(a) The Public Utilities Regulatory Authority shall, on or before November 1, 2005, identify those measures that can reduce federally mandated congestion charges, as defined in section 16-1, and that can be implemented, in whole or in part, on or before January 1, 2006. Such measures may include, but shall not be limited to, demand response programs, other distributed resources, and contracts between an electric distribution company, as defined in said section 16-1, and an owner of generation resources for the capacity of such resources. The authority shall order each electric distribution company to implement, in whole or in part, on or before January 1, 2006, such measures as the authority considers appropriate. The company’s costs associated with complying with the provisions of this section shall be recoverable through federally mandated congestion charges.

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(b) The authority shall conduct a contested case, in accordance with chapter 54, to establish the principles and standards to be used in developing and issuing a request for proposals under this section. The authority shall complete such contested case on or before January 1, 2006.

(c) On or before February 1, 2006, the authority shall conduct a proceeding to develop and issue a request for proposals to solicit the development of long-term projects designed to reduce federally mandated congestion charges for the period commencing on May 1, 2006, and ending on December 31, 2010, or such later date specified by the authority. For purposes of this section, projects shall include (1) customer-side distributed resources, (2) grid-side distributed resources, (3) new generation facilities, including expanded or repowered generation, and (4) contracts for a term of no more than fifteen years between a person and an electric distribution company for the purchase of electric capacity rights. Such request for proposals shall encourage responses from a variety of resource types and encourage diversity in the fuel mix used in generation. An electric distribution company may submit proposals pursuant to this subsection on the same basis as other respondents to the solicitation. A proposal submitted by an electric distribution company shall include its full projected costs such that any project costs recovered from or defrayed by ratepayers are included in the projected costs. An electric distribution company submitting a bid under this subsection shall demonstrate to the satisfaction of the authority that its bid is not supported in any form of cross subsidization by affiliated entities. If such electric distribution company’s proposal is approved pursuant to subsection (g) of this section, the costs and revenues of such proposal shall not be included in calculating such company’s earning for purposes of, or in determining whether its rates are just and reasonable under, sections 16-19, 16-19a and 16-19e. Electric distribution companies may under no circumstances recover more than the full costs identified in the proposals, as approved under subsection (g) of this section and consistent with subsection (h) of this section. Affiliates of the electric distribution company may submit proposals consistent with section 16-244h, regulations adopted under section 16-244h and other requirements the authority may impose. The authority may request from a person submitting a proposal further information that the authority determines to be in the public interest to be used in evaluating the proposal. The authority shall determine whether costs associated with subsection (k) of this section shall be considered in the evaluation or selection of bids.

(d) The authority shall publish such request for proposals in one or more newspapers or periodicals, as selected by the authority, and shall post such request for proposals on its web site. The authority may retain the services of a third-party entity with expertise in the area of energy procurement to oversee the development of the request for proposals and to assist the authority in its approval of proposals pursuant to this section. The reasonable and proper expenses for retaining such third-party entity shall be recoverable through federally mandated congestion charges, as defined in section 16-1, which charges the authority shall allocate to electric distribution companies in proportion to their revenue.

(e) Any person, other than an electric distribution company, submitting a proposal pursuant to subdivision (2), (3) or (4) of subsection (c) of this section shall include with its proposal a draft of a contract that includes the transfer to the electric distribution company of all the rights to the installed capacity, including, but not limited to, forward reserve capacity, locational forward reserve capacity and similar rights associated with such proposal, provided such rights shall not include energy. No such draft of a contract shall have a term exceeding fifteen years. Such draft contract shall include such provisions as the Public Utilities Regulatory Authority directs.

(f) Each person submitting a proposal pursuant to this section shall agree to forgo or credit reliability must run payments, locational installed capacity payments or payments for similar purposes for any project approved pursuant to subsection (g) of this section.

(g) The authority shall, on or before May 1, 2006, evaluate such proposals received pursuant to subsection (c) of this section and may approve one or more of such proposals. The authority shall give preference to proposals that (1) result in the greatest aggregate reduction of federally mandated congestion charges for the period commencing on May 1, 2006, and ending on December 31, 2010, or such later date specified by the authority, (2) make efficient use of existing sites and supply infrastructure, and (3) serve the long-term interests of ratepayers. Projects proposed by persons other than electric distribution companies approved pursuant to this subsection may enter into long-term contracts pursuant to subsection (i) of this section. Projects approved pursuant to this subsection are eligible for expedited siting pursuant to subsection (a) of section 16-50k. Customer-side distributed resource projects approved pursuant to this subsection shall be eligible for the incentives provided pursuant to sections 16-243j, 16-243l, and 16-243o and this section, but shall not be eligible for the programs described in section 16-243i.

(h) If a proposal from an electric distribution company is approved pursuant to subsection (g) of this section, such company may develop, own and operate such resource, provided such company shall, not later than five years after such resource begins commercial operation, (1) sell such resource in accordance with section 16-43, or (2) auction the power or capacity, or both, associated with such resource pursuant to a plan approved by the authority. The authority shall, after notice and hearing, waive the requirements of subdivisions (1) and (2) of this subsection if it determines that compliance with such requirements would be detrimental to retail customers. Such electric distribution company shall recover, as federally mandated congestion charges, the unrecovered portions of the full projected costs in its proposal made under subsection (c) of this section.

(i) An electric distribution company shall negotiate in good faith the final terms of the draft contract, submitted under subsection (e) of this section and included in a proposal approved under subsection (g) of this section, and shall apply to the authority for approval of each such contract. After thirty days, either party may request the assistance of the authority to resolve any outstanding issues. No such contract may become effective without approval of the authority. The authority shall hold a hearing that shall be conducted as a contested case, in accordance with the provisions of chapter 54, to approve, reject or modify an application for approval of a capacity purchase contract. No contract shall be approved unless the authority finds that approval of such contract would (1) result in the lowest reasonable cost of such products and services, (2) increase reliability, and (3) minimize federally mandated congestion charges to the state over the life of the contract. Such a contract shall contain terms that mitigate the long-term risk assumed by ratepayers. No contract approved by the authority shall have a term exceeding fifteen years. As determined by the authority, the electric distribution company shall either sell into the capacity markets all or a portion of capacity rights transferred pursuant to this section and use all proceeds from such sales to offset federally mandated congestion charges incurred by all customers, or shall retain such capacity rights to offset electric capacity charges associated with transitional standard offer, standard service or service as supplier of last resort under section 16-244c. The costs associated with long-term electric capacity contracts shall be recovered through federally mandated congestion charges.

(j) The authority may order an electric distribution company to submit a proposal pursuant to the provisions of this section and may approve such a proposal under this section. Nothing in sections 16-1, 16-32f, 16-50i, 16-50k, 16-50x, 16-243i to 16-243q, inclusive, 16-244c, 16-245d, 16-245m, 16-245n and 16-245z and section 21 of public act 05-1 of the June special session* shall limit the authority’s ability to conduct requests for proposals, in addition to that in subsection (c) of this section, to reduce federally mandated congestion charges and to approve such proposals or otherwise to meet its responsibility under this title.

(k) The authority shall hold a hearing that shall be conducted as a contested case, in accordance with the provisions of chapter 54, to investigate any impact on the financial condition of electric distribution companies of long-term contracts entered into pursuant to this section and to establish, before issuing a request for proposals in accordance with subsection (c) of this section, the methodology for compensating the companies for such impacts. The methodology for addressing such impacts shall be included in the request for proposals under subsection (c) of this section, if appropriate. If the authority determines that entering into such long-term contracts results in increased costs incurred by the electric distribution companies, the authority, annually, shall allow such costs to be recovered through rates or in such manner as the authority considers appropriate. The authority shall determine whether such costs shall be considered in the evaluation or selection of bids under this section.

(l) An electric distribution company may not submit a proposal under this section on or after February 1, 2011. On or before January 1, 2010, the authority shall submit a report, in accordance with section 11-4a, to the joint standing committee of the General Assembly having cognizance of matters relating to energy with a recommendation as to whether the period during which such company may submit proposals under this section should be extended.

(m) For purposes of subdivision (1) of subsection (c) of section 16-50p, there shall be a rebuttable presumption that there is a public benefit in building a facility, as defined in subdivision (1) of subsection (a) of section 16-50i, that has been approved by the Public Utilities Regulatory Authority pursuant to this section.

(n) The aggregate electric generating capacity for all approved proposals by electric distribution companies pursuant to subsections (g) and (j) of this section may not exceed two hundred fifty megawatts of generating capacity state-wide. The authority shall give guiding preference in approving the amount of generation capacity in proposals from electric distribution companies to the approximate proportion of each company’s service area load.

(o) When the authority selects a bid pursuant to subdivisions (2) and (3) of subsection (c) of this section from a person other than an electric distribution company, the authority shall grant the electric distribution company that serves the area in which the subject grid-side distributed resource or new generation facility is to be located a one-time, nonrecurring award, for investments necessary to improve the electric distribution company’s transmission and distribution system to accommodate such facilities, in accordance with the following: For a grid-side distributed resource or new generation facility that is operational (1) on or before January 1, 2010, twenty-five dollars per kilowatt, (2) on or before January 1, 2011, fifteen dollars per kilowatt, and (3) on or before January 1, 2012, five dollars per kilowatt. The cost of the award shall be recoverable from federally mandated congestion charges. No such award may be made unless the projected reduction in federally mandated congestion charges attributed to the investment is greater than the amount of the award. Revenues from such award shall not be included in calculating the electric distribution company’s earnings for the purpose of determining whether its rates are just and reasonable under sections 16-19, 16-19a and 16-19e.

(p) Sixty days after the Public Utilities Regulatory Authority issues a final decision approving long-term contracts pursuant to this section, the authority shall direct an electric distribution company to negotiate, in good faith, long-term contracts for the electric energy output of each of the generation projects selected and approved by the authority to provide capacity pursuant to this section, provided the rates paid for such electric energy output when added to the payments made pursuant to such capacity contracts shall be the project’s cost of service plus a reasonable rate of return. The electric distribution company shall apply to the authority for approval of any such energy output contract. No such contract shall be effective unless approved by the authority. The authority may approve only such contracts it finds would reduce and stabilize the cost of electricity to Connecticut ratepayers. Such contract may not exceed the term of the capacity contract for such generation project.