SB2695sam001 95TH GENERAL ASSEMBLY

Sen. Don Harmon

Filed: 4/11/2008

09500SB2695sam001 LRB095 05628 MJR 48686 a

AMENDMENT TO SENATE BILL 2695

AMENDMENT NO. ______. Amend Senate Bill 2695 by replacing everything after the enacting clause with the following:

"Section 5. The Department of Commerce and Economic Opportunity Law of the Civil Administrative Code of Illinois is amended by adding Section 605-975 as follows:

(20 ILCS 605/605-975 new)

Sec. 605-975. On-bill financing of energy efficiency, renewable energy, and demand response resources.

(a) The Illinois General Assembly finds that Illinois homes and businesses have the potential to save 25% or more of energy now used through conservation and by implementation of cost-effective energy efficiency, renewable energy, and demand response measures. However, persistent barriers in the markets for these measures, including lack of information and lack of capital, prevent many Illinois consumers and businesses from making economical investments in them. It is the purpose of this Section to help overcome those barriers, to assist energy consumers in Illinois to make the most efficient use of energy resources, and to maximize the amount of value that is extracted from electricity and gas delivered by utilities in the State, by the creation of energy efficiency, renewable energy, and demand response resources on-bill financing programs. Programs created pursuant to this Section will allow utility customers to obtain energy efficiency products and services and renewable energy and demand response resources with no required initial payment, and to pay the cost of those products and services and resources over time on a utility bill.

(b) For purposes of this Section:

"Capital provider" means an entity that provides funds to pay the initial costs of the energy efficiency measures and demand response resources installed through the on-bill financing program created pursuant to this Section.

"Certification agent" means an entity designated by the Department to implement a system of energy efficiency and demand response on-bill financing programs.

"Certified contractor" means a person authorized by a certification agent to identify or develop, market, and install energy efficiency measures and renewable energy and demand response resources in programs established under this Section.

"Cost-effective measures" means those energy efficiency products and services, and those renewable energy and demand response resources, identified by the certification agent to have estimated electricity or gas savings, which are determined by rates in effect at the time of purchase, that are sufficient to cover the costs of implementing the measures, including financing charges and program fees, through payments of no more than three-quarters of the estimated savings and over a period no greater than three-quarters of the estimated useful life of the measure. Payment for a measure made by a customer at the time of installation may be deducted from the cost of the measure in determining whether the measure is cost-effective.

"Demand response resources" means tools and devices, including recording-demand meters, that allow a customer to better control energy use in response to price changes.

"Department" means the Department of Commerce and Economic Opportunity.

"Energy efficiency" means the reduction in energy usage by installation of energy-saving devices, materials, appliances or processes, while maintaining comparable light, power, heat, and cooling previously enjoyed.

"Energy efficiency, renewable energy, and demand response on-bill financing system" means a market-based system through which electric and gas utility customers may purchase cost-effective energy efficiency measures and demand response resources with no required upfront payment, and pay the cost of the energy efficiency measures and demand response resources over time on their electric or gas bill after independent certification that the measures and resources are appropriate and that estimated savings will exceed payments. The system assigns the obligation of repayment for permanent measures that continue to provide benefits of energy savings, and for resources, to the meter location

"Energy efficiency, renewable energy, and demand response tariff" means a tariff developed under this Section that defines the requirements for and operational arrangements between and among purchasers of energy efficiency products and services and renewable energy and demand response resources, sellers and installers of the products and services and resources, capital providers who provide financing for the initial costs of these products and services and resources, including vendors who finance the sale and installation of their products, services, and resources, public utilities, and certification agents.

"Permanent measures" means energy efficiency, renewable energy and demand response measures that, as determined by the certification agent, are likely to remain in the premises where installed.

(c) Not later than January 2, 2009, the Department, in cooperation with the Illinois Commerce Commission, shall establish one or more pilot programs through which certain customers of a public utility may be eligible to have cost-effective energy efficiency, renewable energy, or demand response measures that may be installed at the customer's location by a certified contractor. Those customers shall not be required to make any up-front payment for the installation, and may pay the cost of the energy efficiency, renewable energy, or demand response measures over time on a utility bill.

No later than January 2, 2012, the Department shall make an energy efficiency, renewable energy, and demand response on-bill financing system available to all public utility customers in the State. The Department shall monitor and evaluate the effects of the energy efficiency, renewable energy, and demand response measures installed pursuant to the programs established under this Section, and shall issue a report to the Governor and General Assembly on its findings every 2 years beginning in January 2011. This report shall describe, at a minimum, the nature of the measures installed, estimated energy and costs savings from the measures, the effects of reduced energy use on utility costs, and the effects of reduced energy use on the environment.

(d) Within 30 days after the effective date of this amendatory Act of the 95th General Assembly, the Department shall convene and provide staff support to an ad hoc task force comprised of the Illinois Commerce Commission, governments from municipalities with more than 1,000,000 residents, governments from municipalities with less than 1,000,000 residents, representatives of consumer, utility, energy efficiency, renewable energy, and demand response resource vendors, financial institutions, and other relevant interests, which shall advise the Department on the design of an energy efficiency, renewable energy, and demand response on-bill financing system including, but not limited to, the following considerations:

(1) criteria for selection of certification agents to be appointed by the Department;

(2) guidelines for financing of measures and resources installed under an energy efficiency, renewable energy, and demand response resources tariff;

(3) criteria and standards for qualified cost-effective energy efficiency, renewable energy and demand response resources;

(4) qualifications of vendors that will market and install efficiency products and services and renewable energy and demand response resources;

(5) rules for recovering costs for cost-effective energy efficiency measures, renewable energy, and demand response resources when the property where the measures or resources have been implemented transfers ownership;

(6) terms for the establishment of energy efficiency, renewable energy, and demand response resources tariffs in markets throughout the State;

(7) sample contracts and agreements necessary to implement energy efficiency, renewable energy, and demand response resources tariffs throughout the State;

(8) a recommended budget and funding sources to cover the costs to establish and operate an energy efficiency, renewable energy, and demand response resources on-bill financing system throughout the State; and

(9) cost estimates and plans to modify utility billing systems to include billing and collection capabilities for measures and resources installed under an energy efficiency, renewable energy, and demand response tariff.

(e) The Department shall designate, and subject to appropriations for this purpose shall contract with, certification agents to implement energy efficiency, renewable energy, and demand response on-bill financing systems. A certification agent designated by the Department under this Section:

(1) may be for a specified geographic areas of the State, or for specific classes of customers, or both;

(2) shall be qualified by relevant experience and expertise; and

(3) shall have general responsibility for the implementation and operation of an energy efficiency, renewable energy, and demand response resources on-bill financing system, including such duties as the Department assigns it through contract.

Section 10. The Public Utilities Act is amended by adding Sections 4-204.5 and 8-104 as follows:

(220 ILCS 5/4-204.5 new)

Sec. 4-204.5. Energy efficiency, renewable energy, and demand response on-bill financing programs.

(a) The Commission shall, not later than November 1, 2008, issue an order or orders that: (i) will allow certain customers of a public utility in Illinois to purchase cost-effective energy efficiency measures, renewable energy, and demand response resources under an energy efficiency and demand response resources tariff as part of a pilot program established under Section 605-975 of the Department of Commerce and Economic Opportunity Law of the Civil Administrative Code of Illinois; and (ii) require each public utility to file and maintain an energy efficiency, renewable energy, and demand response tariff or tariffs in accordance with this Section no later than January 2, 2010.

(b) Each public utility shall file and maintain an energy efficiency, renewable energy, and demand response tariff or tariffs in accordance with this Section and any applicable order of the Commission to allow any of its customers to pay over time on the utility bill for cost-effective energy efficiency measures, renewable energy, demand response resources as provided in Section 605-975 of the Department of Commerce and Economic Opportunity Law of the Civil Administrative Code of Illinois. An electric utility may include gas saving measures under its energy efficiency, renewable energy, and demand response resources tariff, and a gas distribution utility may include electricity saving measures under its energy efficiency, renewable energy, and demand response resources tariff. Disconnection for non-payment and treatment of bad debt under such a tariff will be subject to the same rules and regulations as other tariffs offered by the utility. To reduce bad debt, the Commission may direct public utilities to extend the payment term as necessary to recover any missed payments or costs needed to repair measures providing the payment term never exceeds the useful life of the measure.

(c) A public utility shall be entitled to recover reasonable costs incurred in complying with this Section and Section 605-975 of the Department of Commerce and Economic Opportunity Law of the Civil Administrative Code of Illinois.

(220 ILCS 5/8-104 new)

Sec. 8-104. Natural gas energy efficiency programs.

(a) It is the policy of the State that natural gas utilities are required to use cost-effective energy efficiency to reduce direct and indirect costs to consumers. It serves the public interest to allow gas utilities to recover costs for reasonably and prudently incurred expenses for energy efficiency.

(b) For purposes of this Section, "cost-effective" means that the measures satisfy the total resource cost test as defined in this Section, and "energy efficiency" means measures that reduce the amount of gas required to achieve a given end use.

For purposes of this Section only, "total resource cost test" means a standard that is met if, for an investment in energy efficiency, the benefit-cost ratio is greater than one. The benefit-cost ratio is the ratio of the net present value of the total benefits of the program to the net present value of the total costs as calculated over the lifetime of the measures. The total resource cost test compares the sum of avoided natural gas utility costs, representing the benefits that accrue to the system and the participant in the delivery of those efficiency programs, to the sum of all incremental costs of end-use measures that are implemented due to the program (including both utility and participant contributions), plus costs to administer, deliver, and evaluate each demand-side program, to quantify the net savings obtained by substituting the demand-side program for supply resources. In calculating avoided costs of power and energy that the gas utility would otherwise have had to acquire, reasonable estimates shall include financial costs likely to be imposed by future regulations and legislation on emissions of greenhouse gases. Provisions include an oversight and evaluation process that shall periodically monitor and develop data on the cost-effectiveness and actual productivity of demand-side efficiency and conservation programs. The low-income measures described in item (4) of subsection (f) of this Section shall not be required to meet the total resource cost test.

(c) Natural gas utilities shall implement cost-effective energy efficiency measures to meet the following incremental annual energy savings goals, based upon the amount of gas delivered in the immediately preceding calendar year:

(1) 0.2% of the total annual Mcf (1,000 cubic feet of gas) delivered in 2009;

(2) 0.4% of the total annual Mcf delivered in 2010;

(3) 0.6% of the total annual Mcf delivered in 2011;

(4) 0.8% of the total annual Mcf delivered in 2012;

(5) 1% of the total annual Mcf delivered in 2013;

(6) 1.4% of the total annual Mcf delivered in 2014;

(7) 1.8% of the total annual Mcf delivered in 2015; and

(8) 2% of the total annual Mcf delivered in 2016; and each year thereafter.

(d) Notwithstanding the requirements of subsection (c) of this Section, a natural gas utility may reduce the amount of energy efficiency resources it procures to meet energy savings goals in any single year by an amount necessary to limit the estimated average increase due to the cost of these resources included in the amounts paid by retail customers in connection with gas service to no more than 0.5% of the amount estimated to have been paid by such customers during the preceding calendar year procurement, with such limit increasing by 0.5% in each of the years 2010 through 2012, for a maximum cap on the allowed estimated average increase due to the cost of these resources of 2%. Three years after the date the Commission approves the initial energy efficiency plan filings, the Commission shall review the rate limitation and report to the General Assembly its findings as to whether the rate cap unduly constrains the procurement of energy efficiency resources that would be cost-effective.

(e) Natural gas public utilities shall be responsible for overseeing the design, development, and filing of their efficiency plans with the Commission. Those public utilities shall implement 75% of the energy efficiency programs approved by the Commission and may, as part of that implementation, outsource various aspects of program development and implementation. The remaining 25% of those energy efficiency measures approved by the Commission shall be implemented by the Department of Commerce and Economic Opportunity, and must be designed in conjunction with the utility and the filing process. The Department may outsource development and implementation of energy efficiency measures. A minimum of 10% of the entire portfolio of cost-effective energy efficiency measures shall be procured from units of local government, municipal corporations, school districts, and community college districts. The Department shall coordinate the implementation of these measures. The apportionment of the dollars to cover the costs to implement the Department's share of the portfolio of energy efficiency measures shall be made to the Department once the Department has executed grants or contracts for energy efficiency measures and provided supporting documentation for those grants and the contracts to the utility. The details of the measures implemented by the Department shall be submitted by the Department to the Commission in connection with the utility's filing regarding the energy efficiency measures that the utility implements. A gas utility providing approved energy efficiency measures in the State shall be permitted to recover costs of those measures through an automatic adjustment clause tariff filed with and approved by the Commission. The tariff shall be established outside the context of a general rate case. Each year the Commission shall initiate a review to reconcile any amounts collected with the actual costs and to determine the required adjustment to the annual tariff factor to match annual expenditures.

Each utility shall include in its recovery of costs the costs estimated for both the utility's and the Department's implementation of energy efficiency measures. Costs collected by the utility for measures implemented by the Department shall be submitted to the Department pursuant to Section 605-323 of the Civil Administrative Code of Illinois and shall be used by the Department solely for the purpose of implementing these measures. A utility shall not be required to advance any moneys to the Department, but only to forward such funds it has collected. The Department shall report to the Commission on an annual basis regarding the costs actually incurred by the Department in the implementation of the measures. Any changes to the costs of energy efficiency measures as a result of plan modifications shall be appropriately reflected in amounts recovered by the utility and turned over to the Department. The portfolio of measures administered by both the utilities and the Department shall, in combination, be designed to achieve the annual savings targets described in subsection (c) of this Section, as modified by subsection (d) of this Section.

The utility and the Department shall agree upon a reasonable portfolio of measures and determine the measurable corresponding percentage of the savings goals associated with measures implemented by the utility or Department.

No utility shall be assessed a penalty under subsection (f) of this Section for failure to make a timely filing if that failure is the result of a lack of agreement with the Department with respect to the allocation of responsibilities or related costs or target assignments. In that case, the Department and the utility shall file their respective plans with the Commission and the Commission shall determine an appropriate division of measures and programs that meets the requirements of this Section.

If the Department is unable to meet incremental annual performance goals for the portion of the portfolio implemented by the Department, then the utility and the Department shall jointly submit a modified filing to the Commission explaining the performance shortfall and recommending an appropriate course going forward, including any program modifications that may be appropriate in light of the evaluations conducted under item (7) of subsection (f) of this Section. In this case, the utility obligation to collect the Department's costs and turn over those funds to the Department under this subsection (e) shall continue only if the Commission approves the modifications to the plan proposed by the Department.

(f) No later than November 15, 2008, each gas utility shall file an energy efficiency and demand-response plan with the Commission to meet the energy efficiency and demand-response standards for 2008 through 2010. Every 3 years thereafter, each utility shall file an energy efficiency plan with the Commission. If a utility does not file a plan, it shall face a penalty of $100,000 per day until the plan is filed. Each utility's plan shall set forth the utility's proposals to meet the utility's portion of the energy efficiency standards identified in subsection (c) of this Section, as modified by subsection (d) of this Section, taking into account the unique circumstances of the utility's service territory. The Commission shall seek public comment on the utility's plan and shall issue an order approving or disapproving each plan within 3 months after its submission. If the Commission disapproves a plan, the Commission shall, within 30 days, describe in detail the reasons for the disapproval and describe a path by which the utility may file a revised draft of the plan to address the Commission's concerns satisfactorily. If the utility does not refile with the Commission within 60 days after the disapproval, the utility shall be subject to penalties at a rate of $100,000 per day until the plan is filed. This process shall continue, and penalties shall accrue, until the utility has successfully filed a portfolio of energy efficiency measures. Penalties shall be deposited into the Energy Efficiency Trust Fund. In submitting proposed energy efficiency plans and funding levels to meet the savings goals adopted by this Act the utility shall:

(1) Demonstrate that its proposed energy efficiency and demand-response measures will achieve the requirements that are identified in subsection (c) of this Section, as modified by subsection (d) of this Section.

(2) Present specific proposals to implement new building and appliance standards that have been placed into effect.

(3) Present estimates of the total amount paid for gas service expressed on a per kilowatthour basis associated with the proposed portfolio of measures designed to meet the requirements that are identified in subsection (c) of this Section, as modified by subsection (d) of this Section.

(4) Coordinate with the Department and the Department of Healthcare and Family Services to present a portfolio of energy efficiency measures targeted to households at or below 150% of the poverty level at a level proportionate to those households' share of total annual utility revenues in Illinois.

(5) Demonstrate that its overall portfolio of energy efficiency and demand-response measures, not including programs covered by item (4) of this subsection (f), are cost-effective using the total resource cost test and represent a diverse cross-section of opportunities for customers of all rate classes to participate in the programs.

(6) Include a proposed cost-recovery tariff mechanism to fund the proposed energy efficiency and demand-response measures and to ensure the recovery of the prudently and reasonably incurred costs of Commission-approved programs.

(7) Provide for an annual independent evaluation of the performance of the cost-effectiveness of the utility's portfolio of measures and the Department's portfolio of measures, as well as a full review of the 3-year results of the broader net program impacts and, to the extent practical, for adjustment of the measures on a going-forward basis as a result of the evaluations. The resources dedicated to evaluation shall not exceed 3% of portfolio resources in any given year.

(g) No more than 3% of energy efficiency and demand-response program revenue may be allocated for demonstration of breakthrough equipment and devices.

(h) This Section does not apply to a gas utility that on December 31, 2006 provided gas service to fewer than 100,000 customers in Illinois.

(i) A utility company that implements energy efficiency programs, and that has a conservation stabilization adjustment rider approved by the Commission, shall be entitled to recover lost revenues that derive from customer implementation of energy efficiency measures. The utility shall submit an annual report to the Commission to reconcile its actual lost revenues with customer adoption of energy efficiency measures. The report shall include whatever information the Commission may require.

For purposes of this subsection (i), "conservation stabilization adjustment" means a utility tariff mechanism intended to recover the annual lost utility revenue from successful customer participation in energy efficiency programs. Annual lost revenue shall be calculated by multiplying (1) the volumetric delivery charges established in the utility's last rate case by applicable rate classification by (2) the deemed volumetric energy reductions for each energy efficiency measure enumerated in the utility's energy efficiency plan and successfully implemented by customers of the utility. The Commission may approve a similar, reasonable method for determining lost utility revenues that derive from programs implemented under this Section.

(j) If a gas utility fails to meet the efficiency standard specified in subsection (c) of this Section, as modified by subsection (d) of this Section, 2 years after the specified year and each year thereafter, it shall make a contribution to the Low-Income Home Energy Assistance Program. The combined total liability for failure to meet the goal shall be $1,000,000, which shall be assessed as follows: a large gas utility shall pay $665,000 and a medium gas utility shall pay $335,000.

For purposes of this subsection (j), (1) a "large gas utility" is a gas utility that, on December 31, 2006, served more than 2,000,000 gas customers in Illinois; (2) a "medium gas utility" is a gas utility that, on December 31, 2005, served 2,000,000 or fewer but more than 100,000 gas customers in Illinois; and (3) Illinois gas utilities that are affiliated by virtue of a common parent company are considered a single gas utility.

(k) No utility shall be deemed to have failed to meet the energy efficiency standards to the extent any failure is due to a failure of the Department.

Section 99. Effective date. This Act takes effect upon becoming law.".