(a) On or before October 1, 2011, the Department of Energy and Environmental Protection shall establish a residential heating equipment financing program. Such program shall allow residential customers to finance, through on-bill financing or other mechanism, the installation of energy efficient natural gas or heating oil burners, boilers and furnaces or ductless heat pumps to replace (1) burners, boilers and furnaces that are not less than seven years old with an efficiency rating of not more than seventy-five per cent, or (2) electric heating systems. Eligible fuel oil furnaces shall have an efficiency rating of not less than eighty-six per cent. An eligible fuel oil burner shall have an efficiency rating of not less than eighty-six per cent with temperature reset controls. An eligible natural gas boiler shall have an annual fuel utilization efficiency rating of not less than ninety per cent and an eligible natural gas furnace shall have an annual fuel utilization efficiency rating of not less than ninety-five per cent. To participate in the program established pursuant to this subsection, a customer shall first have a home energy audit, the cost of which may be financed pursuant to subsection (b) of this section.

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(b) Any customer who participates in the financing program established pursuant to this section may repay such financing as part of such customer’s monthly gas or electric distribution company bill. Said program may be funded by the residential financing program offered by the Energy Efficiency Fund or the Clean Energy Fund established pursuant to section 16-245n.

(c) “Eligible entity” means (1) any residential, commercial, institutional or industrial customer of an electric distribution company or natural gas company, as defined in section 16-1, who employs or installs an eligible in-state energy savings technology, (2) an energy service company certified as a Connecticut electric efficiency partner by the Department of Energy and Environmental Protection, or (3) an installer certified by the Connecticut Green Bank.

(d) “Energy savings infrastructure” means tangible equipment, installation, labor, cost of engineering, permits, application fees and other reasonable costs incurred by eligible entities for operating eligible in-state energy savings technologies designed to reduce electricity consumption, natural gas consumption, heating oil consumption or promote combined heat and power systems.

(e) The Department of Energy and Environmental Protection shall establish an energy savings infrastructure pilot program consisting of financial incentives for the installation of combined heat and power systems, energy efficient heating oil burners, boilers and furnaces and natural gas boilers and furnaces by eligible entities. On or before June 30, 2014, the department shall evaluate the efficacy of the program established pursuant to this section.

(f) On or before October 1, 2011, the department shall begin accepting applications for financial incentives for combined heat and power systems of not more than one megawatt of power. To qualify for such financial incentives, such combined heat and power system shall reduce energy costs at an amount equal to or greater than the amount of the installation cost of the system within ten years of the installation. The department shall review the current market conditions for such systems, including any existing federal or state financial incentives, and determine the appropriate financial incentives under this program necessary to encourage installation of such systems. Such financial incentives may include providing private financial institutions with loan loss protection or grants to lower borrowing costs. Financial incentives pursuant to this subdivision shall not exceed two hundred dollars per kilowatt. A project accepted for such incentives shall qualify for a waiver of (1) the backup power rate under section 16-243o, and (2) the requirement to provide baseload electricity under section 16-243i. Any purchase of natural gas for any combined heat and power system installed pursuant to this subdivision shall not include a distribution charge pursuant to section 16-243l.

(g) On or before December 31, 2011, the department shall begin accepting applications for financial incentives for the installation of more efficient fuel oil and natural gas boilers and furnaces that replace existing boilers or furnaces that are not less than seven years old with an efficiency rating of not more than seventy-five per cent. A qualifying fuel oil furnace shall have an efficiency rating of not less than eighty-six per cent. A qualifying fuel oil boiler shall have an efficiency rating of not less than eighty-six per cent with temperature reset controls. A qualifying natural gas boiler shall have an annual fuel utilization efficiency rating of not less than ninety per cent and a qualifying natural gas furnace shall have an annual fuel utilization efficiency rating of not less than ninety-five per cent. The department shall review the current market conditions for such systems and equipment upgrades, including, but not limited to, any existing federal or state financial incentives, and establish the appropriate financial incentives under this program necessary to encourage such upgrades. Financial incentives shall provide private financial institutions with loan loss protection or grants to lower borrowing costs and, if the department deems it necessary, grants to the lending financial institution to lower borrowing costs and allow for a ten-year loan. Such financial incentive package shall ensure that the annual loan payment by the applicant shall be at not more than the projected annual energy savings less one hundred dollars. Any loan provided as a financial incentive pursuant to this subsection shall include the cost of any related incentives, as determined by the department. The department shall arrange with an electric distribution or gas company to provide for payment of any loan made as financial assistance under this subsection through the loan recipient’s monthly electric or gas bill, as applicable.

(h) Eligible entities seeking a loan under the loan program established in this section shall (1) contract with Connecticut-based licensed contractors, installers or tradesmen for the installation of an eligible in-state energy savings technology; (2) provide evidence of the cost of purchase and installation of the eligible in-state energy savings technology; and (3) periodically provide evidence of the operation and functionality of the eligible in-state energy savings technology to ensure that such technology is operating as intended during the term of the loan.

(i) The department shall develop a prescriptive one-page loan application. Such application shall include, but not be limited to: (1) Detailed information, specifications and documentation of the eligible in-state energy technology’s installed costs and projected energy savings, and (2) for requests for loans in excess of one hundred thousand dollars, certification by a licensed professional engineer, licensed contractor, installer or tradesman with a state license held in good standing.

(j) On or before October 1, 2011, the department shall establish a plan that includes procedures and parameters for its energy savings infrastructure pilot program established pursuant to this section.

(k) On or before October 1, 2014, the department shall, in accordance with the provisions of section 11-4a, report to the joint standing committee of the General Assembly having cognizance of matters relating to energy with regard to the projects assisted by the energy savings infrastructure pilot program established pursuant to this section, the amount of public funding, the energy savings from the technologies installed and any recommendations for changes to the program, including, but not limited to, incentives that encourage consumers to install more efficient fuel oil and natural gas boilers and furnaces prior to failure or gross inefficiency of their current heating system.