717 In accordance with subsection (h) of section20 16-245a,R02-HB.docx the} authoritySubstitute shallBill determine which of the following two options is in the best interest of ratepayers and shall direct each electric distribution company to either (1) retire the renewable energy certificates it purchases pursuant to subsections (a) and (b) of this section on behalf of all ratepayers to satisfy the obligations of all electric suppliers and sHB6764 / File No.

3156764 17[(d)] sHB6764(f) FileIn No.accordance with subsection (h) of section 16-245a, the authority shall determine which of the following two options is in the best interest of ratepayers and shall direct each electric distribution company to either (1) retire the renewable energy certificates it purchases pursuant to subsections (a) and (b) of this section on behalf of all ratepayers to satisfy the obligations of all electric suppliers and electric distribution companies providing standard service or supplier of last resort service pursuant to section 16-245a, or (2) sell such renewable energy certificates into the New England Power Pool Generation information system renewable energy credit market.

315 electric distribution companies providing standard service or supplier of last resort service pursuant to section 16-245a, or (2) sell such renewable energy certificates into the New England Power Pool Generation information system renewable energy credit market.

(Effective July 1, 2023) (a) Not later than February 1, 2024, the Commissioner of Energy and Environmental Protection, in consultation withLCO the{\\PRDFS1\HCOUSERS\BARRYJN\WS\2023HB-06718 Commissioners of Administrative20 Services,R02-HB.docx Correction} andSubstitute Transportation,Bill shall submit a report, in accordance with the provisions of section 11-4a of the general statutes, to the joint standing committee of the General Assembly having cognizance of matters relating to energyandtechnologythatidentifiesstateproperties,including,but not limited to, highway corridors and correctional institutions, that are sHB6764 / File No.

3156764 18with sHB6764the FileCommissioners No.of Administrative Services, Correction and Transportation, shall submit a report, in accordance with the provisions of section 11-4a of the general statutes, to the joint standing committee of the General Assembly having cognizance of matters relating to energyandtechnologythatidentifiesstateproperties,including,but not limited to, highway corridors and correctional institutions, that are suitable for lease to private entities for the construction or location of solar photovoltaic facilities with capacities of two or more megawatts.

315 suitable for lease to private entities for the construction or location of solar photovoltaic facilities with capacities of two or more megawatts.

ThisLCO act{\\PRDFS1\HCOUSERS\BARRYJN\WS\2023HB-067619 shallof take20 effectR02-HB.docx as} followsSubstitute andBill shallNo. amend the following sections:

6764 This act shall take effect as follows and shall amend the following sections:

4 July 1, 2023 New section sHB6764Sec. / File No.

3155 19July sHB67641, File2023 No.New section ET Joint Favorable Subst.

315APP Sec.Joint Favorable LCO {\\PRDFS1\HCOUSERS\BARRYJN\WS\2023HB-06764- 20 of 20 R02-HB.docx }

5 July 1, 2023 New section Statement of Legislative Commissioners:

The title was changed.

ET Joint Favorable Subst.

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315 The following Fiscal Impact Statement and Bill Analysis are prepared for the benefit of the members of the General Assembly, solely for purposes of information, summarization and explanation and do not represent the intent of the General Assembly or either chamber thereof for any purpose.

In general, fiscal impacts are based upon a variety of informational sources, including the analyst’s professional knowledge.

Whenever applicable, agency data is consulted as part of the analysis, however final products do not necessarily reflect an assessment from any specific department.

OFA Fiscal Note State Impact:

Agency Affected Fund-Effect FY 24 $ FY 25 $ Resources of the General Fund GF - Cost Up to Up to $1,400,000 $1,400,000 Resources of the General Fund GF - Revenue Up to Up to Gain $2,800,000 $2,800,000 Note:

GF=General Fund Municipal Impact:

Municipalities Effect FY 24 $ FY 25 $ Various Municipalities STATE None Potential MANDATE - Grand List Reduction Explanation The bill would have a net revenue gain for the state.

The bill imposes a tax of $5.00 fee per kw of capacity of any facility with a greater kwh capacity than 25 kW.

As of 2019 Connecticut had a Photovoltaic Solar capacity of 566.3 mW or 566,300 kw .

This at the time was spread in over 44,514 facilities.

Assuming that the entire capacity was produced at facilities with greater than 25 kW capacity this would leave a maximum tax collection of $2,831,500.

Under the bill half of the additional tax revenue would be distributed to the general fund, and the one half 1State mandate is defined in Sec.

2-32b(2) of the Connecticut General Statutes, "state mandate" means any state initiated constitutional, statutory or executive action that requires a local government to establish, expand or modify its activities in such a way as to necessitate additional expenditures from local revenues.

2ISO New England 2020 PV Forecast sHB6764 / File No.

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315 would be designated to the bill's Solar Uniform Capacity Account.

The Department of Energy and Environmental Protection (DEEP) is charged with producing a study on properties that the state holds that could be leased by solar projects to increase capacity The bill specifically includes highway corridors and correctional institutions as potential locations.

DEEP must consult with the commissioners of administrative services, corrections, and transportation for the report.

DEEP is also requiredtoputtogetheranadditionalstudyonlocationsinright-of-way and underutilized parking lots.

There is no additional cost for conducting Either study.

The bill expands the net zero mW cap from 100 mW to 200 mW.

The Non-Residential Energy Solutions program (NRES) and the Shared Clean Energy Facilities program (SCEF) would both maintain aggregate caps at 160 mW;

but unused capacity may be transferred to another program if it is under existing caps.

The programmatic caps were not changed by this legislation.

This does not obligate the Public Utility Regulatory Authority ( PURA) to any additional action and has no cost to the state.

The bill, which exempts certain solar facilities from property tax, results in a potential grand list reduction beginning in FY 25 for municipalities that have these solar facilities.

The grand list reduction will be partially mitigated by the funds collected from the facilities and deposited into the new Solar Uniform Capacity Tax Account.

These funds are distributed to municipalities in proportion to the municipality'sshare oftotalcapacity ofsolar facilitiessubject to thebill's property tax exemption and tax.

Rate Payer Impact Statement:

This bill may cause a slight rate increase.

The program NRES and SCEF are programs administered by electric distribution companies in Connecticut.

These companies are allowed to reclaim any investment made in infrastructure via the cost recovery method currently built into sHB6764 / File No.

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315 the rate.

The expansion of zero emissions projects through these programs may require additional infrastructure improvements increasing costs available to recover through the ratepayer.

The exact impact fiscally would depend heavily on existing infrastructure conditions, market fluctuations, and if the additional power purchased would come from current participants or new participants.

The Out Years The annualized ongoing fiscal impact identified above would continue into the future subject to inflation.

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315 OLR Bill Analysis sHB 6764 AN ACT CONCERNING A SOLAR UNIFORM CAPACITY TAX AND MODIFICATIONS TO THE STATE'S RENEWABLE ENERGY PROGRAMS.

SUMMARY This bill exempts certain solar facilities larger than 25 kilowatts (kW) in capacity from the property tax and establishes a “solar uniform capacity tax” for facility owners.

The bill requires the Department of Revenue Services (DRS) commissioner to collect the tax and deposit half of received funds into the General Fund and half into a new Solar Uniform Capacity Tax Account that provides financial assistance to municipalities in proportion to their share of the state’s total solar capacity.

The bill also expands the Non-Residential Energy Solutions (NRES) program by expanding the yearly amount of capacity in megawatts (MW) available for zero-emissions projects from 100 to 200 MW (though the bill appears to keep a 160 MW aggregate annual cap for NRES and the Shared Clean Energy Facilities (SCEF) program).

The bill makes other changes affecting the NRES and SCEF programs, including (1) allowing unused capacity under a program’s annual cap to be reallocated to other programs in certain cases and (2) changing the income eligibility for SCEF capacity set aside for low- and moderate- income customers (see BACKGROUND).

The bill requires the Department of Energy and Environmental Protection (DEEP) to submit two reports to the Energy and Technology Committee by February 1, 2024, related to land use and solar facilities with capacities of two or more megawatts.

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315 Lastly, the bill makes technical and conforming changes.

EFFECTIVE DATE:

October 1, 2023, except DEEP’s reporting requirements are effective July 1, 2023.

§§ 1 & 2 — PROPERTY TAX EXEMPTION AND SOLAR UNIFORM CAPACITY TAX Property Tax Exemption for Certain Solar Facilities The bill establishes a property tax exemption for solar photovoltaic systemswitha capacity over 25kW,beginning withtheassessment year starting October 1, 2023.

Under the bill, “capacity” is the aggregate alternating current nameplate capacity of all inverters used to convert a solar photovoltaic system’s output to alternating current power.

Nameplate capacity generally refers to a facility’s maximum output under specific conditions designated by the manufacturer.

Under the bill, owners of these facilities do not have to file an application with the municipal assessor or board of assessors to claim the exemption, as existing law requires for other property tax exemptionsfor ClassI renewableresources(e.g., solar facilities).The bill also makes these facilities ineligible for a separate property tax exemption, at municipal option, for Class I renewable energy sources subject to a power purchase agreement approved by the Public Utilities Regulatory Authority (PURA).

Solar Uniform Capacity Tax and Account The bill establishes a separate tax for these facilities, beginning January 1, 2024.

It requires facility owners to annually pay the DRS commissioner an amount calculated by multiplying $5 by the facility’s capacity (e.g., someone who owns a 30 kW facility would pay $150).

Under the bill, facility owners must electronically submit a return on DRS-prescribed forms, annually by July 31, that reports the following information:

1.

the capacity of each solar facility subject to the tax the person owned in the state during the previous calendar year;

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315 2.

eachfacility’sphysicaladdress,includingthemunicipalitywhere it was located;

3.

the calculated tax amount for each facility the person owned;

4.

the calculated tax amount for all facilities the person owned in a municipality, aggregated by municipality;

and 5.

the calculated total tax due.

The bill makes the tax due the same day as the return’s due date (July 31) and requires facility owners to pay the tax via electronic funds transfer under existing provisions otherwise applicable to certain taxpayers.

These provisions require the taxpayer to use an electronic fund transfer method approved by DRS.

The bill requires DRS to maintain an accounting of all sums paid for the tax and an accounting that shows the sums attributable to each municipality where a solar facility is located, aggregated by municipality.

It also requires the DRS commissioner to maintain other information he needs to implement the tax.

The bill sets a penalty for failure to timely pay the tax.

The penalty is the greater of 10% of the amount due or $50, with interest imposed at the rate of 1% per month, or a fraction thereof, from the tax due date.

Under the bill, the DRS commissioner must transfer half of the funds received into the General Fund and the other half to the Solar Uniform Capacity Tax Account which the bill establishes (see below).

Solar Uniform Capacity Tax Account The bill establishes the Solar Uniform Capacity Tax Account as a separate, nonlapsing account within the General Fund.

The bill requires the Office of Policy and Management (OPM) secretary, or his designee, to spend account funds on direct financial assistance to municipalities in proportion to their share of total capacity of solar facilities subject to the bill’s property tax exemption and tax.

DRS must share information on the tax with OPM, including the information provided on tax return sHB6764 / File No.

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315 forms it receives.

§ 3 — NRES AND SCEF PROGRAMS NRES Expansion The bill increases the yearly amount of capacity in megawatts available for zero-emissionNRES projects(e.g., solar facilities,) from100 MW to 200 MW.

However,existing law,unchanged by thebill, has a 160 MW aggregate cap for the NRES and SCEF programs.

Current law sets this 160 MW aggregate cap in years two through six of these programs.

The bill instead sets the aggregate cap beginning January 1, 2023, generally conforming to current practice.

(In practice, the programs began in different years.

Year two for NRES is 2023;

year two for SCEF is 2021.) Underused Program Capacity For SCEF and NRES, the bill requires PURA to allocate megawatts available under one program to other fully subscribed programs under certain conditions.

Specifically, PURA must make additional megawatts available to customers under fully subscribed programs if, in any given year, the actual program capacity for any program is less than 95% of the available capacity under the program’s annual cap.

The additional megawatts amount is equal to the difference between the actual and available program capacities for the undersubscribed program.

The bill requires PURA to allow Eversource and United Illuminating to solicit additional projects for reallocated megawatts in the year PURA makes them available or the following year, following their procurement plans required under existing law.

The law already requires assignment of unused megawatts to the next program year.

The bill makes a technical change to transfer, rather than roll, these megawatts into the next program year, but it exempts capacity reallocated under the process described above from this provision.

Low- and Moderate-Income SCEF Customers Existing law reserves at least 20% of each SCEF’s total capacity for sHB6764 / File No.

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315 low-income customers and at least 60% for low-income customers, moderate-income customers, and low-income service organizations.

The bill modifies eligibility for these reserved amounts by changing definitions for low- and moderate-income customers.

Under current law, a low-income customer has income at or below 60% of state median income.

The bill instead defines low-income customers as those with incomes below (1) 80% of area median income, as defined by the U.S.

Department of Housing and Urban Development or (2) 200% of the federal poverty limit.

The bill keeps existing law’s provision that includes affordable housing facilities as low-income customers.

Currently, a moderate-income customer has income from 60% to 100% of the area median income.

Under the bill, this customer has income of up to 80% of area median income, the same threshold as low- income customers.

(By setting the same threshold for both low- and moderate-incomecustomers,thebillappearstoeliminatethedistinction between the two, making moderate-income customers eligible for capacity set aside for low-income customers.) §§ 4 & 5 — DEEP REPORTS ON PROPERTIES FOR SOLAR FACILITIES WITH AT LEAST TWO MEGAWATTS CAPACITY The bill requires the DEEP commissioner to report to the Energy and Technology Committee by February 1, 2024, identifying suitable state properties for lease to private entities to construct or locate solar facilities of at least two MW capacity.

The bill specifically includes highway corridors and correctional institutions as potential locations.

DEEP must consult with the commissioners of administrative services, corrections, and transportation for the report.

The bill requires the four commissioners to post the report on their respective department websites within 60 days after DEEP submits the report to the committee.

Once posted, DEEP must forward a copy of the report to the Connecticut Siting Council (CSC) chairperson, who must also post it on the CSC’s website within 30 days after receiving it.

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315 The bill requires DEEP to submit another report to the Energy and Technology Committee by February 1, 2024, that identifies types of property in the state suitable for constructing or locating solar facilities with capacities of at least two MW.

The report must analyze whether the following properties may serve as suitable locations for these solar facilities:

1.

right-of-ways occupied by overhead transmission facilities in areas not subject to restoration or revegetation orders or 2.

abandoned or underutilized parking facilities.

The report must exclude prime farmlands and forest lands.

By law, “prime farmland” is generally land that has the best combination of physical and chemical characteristics for producing food, feed, forage, fiber, and oilseed crops and is also available for these uses (CGS § 16a- 3k and 7 C.F.R.

§ 657).

BACKGROUND NRES Program The NRES program allows non-residential customers (e.g., commercial and industrial customers) to participate in an annual solicitation conducted by Eversource and United Illuminating in which selected projects enter into a 20-year contract with the companies for energy and related products (e.g., renewable energy credits (RECs)).

To be eligible, a project must be a Class I renewable energy source that (1) uses anaerobic digestion or has low emissions (e.g., fuel cells) or (2) has zero emissions (e.g., solar facilities) (CGS § 16-244z(a)(2)(A) & (B)).

The law sets a six-year schedule for the program, which is currently in its second year (i.e., 2022 was Year 1).

SCEF Program Generally, a shared clean energy facility allows customers to subscribe for energy or RECs from a facility that is not on the customer’s premises.

Under the SCEF program, eligible facilities are Class I renewable energy sources (e.g., wind or solar) served by Eversource or United Illuminating with at least two subscribers in the same utility sHB6764 / File No.

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315 service territory as the facility (CGS § 16-244z(a)(2)(C)).

Eversource and United Illuminating do an annual solicitation using a competitive bidding procurement process and enter into 20-year contracts with selected projects.

The law sets a six-year schedule for the program, which is currently in its fourth year (i.e., 2020 was Year 1).

Related Bill SB 519, favorably reported by the Planning and Development Committee, makes solar installations between 0.5 and 7 MW ineligible for existing law’s residential- and farm-use renewable energy property tax exemption.

COMMITTEE ACTION Energy and Technology Committee Joint Favorable Substitute Yea 15 Nay 5 (03/14/2023) sHB6764 / File No.

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