FILED ON: 6/9/2016

HOUSE  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  No. 4385

The Commonwealth of Massachusetts

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In the One Hundred and Eighty-Ninth General Court
(2015-2016)

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An Act to promote energy diversity.

Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows:
 

SECTION 1. Section 144 of chapter 164 of the General Laws, as appearing in the 2014 Official Edition, is hereby amended by striking out subsection (c) and inserting in place thereof the following subsection:

(c) Upon the undertaking of a significant project that exposes confirmed natural gas infrastructure, including the repair or paving of a public way, the installation, replacement or repair of an underground water or sewer line or underground electrical or other cable, a municipality or the commonwealth or other entity responsible for the aforesaid undertaking may submit written notification of the project to a gas company at least 6 months in advance of such project. Upon commencement of the project, the gas company shall survey the project area for the presence of gas leaks, and all gas leaks shall be repaired by the gas company to the extent such repairs are feasible within the timeframe of the construction project. The gas company shall ensure that any shut off valve in the significant project area has a gate box installed upon it or a reasonable alternative that would otherwise ensure continued public safety and that any critical valve that has not been inspected and tested within the past 12 months is verified to be operational and accessible. If a gas leak cannot be repaired within the timeframe allowed for the construction project, the gas company shall provide the repair and replacement schedule of any gas leaks detected during the survey performed during the project to the municipality or the commonwealth.  Gas companies shall coordinate with municipalities to determine which leaks shall be addressed by full replacement of lines and mains. A gas company that has previously submitted plans to the municipality or the commonwealth to replace existing gas lines or mains shall continue to adhere to those plans and the replacement projects therein in addition to any repairs of individual leaks as required by this section.

SECTION 1A.  Subsection (e) of said section 144 of chapter 164 of the General Laws, as so appearing, is hereby amended by inserting at the end thereof the following sentence:- Gas companies shall also report to the department the total volume of statewide lost or unaccounted for gas attributed to Grade 1, Grade 2, or Grade 3 leaks located within the commonwealth.

SECTION 1B. Chapter 169 of the acts of 2008, as amended by chapter 209 of the acts of 2012, is hereby further amended by inserting after section 83A the following 3 sections:-

Section 83B. For the purposes of sections 83C and 83D, the following terms shall, unless the context clearly indicates otherwise, have the following meanings:-

“Clean energy generation”, either: (1) firm service hydroelectric generation from hydroelectric generation alone; or (2) new Class I RPS eligible resources that are firmed up with firm service hydroelectric generation.

“Distribution company”, a distribution company as defined in section 1 of chapter 164 of the General Laws.

“Firm service hydroelectric generation”, hydroelectric generation provided without interruption for 1 or more discrete period designated in a long-term contract, including but not limited to multiple hydroelectric run-of-the-river generation units managed in a portfolio that creates firm service though the diversity of multiple units.

“Long-term contract”, a contract for a period of 15 to 20 years.

“New Class I RPS eligible resources”, Class I renewable energy generating sources as defined in section 11F of chapter 25A of the General Laws that have not commenced commercial operation prior to the date of execution of a long-term contract or represent the net increase from incremental new generating capacity at an existing facility after the date of execution of a long-term contract.  

“Offshore wind developer”, a provider of electricity developed from an offshore wind energy generation project that is located on the Outer Continental Shelf and for which no turbine is located within 10 miles of any inhabited area.

“Offshore wind energy generation”, offshore electric generating resources derived from wind that: (1) are Class I renewable energy generating sources, as defined in section 11F of chapter 25A of the General Laws; (2) have a commercial operation date on or after January 1, 2018, as verified by the department of energy resources; and (3) operate in a designated wind energy area for which an initial federal lease was issued on a competitive basis after January 1, 2012.

Section 83C. (a) Notwithstanding any general or special law to the contrary, beginning on or before June 30, 2017, all distribution companies in the commonwealth shall jointly and competitively solicit proposals from offshore wind developers and, provided that reasonable proposals have been received, shall enter into cost-effective long-term contracts, subject to the approval of the department of public utilities, to facilitate the financing of offshore wind energy generation resources, apportioned among the distribution companies under this section.

(b) The timetable and method for solicitations of such contracts shall be proposed jointly by the distribution companies and the department of energy resources using a competitive bidding process, and shall be subject to review and approval by the department of public utilities. Solicitations may be coordinated and issued jointly with other New England states or entities designated by said states. Distribution companies may conduct 1 or more competitive solicitations through a schedule or staggered procurement schedule developed by the distribution companies and the department of energy resources; provided, that distribution companies shall jointly enter into cost-effective long-term contracts for offshore wind energy generation equal to approximately 1,200 megawatts of aggregate nameplate capacity by June 30, 2027. Individual solicitations shall seek proposals for no less than 400 megawatts of aggregate nameplate capacity of offshore wind energy generation resources. Distribution companies shall issue a competitive solicitation under this section no later than June 30, 2017, and subsequent solicitations under a staggered procurement schedule developed by the department of energy resources, if applicable, shall occur within 24 months of a previous solicitation; provided, however that following the first procurement period, the levelized cost of the energy, transmission and; procured pursuant to any long-term contract shall decrease with each additional solicitation and resulting procurement

. If the department of public utilities determines that reasonable proposals were not received pursuant to a solicitation, the department may terminate the solicitation, and may require additional solicitations to fulfill the requirements of this section.

(c) In developing proposed long-term contracts, the distribution companies shall consider long-term contracts for renewable energy certificates, hereinafter referred to as RECs, for energy and for a combination of both RECs and energy. A distribution company may decline to consider contract proposals having terms and conditions that it determines would require the contract obligation to place an unreasonable burden on the distribution company’s balance sheet, and may structure its contracts, pricing or administration of the products purchased to mitigate impacts on the balance sheet or income statement of the distribution company or its parent company, subject to the approval of the department of public utilities; provided, that such mitigation shall not increase costs to ratepayers. In the event a distribution company deems all proposals to be unreasonable, the department of public utilities shall initiate a docket to determine the distribution company’s rationale for declining said proposals. The department of energy resources may require additional solicitations to fulfill the requirements of this section.

The distribution companies shall coordinate with the department of energy resources, and consult with the office of the attorney general, regarding the choice of solicitation methods.

All proposed contracts shall be subject to the review and approval of the department of public utilities.

(d) The department of public utilities and the department of energy resources each shall adopt regulations consistent with this section. The regulations shall: (1) allow offshore wind developers of offshore wind energy generation to submit proposals for long-term contracts consistent with this section; (2) require that contracts executed by the distribution companies under such proposals are filed with, and approved by, the department of public utilities before they become effective; (3) provide for an annual remuneration for the contracting distribution company up to 2.75 per cent of the annual payments under the contract to compensate the company for accepting the financial obligation of the long-term contract, such provision to be acted upon by the department of public utilities at the time of contract approval; (4) allow transmission costs to be incorporated into a proposal; provided that, to the extent there are transmission costs included in a bid, the department of public utilities may authorize or require the contracting parties to seek recovery of such transmission costs of the project through federal transmission rates, consistent with policies and tariffs of the Federal Energy Regulatory Commission, to the extent the department finds such recovery is in the public interest; and (5) require that offshore wind energy generating resources to be used by a developer under the proposal meet the following criteria: (i) provide enhanced electricity reliability within the commonwealth; (ii) contribute to reducing winter electricity price spikes; (iii) be cost effective to Massachusetts electric ratepayers over the term of the contract; (iv) avoid line loss and mitigate transmission costs to the extent possible; (v) adequately demonstrate project viability in a commercially reasonable timeframe; (vi) provide reliability, price, economic and environmental benefits that outweigh any costs to ratepayers; (vii) where possible, mitigate any environmental impacts; and (viii) where feasible, create additional employment and economic development in the commonwealth.

(e) As part of its approval process, the department of public utilities shall consider the attorney general’s recommendations, which shall be submitted to the department of public utilities within 45 days following the filing of such contracts with the department of public utilities. The department of public utilities shall consider both the potential costs and benefits of such contracts and shall approve a contract only upon a finding that it is a cost effective mechanism for procuring reliable renewable energy on a long-term basis, taking into account the factors outlined in this section.

(f) The department of energy resources and the attorney general shall jointly select an independent evaluator to monitor and report on the solicitation and bid selection process in order to assist the department of public utilities in its consideration of any resulting long-term contracts filed for approval. To ensure an open, fair and transparent solicitation and bid selection process, the independent evaluator shall: (1) issue a report to the department of energy resources analyzing the solicitation process proposed under subsection (b) of this section, including recommendations for improving the process, if any; and (2) within 45 days following the filing of a long-term contract for a winning bid proposal, file a report with the department of public utilities summarizing and analyzing the solicitation and the bid selection process, and providing its independent assessment of whether all bids were evaluated in a fair and non-discriminatory manner. The independent evaluator shall have access to all information and data related to the competitive solicitation and bid selection process necessary to fulfill the purposes of this subsection, but shall ensure all proprietary information remains confidential. The department of public utilities shall consider the findings of the independent evaluator and may adopt recommendations made by the independent evaluator as a condition for approval.  If the independent evaluator concludes in the findings that the solicitation and bid selection of a long-term contract was not fair and objective, the department of public utilities may reject the contract.   

(g) If distribution companies are unable to agree on a winning bid under a solicitation under this section, the matter shall be submitted to the department of energy resources for a final, binding determination of the winning bid. Electric distribution companies shall each enter into a contract with the winning bidders for their apportioned share of the market products being purchased from the project. The apportioned share shall be calculated and based upon the total energy demand from all distribution customers in each service territory of the distribution companies.

(h) A distribution company may elect to use any energy purchased under such contracts for resale to its customers, and may elect to retain RECs to meet the applicable annual renewable portfolio standard requirements under said section 11F of said chapter 25A. If the energy and RECs are not so used, such companies shall sell such purchased energy into the wholesale spot market and shall sell such purchased RECs through a competitive bid process. Notwithstanding the previous sentence, the department of energy resources shall conduct periodic reviews to determine the impact on the energy and REC markets of the disposition of energy and RECs under this section.  The department of energy resources may issue reports recommending legislative changes if it determines that said disposition adversely affects the energy and REC markets.

(i) If a distribution company sells the purchased energy into the wholesale spot market and auctions the RECs as described in this section, the distribution company shall net the cost of payments made to projects under the long-term contracts against the proceeds obtained from the sale of energy and RECs, and the difference shall be credited or charged to all distribution customers through a uniform fully reconciling annual factor in distribution rates, subject to review and approval of the department of public utilities.

(j) Any long-term contracts procured under this section shall contain provisions that require an appropriate unit-specific tracking system to enable an accounting of the delivery of clean energy generation resources.

(k) If this section is subject to a judicial challenge, the department of public utilities may suspend the applicability of the challenged provision during the pendency of the judicial action until final resolution of the challenge and any appeals and shall issue such orders and take such other actions as are necessary to ensure that the provisions that are not challenged are implemented expeditiously to achieve the public purposes of this section.

Section 83D. (a) Notwithstanding any general or special law to the contrary, beginning on January 1, 2017, all distribution companies in the commonwealth shall jointly and competitively solicit proposals from developers of clean energy generation resources to deliver an annual amount of electricity equal to  approximately 9,450,000 megawatts-hours, and, provided reasonable proposals have been received, shall enter into either long-term contracts, subject to the approval of the department of public utilities, or delivery commitment agreements, subject to the approval of the Federal Energy Regulatory Commission, to facilitate the financing of clean energy generation resources, apportioned among the distribution companies under this section.

(b) The timetable and method for solicitation of such contracts shall be proposed jointly by the distribution companies and the department of energy resources using a competitive bidding process, and shall be subject to review and approval by the department of public utilities. Solicitations may be coordinated and issued jointly with other New England states or entities designated by said states.  Distribution companies may conduct 1 or more competitive solicitations through a schedule or staggered procurement schedule developed by the distribution companies and the department of energy resources; provided, however, that distribution companies shall enter into cost-effective long-term contracts for clean energy generation equal to approximately 9,450,000 megawatt-hours by December 31, 2022.  If the department of public utilities determines that reasonable proposals were not received pursuant to a solicitation, the department may terminate the solicitation, and may require additional solicitations to fulfill the requirements of this section. 

(c) In developing proposed long-term contracts, the distribution companies shall consider long-term contracts for renewable energy certificates, hereinafter referred to as RECs, for energy, and for a combination of both RECs and energy, if applicable. A distribution company may decline to consider proposals having terms and conditions that it determines would require the contract obligation to place an unreasonable burden on the distribution company’s balance sheet, and may structure its contracts, delivery commitments, pricing or administration of the products purchased to mitigate impacts on the balance sheet or income statement of the distribution company or its parent company, subject to the approval of the department of public utilities; provided, that such mitigation shall not increase costs to ratepayers. In the event a distribution company deems all proposals to be unreasonable, the department of public utilities shall initiate a docket to determine the distribution company’s rationale for declining said proposals. The department of energy resources may require additional solicitations to fulfill the requirements of this section.  The distribution companies shall consult with the department of energy resources and the attorney general’s office regarding the choice of contracting methods and solicitation methods. All proposals shall be subject to the review and approval of the department of public utilities.

(d) For the purposes of this section, the term delivery commitment agreement means a contractual commitment by a clean energy developer, which may be included in a tariff filed with the Federal Energy Regulatory Commission, to deliver electricity to the ISO New England Control Area for a term of 15 to 20 years, subject to the rules governing that market as approved by the Federal Energy Regulatory Commission, for a designated number of megawatt-hours per year during designated periods. Such output shall be from clean energy generation, as defined in section 83B of this act. Delivery commitment agreements may be contingent upon a transmission line being constructed, maintained, and placed under the operational control of ISO New England that adds sufficient capacity to the ISO New England transmission system to enable the delivery into the New England market of the electric energy comprising the supplier’s delivery commitment. A clean energy generation developer shall be obligated, in the event it fails to meet its delivery commitment agreement in any designated period, to pay liquidated damages or charges under the tariff filed with the Federal Energy Regulatory Commission to the electric distribution company, which in turn shall be returned to ratepayers, or to provide a credit under such tariff, which will be passed on to ratepayers. The department of public utilities, in consultation with the department of energy resources, may promulgate regulations to implement the provisions of this section, subject to the applicable rules, orders and regulations established by the Federal Energy Regulatory Commission.

(e) The department of public utilities and the department of energy resources each shall adopt regulations consistent with this section. The regulations shall: (1) allow developers of clean energy generation resources to submit proposals for long-term contracts or delivery commitment agreements; (2) require that contracts or delivery commitment agreements executed by the distribution companies under such proposals are filed with, and approved by, the department of public utilities before they become effective; (3) provide for an annual remuneration for the contracting distribution company up to 2.75 per cent of the annual payments under the contract to compensate the company for accepting the financial obligation of the long-term contract, such provision to be acted upon by the department of public utilities at the time of contract approval; (4) allow transmission costs to be incorporated into a proposal; provided that, to the extent there are transmission costs included in a bid, the department of public utilities may authorize or require the relevant parties to seek recovery of such transmission costs of the project through federal transmission rates, consistent with policies and tariffs of the Federal Energy Regulatory Commission, to the extent the department finds such recovery is in the public interest; and (5) require that the clean energy resources to be used by a developer under the proposal meet the following criteria: (i) provide enhanced electricity reliability within the commonwealth; (ii) contribute to reducing winter electricity price spikes; (iii) be cost effective to Massachusetts electric ratepayers over the term of the contract or delivery commitment agreement; (iv) avoid line loss and mitigate transmission costs to the extent possible; (v) allow the long-term contract price to be indexed to the wholesale market prices, as determined by the department of public utilities and decrease in periods of low wholesale prices; (vi) guarantee energy delivery in winter months; (vii) adequately demonstrate project viability in a commercially reasonable timeframe; (viii) provide reliability, price, economic and environmental benefits that outweigh any costs to ratepayers; (ix) give preference for proposals that combine more than 1 renewable energy generating source; (x) where feasible, create additional employment and economic development in the commonwealth.

(f) As part of its approval process, the department of public utilities shall consider the attorney general’s recommendations, which shall be submitted to the department of public utilities within 45 days following the filing of such contracts or delivery commitment agreements with the department of public utilities. The department of public utilities shall consider both the potential costs and benefits of such contracts and shall approve a contract or delivery commitment agreement only upon a finding that it is a cost effective mechanism for procuring low cost renewable energy on a long-term basis taking into account the factors outlined in this section.

(g) The department of energy resources and the attorney general shall jointly select an independent evaluator to monitor and report on the solicitation and bid selection process in order to assist the department of public utilities in its consideration of any resulting long-term contracts or delivery commitment agreements filed for approval. To ensure an open, fair and transparent solicitation and bid selection process, the independent evaluator shall: (1) issue a report to the department of energy resources analyzing the solicitation process proposed under subsection (b) of this section, including recommendations for improving the process, if any; and (2) within 45 days following the filing of a long-term contract for a winning bid proposal, file a report with the department of public utilities summarizing and analyzing the solicitation and the bid selection process, and providing its independent assessment of whether all bids were evaluated in a fair and non-discriminatory manner. The independent evaluator shall have access to all information and data related to the competitive solicitation and bid selection process necessary to fulfill the purposes of this subsection, but shall ensure all proprietary information remains confidential. The department of public utilities shall consider the findings of the independent evaluator and may adopt recommendations made by the independent evaluator as a condition for approval.  If the independent evaluator concludes in the findings that the solicitation and bid selection of a long-term contract was not fair and objective, the department of public utilities may reject the contract.   

(h) If distribution companies are unable to agree on a winning bid under a solicitation under this section, the matter shall be submitted to the department of energy resourcesfor a final, binding determination of the winning bid. The electric distribution companies shall each enter into a contract or delivery commitment agreement with the winning bidders for their apportioned share of the market products being purchased from the project. The apportioned share shall be calculated and based upon the total energy demand from all distribution customers in each service territory of the distribution companies.

(i) An electric distribution company may elect to use any energy purchased under such contracts or delivery commitments for resale to its customers, and may elect to retain RECs to meet the applicable annual RPS requirements under said section 11F of said chapter 25A. If the energy and RECs are not so used, such companies shall sell such purchased energy into the wholesale spot market and shall sell such purchased RECs through a competitive bid process. Notwithstanding the previous sentence, the department of energy resources shall conduct periodic reviews to determine the impact on the energy and REC markets of the disposition of energy and RECs under this section and may issue reports recommending legislative changes if it determines that actions are being taken that will adversely affect the energy and REC markets.

(j) If a distribution company sells the purchased energy into the wholesale spot market and auctions the RECs as described in this section, the distribution company shall net the cost of payments made to projects under the long-term contracts or delivery commitments against the proceeds obtained from the sale of energy and RECs, and the difference shall be credited or charged to all distribution customers through a uniform fully reconciling annual factor in distribution rates, subject to review and approval of the department of public utilities.

(k) Any long-term contracts procured under this section shall contain provisions that require an appropriate unit-specific tracking system to enable an accounting of the delivery of clean energy generation resources.

(l) If this section is subject to a judicial challenge, the department of public utilities may suspend the applicability of the challenged provision during the pendency of the judicial action until final resolution of the challenge and any appeals and shall issue such orders and take such other actions as are necessary to ensure that the provisions that are not challenged are implemented expeditiously to achieve the public purposes of this section.

SECTION 2. Subsection (a) of section 11F1/2 of Chapter 25A of the General Laws, as appearing in the 2014 Official Edition, is hereby amended by striking the following words, "practices; or (v)" and inserting in place thereof the following words:- "practices; (v) fuel cells; or (vi)".

SECTION 3. Subsection (e) of said section 11F1/2 of Chapter 25A is hereby amended by inserting after the words "may provide that for" the following words:- "fuel cells and" and after the words "new on-site" striking the words "renewable thermal".

SECTION 4: The General Laws are hereby amended by adding the following Chapter 23M:

Section 1. As used in this chapter, the following words shall have the following meanings, unless the context clearly requires otherwise:

“Agency”, the Massachusetts Development Finance Agency as established in chapter 23G or a special purpose entity created or duly authorized by the agency.

“Betterment Assessment”, an assessment of a betterment on qualified commercial or industrial property or residential property in relation to commercial energy improvements established under the commercial sustainable energy program, or in relation to residential energy improvements established under the residential sustainable energy program, that has been duly assessed in accordance with chapter 80.

“Benefitted property owner”, an owner of qualifying commercial or industrial property or residential property who desires to install commercial or residential energy improvements and who provides free and willing consent to the betterment assessment against the qualifying commercial or industrial property or residential property.

“Commercial Energy Improvements”, (1) any renovation or retrofitting of qualifying commercial or industrial real property to reduce energy consumption or installation to serve qualifying commercial or industrial property, provided such renovation, retrofit or installation is permanently fixed to such qualifying commercial or industrial property, or (2) the construction of an extension of an existing natural gas distribution company line to qualifying commercial or industrial property to enable the qualifying commercial or industrial property to obtain natural gas distribution service to displace utilization of fuel oil, electricity or other conventional energy sources.

“Commercial or industrial property”, any real property other than a residential dwelling containing fewer than five dwelling units.

“Commercial PACE project”, with respect to a parcel of qualifying commercial or industrial property, (1) design, procurement, construction, installation and implementation of commercial energy improvements; (2) related energy audits; and (3) measurement and verification reports of the installation and effectiveness of such energy improvements.

“Commercial sustainable energy program”, a program that facilitates commercial PACE projects and utilizes the betterment assessments authorized by section 3 as the source of both the repayment of and collateral for the financing of commercial PACE projects.

“Department”, the Department of Energy Resources as established in chapter 25A.

“Municipality” a city, town, county, the Devens Regional Enterprise Zone created by Chapter 498 of Acts of 1993 or the Southfield Redevelopment Authority created by Chapter 291 of the Acts of 2014.

“PACE bonds”, bonds, notes or other evidence of indebtedness, in the form of revenue bonds and not general obligation bonds of the commonwealth or the agency, issued by the agency related to the commercial and residential sustainable energy program established by this chapter.

“Participating municipality”, a municipality that has determined to participate in a commercial sustainable energy program and a residential sustainable energy program.

“Program administrator”, the agency or another entity assigned responsibility by the agency, which program administrator may be the agency, or one or more private, public or quasi-public third-party administrators, to administer, provide support, and provide financing for the residential sustainable energy program.

“Qualifying commercial or industrial property”, any commercial or industrial property owned by any person or entity other than a municipality or other governmental entity, that meets the qualifications established for the commercial sustainable energy program in accordance with the program guidelines as established in subsection (c) of section 2 and in subsection (13) of section 6 of chapter 25A.

“Residential PACE project”, with respect to a residential property, (i) the design, procurement, construction, installation and implementation of energy efficiency or conservation improvements; including the installation of electric vehicle charging stations permanently affixed to the property; (ii) the design, procurement, construction, installation and implementation of water efficiency or conservation improvements and (iii) the design, procurement, construction, and installation including any required feasibility studies.

“Residential property”, any real property other than a commercial or industrial property with fewer than five dwelling units, provided that the property is owned by any person or entity other than a municipality or other governmental entity.

“Residential Energy improvements”, any renovation, retrofitting or installation of energy efficiency measures to reduce energy consumption and/or water conservations and savings on a residential property, or installation of electric vehicle charging infrastructure; provided, however, that any such renovation, retrofit or installation shall be permanently fixed to the residential property.

“Residential sustainable energy program”, a program that facilitates residential PACE projects and utilizes the betterment assessments authorized by section 4 as the source of both the repayment of and collateral for the financing of residential PACE projects.

“Special purpose entity”, a partnership, limited partnership, association, corporation, limited liability company or other entity established and authorized by the agency to issue PACE bonds, subject to approval by the agency as provided by the agency in its resolution authorizing the special purpose entity to issue PACE bonds.

Section 2.  Municipal Opt In.  Each municipality in the commonwealth shall have the option to participate in the commercial sustainable energy program or the residential sustainable energy program, or both, as a participating municipality by a majority vote of the city or town council, by a majority vote of the board of selectmen or by resolution of its legislative body, as may be appropriate, pursuant to which the municipality shall assess, collect, remit and assign betterment assessments, in return for commercial energy improvements or residential energy improvements for a benefitted property owner located within such municipality and for costs reasonably incurred in performing such acts.

Section 3. Commercial Sustainable Energy Program. (a)(1) The agency, in consultation with the department, shall establish a commercial sustainable energy program in the commonwealth, and in furtherance thereof, is authorized to issue PACE bonds, either directly or through a special purpose entity, for the purpose of financing all or a portion of the costs of the activities comprising one or more commercial PACE projects.

(2) Upon the approval of a commercial PACE project by the department, the agency may issue PACE bonds.  Such PACE bonds shall be issued in accordance with section 8 of chapter 23G; provided, however, that the agency shall not be required to make the findings set forth in subsections (a) and (b) of said section 8.  PACE bonds issued in furtherance of this section shall not be subject to, or otherwise included in, the principal amount of debt obligations issued under section 29 of chapter 23G. Such PACE bonds may be secured as to both principal and interest by a pledge of revenues to be derived from the commercial sustainable energy program, including revenues from betterment assessments on qualifying commercial or industrial property on which the commercial PACE projects being financed by the issuance of such PACE bonds are levied, as well as any reserve funds or other credit enhancements created in connection with the commercial sustainable energy program.

(b) The agency, (1) working in conjunction with the department, shall develop program guidelines governing the terms and conditions under which financing for commercial PACE projects may be made available to the commercial sustainable energy program, which may include standards to encourage property owners to undertake projects where the energy cost savings of the commercial energy improvements over the useful life of the improvements exceeds the costs of the improvements; (2) shall provide information as requested by the department regarding the expected financing costs for commercial PACE projects; (3) may serve as an aggregating entity for the purpose of securing state or private third-party financing for commercial energy improvements pursuant to this section; (4) may establish a loan loss, liquidity reserve or credit enhancement program to support PACE bonds issued under this section; and (5) may use the services of one or more private, public or quasi-public third-party administrators to administer, provide support or obtain financing for commercial PACE projects under the commercial sustainable energy program.

(c) If a benefitted property owner requests financing from the agency for commercial energy improvements under this section, the agency shall:

(1) Refer the project to the department for approval under the guidelines established by subsection (13) of section 6 of chapter 25A;

(2) Upon confirmation of project approval by the department, evaluate the project for compliance with the financial underwriting guidelines established by the agency;

(3) Impose requirements and conditions on the financing in order to ensure timely repayment, including, but not limited to, procedures for placing a lien on a property as security for the repayment of the betterment assessment;

(4) Require that the property owner provide a copy of a contract duly executed by the contractor performing the commercial energy improvements;

(5) Require that the property owner obtain consent from any existing mortgage holder of the property to the intent to finance such commercial energy improvements pursuant to this section; and

(6) If the agency approves financing, require the participating municipality to levy a betterment assessment in a manner consistent with this section and with chapter 80, insofar as such provisions may be applicable and consistent with this section, on the qualifying commercial or industrial property in a principal amount sufficient to pay the costs of the commercial energy improvements and any associated costs that the agency determines will benefit the qualifying commercial or industrial property, including costs of the agency.

(d)(1) The agency may enter into a financing and assessment agreement with the property owner of qualifying commercial or industrial property.  The agency may raise funds to supply the financing under such agreement by issuing PACE bonds.  Upon execution of such agreement and immediately prior to making the funds, which may constitute all or a portion of the proceeds from the issuance of such PACE bonds, available to the property owner for the commercial PACE project under the agreement, the agency shall notify the participating municipality and the participating municipality or its designee shall record the betterment assessment and lien on the qualifying commercial or industrial property.

(2) The agency shall disclose to the property owner the costs associated with participating in the commercial sustainable energy program established by this section, including the effective interest rate of the betterment assessment, any fees charged by the agency to administer the program and any fees charged by third parties such as originators or other intermediaries.

(e) At the time the betterment assessment is made, the agency shall set the term and amortization schedule, the fixed or variable rate of interest for the repayment of the betterment assessment amount, and any required closing fees and costs.  The amortization schedule shall provide for an amortization period of no longer than the lesser of: (1) the useful life of the longest-lived of the commercial energy improvements comprising the commercial PACE project(s) financed by such betterment assessment; or (2) 20 years.  The interest rate, which may be supplemented with state or federal funding, shall be sufficient to pay the principal and interest and shall be calculated to include the agency’s fees, financing and administrative costs of the commercial sustainable energy program, including delinquencies.

(f) When the agency has authorized, but not issued, PACE bonds for commercial PACE projects and other costs of the commercial sustainable energy program, including interest costs and other costs related to the issuance of PACE bonds, the agency shall require the participating municipality where the qualifying commercial or industrial property is located, or the program administrator duly approved by the agency, to record the agreement between the agency and the property owner as a betterment pursuant to chapter 80, except that such betterment may apply to a single parcel of qualifying commercial or industrial property, and as a lien against the qualifying commercial or industrial property benefitted.

(g) Betterment assessments levied pursuant to this section and the interest, fees and any penalties thereon shall constitute a lien against the qualifying commercial or industrial real property until they are paid, notwithstanding the provisions of section 12 of chapter 80, and shall continue notwithstanding any alienation or conveyance of the qualifying commercial or industrial real property by one property owner to a new property owner.  A new property owner shall take title to the qualifying commercial or industrial property subject to the betterment assessment and related lien.  The lien shall be levied and collected in the same manner as the property taxes of the participating municipality on real property, including, in the event of default or delinquency, with respect to any penalties, fees and remedies and lien priorities.  Each lien may be continued, recorded and released upon repayment in full of the betterment assessment in the manner provided for property tax liens.  Each lien, subject to the consent of existing mortgage holders, shall take precedence over all other liens or encumbrances, except a lien for taxes of the municipality on real property. To the extent betterment assessments are paid in installments and any such installment is not paid when due, the betterment assessment lien may be foreclosed to the extent of any unpaid installment payments and any penalties, interest and fees related thereto. In the event such betterment assessment lien is foreclosed, such lien shall survive the judgment of foreclosure to the extent of any unpaid installment payments of the betterment assessment secured by such lien that were not the subject of such judgment.

(h) Any participating municipality shall assign to the agency any and all liens filed by the tax collector, as provided in the written agreement between the participating municipality and the agency.  The agency may sell or assign, for consideration, any and all liens received from the participating municipality. The agency and the assignee(s) shall negotiate the consideration received by the agency. The assignee(s) shall have and possess the same powers and rights at law or in equity as the agency and the participating municipality and its tax collector would have had with regard to the precedence and priority of such lien, the accrual of interest and the fees and expenses of collection.  The assignee(s) shall have the same rights to enforce such liens as any private party holding a lien on real property, including, but not limited to, foreclosure and a suit on the debt.  The assignee(s) shall recover costs and reasonable attorneys’ fees incurred as a result of any foreclosure action or other legal proceeding brought pursuant to this section and directly related to the proceeding from those having title to the property subject to the proceedings.  Such costs and fees may be collected by the assignee(s) at any time after the assignee(s) have made a demand for payment.

(i) The exercise of the powers granted by this section shall be for the benefit of the people of the commonwealth by increasing energy efficiency in the commonwealth.  As the exercise of such powers shall constitute the performance of essential government functions, the agency shall not be required to pay any taxes or assessments upon the property acquired or used by the agency under this section or upon the income derived therefrom.  The PACE bonds issued under this section, their transfer and the income derived therefrom, including any profit made on the sale thereof, shall at all times be free of taxation within the commonwealth.

(j) The activities of the commercial sustainable energy program shall be reviewed in the 3-year planning process and annual reviews undertaken pursuant to section 21 of chapter 25.

(k) The agency may establish rules and guidelines as are necessary to implement the purposes of the program, including procedures describing the application process and criteria to be used in evaluating application for PACE bonds under this section.

Section 4. Residential Sustainable Energy Program. (a) The agency, by resolution of its board of directors, and in consultation with the department, shall establish a residential sustainable energy program pursuant to this section.

(b) The agency shall have the power and authority to issue PACE bonds to finance all or a portion of the costs of the activities comprising one or more residential PACE projects.  Such PACE bonds shall be authorized by a resolution of the board of directors of the agency; provided, however, that the agency shall not be required to make the findings required by subsections (a) and (b) of section 8 of chapter 23G.  PACE bonds issued pursuant to this section shall not be subject to or otherwise included in the calculation of any limitation on the incurrence of indebtedness by the agency set forth in any general or special laws.  PACE bonds may be secured as to both principal and interest by a pledge of revenues derived from the residential sustainable energy program, including revenues from betterment assessments on residential property on which the residential PACE projects being financed by the issuance of the PACE bonds are located and any reserve funds or other credit enhancements created under the residential sustainable energy program.  PACE bonds of each issue may be dated, may bear interest at such rate or rates, may mature or otherwise be payable at such time or times, may be redeemable before maturity, and may be subject to such other terms and conditions as may be provided for by the agency.

(c) The agency shall designate one or more program administrators, which may be the agency or one or more other public, private or quasi-public third-parties to administer, provide support and provide financing for the residential sustainable energy program.  The program administrator may originate, execute, and finance contracts for residential energy improvements with property owners on behalf of the agency. The program administrator shall, in accordance with guidelines in sections (m) and (n): (i) develop consumer protection features for the residential sustainable energy program; (ii) develop procedures for working with contractors and installers of residential energy improvements for the purposes of facilitating residential energy improvements; (iii) work with the agency to enable efficient and cost-effective financing mechanisms for the residential sustainable energy program; (iv) provide information as requested by the agency regarding the expected financing costs for residential PACE projects; and (v) provide ongoing data and reporting to the agency and the department. The agency may: (A) serve as an aggregating entity to secure state or private third-party financing for residential energy improvements pursuant to this chapter; and (B) use the services of one or more private, public or quasi-public third-party administrators to administer, provide support or obtain financing for residential PACE projects under the residential sustainable energy program.

(d) If the owner of a benefitted property requests financing from the agency for residential energy improvements for a residential PACE project under this section, the agency or its designated program administrator shall:

(i) evaluate the project for compliance with the technical and financial underwriting guidelines established for the residential sustainable energy program in sections (m) and (n);

(ii) impose requirements and conditions on the financing to ensure timely repayment including, but not limited to, procedures for placing a lien on the benefitted property as security for the payment of the betterment assessment; and

(iii) upon approval of financing, require the participating municipality to levy a betterment assessment in a manner consistent with this section and with chapter 80, as such provisions may be applicable and consistent with this section, on the benefitted property in a principal amount sufficient to pay the costs of the residential energy improvements and any associated costs, including the costs and fees of the program administrator, the agency, the department and the costs of the participating municipality.

(e)(1) The agency shall enter into a financing and assessment agreement with the owner of a benefitted property. The agency may raise funds to supply the financing under the agreement by issuing PACE bonds or from other financing sources, including by encouraging third-party capital providers to participate directly or indirectly in the program. Upon execution of the agreement and immediately prior to making the funds, which may constitute all or a portion of the proceeds from the issuance of the PACE bonds or other source of financing, available to the property owner for the residential PACE project under the agreement, the agency or its designated program administrator shall notify the participating municipality and the participating municipality or its designee shall record the betterment assessment and lien on the benefitted property.

(2) The agency or its designated program administrator shall disclose, in written format, to the property owner the costs associated with participating in the residential sustainable energy program established by this section, in accordance with the guidelines established in sections (m) and (n), including the effective interest rate of the betterment assessment, any fees charged by the agency or the program administrator to administer the program and any fees charged by third parties such as originators or other intermediaries, and the estimated payment schedule. The property owner shall acknowledge receipt of the disclosure.

(f) Prior to the betterment assessment being levied, the program administrator shall set the term and amortization schedule, the rate of interest for the repayment of the betterment assessment amount and any required closing fees and costs, and disclose this information to the participating property owner in written format. The term of each financing shall conform with the guidelines established in sections (m) and (n). The assessment contract shall specify that the interest rate shall be fixed, and that payments of principal and interest shall be in roughly equal installments and principal payments shall be fully amortized over the term of the financing. The property owner shall acknowledge receipt of the disclosure.

(g) At the time that the residential energy improvement is completed, the participating municipality where the benefitted property is located or the program administrator duly approved by the participating municipality or the agency shall notice and record the agreement between the agency and the property owner as a betterment pursuant to chapter 80 and place a lien on the property according to the terms of the agreement between the property owner and the agency, as security for the PACE bonds or other financing from the agency or other third-party capital providers; provided, however, that the betterment may apply to a single parcel of benefitted property and as a lien against the residential property benefitted.

(h) Notwithstanding section 12 of chapter 80, betterment assessments levied pursuant to this section and the interest, fees and any penalties on the betterment assessments shall constitute an assessment and a lien against the benefitted property until they are paid and shall continue notwithstanding any alienation or conveyance of the benefitted property by one property owner to a new property owner, including by foreclosure of the right of redemption by a mortgagee, by a municipality for unpaid taxes or otherwise. A new property owner shall take title to the benefitted property subject to the betterment assessment and lien. Only those past due balances of any betterment assessment under this Section shall be considered delinquent and subject to foreclosure. All payments on the betterment assessment that become due after the date of transfer by foreclosure or otherwise shall continue to be secured by a lien on the benefitted property and shall be the responsibility of the transferee. Betterment assessments payable pursuant to this Section shall constitute a covenant that runs with the premises, and that portion of the betterment assessment that is not yet due shall not be accelerated or eliminated by foreclosure of any lien, including a property tax lien.  The assessment and lien shall be treated, levied and collected in the same manner as the property taxes of the participating municipality on real property including, in the event of default or delinquency, the manner in which the participating municipality collects any penalties and fees and exercises remedies. Each lien may be continued, recorded and released upon repayment in full of the betterment assessment in the manner provided for property tax liens.

(i) Notwithstanding the provisions of section 12 of chapter 80, a lien on a benefitted property established pursuant to this section shall be: (i) subordinate to any existing lien against the benefitted property in existence and properly recorded on the date on which the betterment assessment is recorded; (ii) subordinate to any subsequent purchase money mortgage or first deed of trust recorded after the date on which the betterment assessment is recorded, provided, that the purchase money mortgage or first deed of trust was executed with or obtained from a mortgage lender licensed to do business in the Commonwealth; and (iii) except as otherwise agreed by the parties to the assessment agreement, superior to any other subsequent lien against the property recorded after the date on which the betterment assessment is recorded.  The agency or participating municipality may choose to implement clauses (i) or (ii) above, through contract if convenient and/or necessary; however, at no time shall a betterment lien established pursuant to this chapter be deemed by any court or agency of the Commonwealth to not be subordinate in accordance with the above. This subsection shall not affect the status or priority of any other municipal or statutory lien.

(j) The agency may sell or assign any betterment assessment receivables and any and all liens filed by the tax collector as provided in an assessment contract executed pursuant to this chapter. Notwithstanding any general or special law to the contrary, the provisions of Sections 2A and 2C of chapter 60 and any regulations promulgated pursuant thereto shall not apply to the assignment or sale of betterment assessment receivables or liens securing such receivables pursuant hereto.  The agency and the assignee shall negotiate the consideration received for such assignment. The assignee shall have the same powers and rights at law or in equity as the agency, the participating municipality, and the participating municipality’s tax collector would have had with regard to the precedence and priority of the lien, the accrual of interest, and the fees and expenses of collection. The assignee shall have the same rights to enforce the liens as any private party holding a lien on real property including, but not limited to, foreclosure. The assignee shall recover costs and reasonable attorney’s fees incurred as a result of any foreclosure action or other legal proceeding brought pursuant to this section and directly related to the proceeding from those having title to the property subject to the proceedings. Such costs and fees may be collected by the assignee at any time after the assignee has made a demand for payment.

(k) The program administrator shall report to the agency and the department on the activities of the residential sustainable energy program in accordance with the guidelines established in (m) and (n). Activities of the residential sustainable energy program shall be reviewed on a periodic basis by the agency and the department as determined by the guidelines developed in sections (m) and (n).

(l) The agency shall establish rules and guidelines for the residential sustainable energy program governing eligibility and underwriting guidelines, consumer protection features including but not limited to contractor participation and standards, underwriting, disclosures and marketing practices, and criteria to evaluate the applications for PACE bonds under this section.

(m) The agency shall conduct periodic reviews of compliance with these rules and guidelines.

(n) The department shall develop rules and guidelines for the residential sustainable energy program governing project technical requirements and product eligibility, PACE project components, consumer protection features including but not limited to contractor participation and standards, and reporting requirements including the coordination with other clean energy programs in the Commonwealth. The department shall conduct periodic reviews of compliance with these rules and guidelines.

(o)  Betterment assessments established pursuant hereto shall not be subject to Sections 20A or 21C of Chapter 59 of the General Laws.

(p)  Notwithstanding any general or special law to the contrary, the provisions of any other general or special law, regulation, ordinance or bylaw providing for the advertising, bidding awarding of contracts or consultation for the design, construction or improvement of property shall not apply to the procurement of residential PACE projects financed pursuant hereto.

SECTION 5. Section 6 of chapter 25A of the General Laws, as appearing in the 2010 Official Edition, is hereby amended by striking subsection 12 and inserting in place thereof the following subsections:

(12) intervene and advocate on behalf of small commercial and industrial users before the department of public utilities in any dispute between such businesses and generation or distribution companies, as defined pursuant to section 1 of chapter 164; and

(13) plan, develop, oversee and operate the commercial sustainable energy program, with the Massachusetts Development Finance Agency, in accordance with the provisions of chapter 23M.  In accordance with this section, the Department shall approve each commercial PACE project prior to the issuance of a PACE bond under chapter 23M and in so doing shall consider whether the energy cost savings of the commercial energy improvements over the useful life of such improvements exceed the costs of such improvements.

SECTION 6. Notwithstanding any general or special law, rule, regulation or procedure to the contrary, there is hereby created a small hydro and anaerobic digestion tariff program for small hydropower facilities and anaerobic digestion net metering facilities in the commonwealth.  For the purposes of this section the following terms shall mean “Small hydropower facility” shall mean a facility in the commonwealth with a Federal Energy Regulatory Comission-rated capacity of 2 megawatts or less, using water to generate electricity that is connected to a distribution company and an “anaerobic digestion net metering facility” shall mean a Class I, Class II, and Class III anaerobic digestion net metering facility that has begun commercial operation on and after January 1, 2015. The “small hydro and anaerobic digestion tariff” shall mean the default service kilowatt-hour rate of the local distribution company as defined in section 1 of chapter 164 of the General Laws that receives electricity from a small hydropower facility or an anaerobic digestion net metering facility. An electric distribution company shall pay a small hydropower facility or an anaerobic digestion net metering facility monthly for electricity it received from such a facility based on the kilowatt hours of electricity the distribution company received from the facility multiplied by the small hydro and anaerobic digestion tariff. A participating small hydropower facility and anaerobic digestion shall notify a distribution company that it intends to deliver electricity pursuant to the small hydro and anaerobic digestion tariff program and shall comply with the distribution company’s applicable reporting and interconnection requirements; provided, however that no more than 50 megawatts of small hydropower and anaerobic digestion aggregate capacity state wide shall be permitted to participate in the small hydro and anaerobic digestion tariff.

SECTION 7.  The department of public utilities shall open an investigation to establish specific criteria for identifying the environmental impact of gas leaks which have been classified as Grade 3 pursuant to section 144 of chapter 164 of the General Laws, and to establish a 5-year plan to repair such leaks.  The department shall promulgate rules regarding the timeline and acceptable methods for remediation and repair of any Grade 3 leak which is determined to have significant environmental impact.

SECTION 8.  Notwithstanding any general or special law to the contrary, the department of energy resources may establish a carbon reduction research center. The carbon reduction research center shall be established to advance the Commonwealth’s carbon reduction goals. The carbon reduction research center may include, but not be limited to, any of the following research initiatives: fuel cells; energy storage technology; residential property assessed clean energy programming; commercial property assessed clean energy programming; increased efficiency of existing small domestic energy production; and increased efficiency of and cleaner use of traditional fossil based fuels. The carbon reduction research center shall be located upon a campus within the University of Massachusetts, as defined by section 1, of chapter 75 of the general laws, that meets the following criteria: (1) located within a gateway city; (2) located near the Emerging Technologies and Innovation Center; and (3) has access to academic resources necessary for civil, environmental, and nuclear engineering.