November 4, 2013

Submetering fuels $3.1M energy efficiency fight

Photo | Steve Laschever
Photo | Steve Laschever
Developer Bruce Becker, in front of his fuel cell at 360 State St., the source of much of his dispute with United Illuminating.
PHOTO | Contributed
The outside of 360 State St. (right), that includes the Elm City Market, a co-op grocery store. Becker is considering a grocery store for downtown Hartford at 777 Main St.

One of the state's most energy efficient buildings has been denied millions of dollars in energy efficiency incentives for four years, the result of a fight between a prominent Connecticut developer and United Illuminating with far-reaching impacts on Gov. Dannel P. Malloy's energy policy.

The conflict revolves around whether submetered buildings are eligible for energy incentives administered by utilities.

Submetering is a concept heavily favored by Malloy— and made legal in the state this year by the General Assembly— as a way to make Connecticut more energy efficient. It allows multi-unit building owners to charge individual tenants for their own electricity and heating use, rather than all tenants paying the same flat fee for a building's energy consumption.

UI has refused to pay developer Bruce Becker nearly $3.1 million in efficiency incentives because he wants to submeter his 360 State St. mixed-use, high rise in New Haven. UI feels submetering would disqualify Becker's building from ratepayer-funded incentives. Becker disagrees with UI, and now the Public Utilities Regulatory Authority will rule on the dispute in the coming weeks.

"The idea that submetering could make it harder to obtain efficiency incentives just doesn't make sense to me, since fuel cells and other types of renewable energy … depend on submetering to be most effective." Becker said. "The utilities might not prefer submetering, but it's now the law."

Even if Becker receives his $3.1 million, the long-denial of funds sends a negative message to developers and businesses who count on incentives to make conservation projects affordable, said Paul McCary, Becker's attorney and partner at Hartford law firm Murtha Cullina. The 360 State St. complex includes several efficiency components favored by Connecticut state energy officials and is the largest building in the state with a LEED platinum designation from the U.S. Green Building Council's Leadership in Energy & Environmental Design program.

Becker planned to undertake similar conservation efforts for his proposed 777 Main St. high-rise housing redevelopment in downtown Hartford, but those plans could change depending on how state regulators rule on his fight with UI over 360 State St.

A working group advising PURA will hold a meeting Wednesday on submetering and will issue recommendations Nov. 15, including if submetered buildings are eligible for utility incentives, said Dennis Schain, spokesman for the Department of Energy & Environmental Protection (DEEP), the agency that includes PURA.

That ruling also impacts Malloy's plans for energy conservation. As part of his comprehensive energy strategy — passed by the legislature in June — Malloy made it legal for multi-unit buildings to use submetering, believing it will force tenants to be more careful about energy use. The measure also gives property owners the option to install renewable generation and then submeter the tenants to pay for the project's cost.

Meanwhile, DEEP is pushing for PURA to more than double the amount of energy efficiency incentives, to $231 million annually.

However, if PURA decides submetered buildings are not eligible for efficiency subsidies administered by the utilities, property owners will be deterred from submetering or doing other energy projects, McCary said.

"There will be the people that look at what happened to Bruce and might want to stay away from doing these things in Connecticut," McCary said. "It is a disincentive for anyone that is undertaking an innovative, large-scale development."

Becker said he has spent $300,000 in legal fees trying to recover the $3.1 million.

From the utility perspective, the delay is about protecting ratepayer funds.

The energy efficiency funds are collected from a charge on natural gas and electric utility bills, and then administered to recipients by UI and the other utilities through the Connecticut Energy Efficiency Fund.

UI argues with submetering, 360 State St. becomes a utility unto itself as it is reselling electricity. As a result, the building's residents would be energy customers of 360 State St. and not UI, making the building ineligible for incentives collected from UI ratepayers.

"If you are not a customer of any of those utilities, can you really benefit from those funds?" UI spokesman Michael West said.

The Becker vs. UI fight has a long history that started in 2007 when he was initially told the building wasn't eligible for incentives because it was multi-unit. Since that time, the two sides have gone back and forth:

In 2009, UI approved the $3.1 million in incentives, but told Becker it wouldn't be paid if he installed a fuel cell for the building. Becker installed the fuel cell anyway, as it decreased the building's environmental footprint, a move favored by Malloy's energy policies.

To resolve the fuel cell dispute, UI, Becker, and PURA in 2011 haggled over the money Becker would receive for selling the fuel cell's excess power to UI. Becker ultimately refused to sign a deal with UI, saying the purchase price was too low.

In 2012, UI said it would pay Becker the $3.1 million in energy efficiency funds, but only if he took out a $3 million letter of credit, in case 360 State St. was ruled ineligible for energy efficiency incentives. Becker refused to take out the credit line because of the added costs.

Despite the $3.1 million fight, Becker opened 360 State St. in 2010, and the building is 88 percent occupied with residents and two retail shops, including a grocery store.

Becker said he is tentatively moving forward with similar energy conservation provisions for the 777 Main St. project in Hartford, largely because he is dealing with a different utility – Connecticut Light & Power.

"CL&P, they have been very helpful in moving the project forward," Becker said.

CL&P bought the historic tax credits for 777 Main St., providing needed revenue. The utility also awarded Becker a 15-year contract under the competitive Low-emissions Renewable Energy Credit program, agreeing to buy the credits from a fuel cell Becker will install in the downtown Hartford high rise.

When Becker applies for efficiency incentives for 777 Main, representatives from CL&P will determine the eligilibilty, said CL&P spokesman Mitch Gross. PURA's upcoming ruling will factor into that decision.g

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