(a) On and after January 1, 2007, each electric distribution company providing standard service pursuant to section 16-244c and each electric supplier as defined in section 16-1 shall demonstrate to the satisfaction of the Public Utilities Regulatory Authority that not less than one per cent of the total output of such supplier or such standard service of an electric distribution company shall be obtained from Class III sources. On and after January 1, 2008, not less than two per cent of the total output of any such supplier or such standard service of an electric distribution company shall, on demonstration satisfactory to the Public Utilities Regulatory Authority, be obtained from Class III sources. On or after January 1, 2009, not less than three per cent of the total output of any such supplier or such standard service of an electric distribution company shall, on demonstration satisfactory to the Public Utilities Regulatory Authority, be obtained from Class III sources. On and after January 1, 2010, not less than four per cent of the total output of any such supplier or such standard service of an electric distribution company shall, on demonstration satisfactory to the Public Utilities Regulatory Authority, be obtained from Class III sources. On and after January 1, 2022, until December 31, 2024, not less than five per cent of the total output of any such supplier or such standard service of an electric distribution company shall, on demonstration satisfactory to the Public Utilities Regulatory Authority, be obtained from Class III sources. Electric power obtained from customer-side distributed resources that does not meet air and water quality standards of the Department of Energy and Environmental Protection is not eligible for purposes of meeting the percentage standards in this section.

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(b) Except as provided in subsection (d) of this section, the Public Utilities Regulatory Authority shall assess each electric supplier and each electric distribution company that fails to meet the percentage standards of subsection (a) of this section a charge of up to five and five-tenths cents for each kilowatt hour of electricity that such supplier or company is deficient in meeting such percentage standards. Seventy-five per cent of such assessed charges shall be used in furtherance of the Conservation and Load Management Plan established in section 16-245m, and twenty-five per cent shall be deposited in the Clean Energy Fund established in section 16-245n, except that such seventy-five per cent of assessed charges with respect to an electric supplier shall be allocated among the Conservation and Load Management Plan of electric distribution companies in proportion to the amount of electricity such electric supplier provides to end use customers in the state using the facilities of each electric distribution company.

(c) An electric supplier or electric distribution company may satisfy the requirements of this section by participating in a conservation and distributed resources trading program approved by the Public Utilities Regulatory Authority. Credits created by conservation and customer-side distributed resources shall be allocated to the person that conserved the electricity or installed the project for customer-side distributed resources to which the credit is attributable and to the Conservation and Load Management Plan. Such credits shall be made in the following manner: A minimum of twenty-five per cent of the credits shall be allocated to the person that conserved the electricity or installed the project for customer-side distributed resources to which the energy credit is attributable and the remainder of the credits shall be used in furtherance of the Conservation and Load Management Plan, based on a schedule created by the authority no later than January 1, 2007, and reviewed annually thereafter. The authority may, in a proceeding and for good cause shown, allocate a larger proportion of such credits to the person who conserved the electricity or installed the customer-side distributed resources. The authority shall consider the proportion of investment made by a ratepayer through various ratepayer-funded incentive programs and the resulting reduction in federally mandated congestion charges. The portion used in furtherance of the Conservation and Load Management Plan shall be used for measures that respond to energy demand and for peak reduction programs.

(d) An electric distribution company providing standard service may contract with its wholesale suppliers to comply with the conservation and customer-side distributed resources standards set forth in subsection (a) of this section. The Public Utilities Regulatory Authority shall annually conduct a contested case, in accordance with the provisions of chapter 54, to determine whether the electric distribution company’s wholesale suppliers met the conservation and distributed resources standards during the preceding year. Any such contract shall include a provision that requires such supplier to pay the electric distribution company in an amount of up to five and one-half cents per kilowatt hour if the wholesale supplier fails to comply with the conservation and distributed resources standards during the subject annual period. The electric distribution company shall immediately transfer seventy-five per cent of any payment received from the wholesale supplier for the failure to meet the conservation and distributed resources standards to the Conservation and Load Management Plan and twenty-five per cent to the Clean Energy Fund. Any payment made pursuant to this section shall not be considered revenue or income to the electric distribution company.

(e) The Public Utilities Regulatory Authority shall conduct a contested proceeding to develop the administrative processes and program specifications that are necessary to implement a Class III sources conservation and distributed resources trading program. The proceeding shall include, but not be limited to, an examination of issues such as (1) the manner in which qualifying activities are certified, tracked and reported, (2) the manner in which Class III certificates are created, accounted for and transferred, (3) verification of the accuracy of conservation and customer-side distributed resources credits, (4) verification of the fact that resources or credits used to satisfy the requirement of this section have not been used to satisfy any other portfolio or similar requirement, (5) the manner in which credits created by conservation and customer-side distributed resources may best be allocated to maximize the impact of the trading program, and (6) setting such alternative payment amounts at a level that encourages development of conservation and customer-side distributed resources. The authority may retain the services of a third party entity with expertise in the development of energy efficiency trading or verification programs to assist in the development and operation of the program. The authority shall issue a decision no later than February 1, 2008.