(a) As used in this section, (1) “qualifying project” means a combined heat and power system, as described in subdivision (38) of subsection (a) of section 16-1, that (A) provides commercial, industrial or residential facilities with both electrical generation and heat output, (B) has a nameplate capacity of between five hundred and five thousand kilowatts, (C) is placed into service between January 1, 2012, and January 1, 2015, and (D) is not eligible under section 16-245hh or section 103 of public act 11-80*, and (2) “electric distribution company” has the same meaning as provided in section 16-1.

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(b) The Commissioner of Energy and Environmental Protection shall establish a pilot program to promote large combined heat and power systems by mitigating the economic disincentives for such systems created by the existing demand charge tariffs of the electric distribution companies.

(c) On or after July 8, 2013, the Commissioner of Energy and Environmental Protection shall solicit applications from qualifying projects and shall select such projects for participation in the pilot program on a first-come, first-served basis. The commissioner shall select as many qualifying projects as is deemed appropriate, in the commissioner’s discretion, up to a maximum of twenty megawatts of nameplate capacity for the entire pilot program. Qualifying projects selected for participation in the pilot program shall become operational within one year of such selection or that capacity shall be offered to at least one other qualifying project that participated in the solicitation. Qualifying projects selected pursuant to this subsection shall be eligible to continue the terms of the pilot program for a period of ten years from the time the project is placed into service.

(d) A qualifying project selected to participate in the pilot program shall not be required to pay the demand charges pursuant to the distribution demand-ratchet provision of firm service due to an outage of service of such project. If a qualifying project that participates in the pilot program has an outage of service, the only demand charge that shall be assessed by an electric distribution company shall be based on daily demand pricing prorated from standard monthly rates, provided, however, that if the outage of service lasts for less than three hours, no demand charge shall be assessed by an electric distribution company.

(e) Any qualifying project that participates in the pilot program shall provide to the Public Utilities Regulatory Authority and the Commissioner of Energy and Environmental Protection all system performance and supplemental utility data that the authority shall, in its reasonable discretion, deem to be appropriate for measuring the performance of the pilot program. Such data shall consist of (1) net electrical production from the qualifying project, measured in kilowatt-hours per fifteen minute interval, (2) net thermal production from the qualifying project, measured in million BTU per fifteen minute interval, (3) fuel consumed by the qualifying facility, measured in million BTU per fifteen minute interval, (4) supplemental electricity received from the electric distribution company, measured in kilowatt-hours and average kilovolt-ampere per fifteen minute interval, (5) each downtime of the qualifying project, including the time of day of the downtime, the duration of the downtime and the reasons therefor, and (6) other such data as the authority deems appropriate. Such data shall be provided on a form approved by the authority.

(f) The authority shall, with the system performance and supplemental utility data received pursuant to subsection (e) of this section, analyze (1) the system performance of the qualifying projects, (2) the as-used daily demand charge versus standard distributed generation rider demand charges, and (3) the viability of conforming all distributed generation combined heat and power systems to an as-used daily time of use demand tariff.

(g) After the authority and commissioner have received the system performance and supplemental utility data pursuant to subsection (e) of this section for a period of three years, the commissioner shall, within ninety days, 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, recommending whether to continue, expand, modify or eliminate the pilot program.

(h) Any electric customer of an electric distribution company, as defined in section 16-1, with a qualifying project that participates in the pilot program shall be allowed to aggregate all electric meters that are (1) on the same premises as such qualifying project, and (2) billable to such customer.