SECTION 1. Chapter 164 of the General Laws is hereby amended by adding, after section 137, the following section:-

Section 138. Net Metering

Section 138. (a) In this section, unless context otherwise requires, the following words shall have the following meanings:

“Net metering”, the process of measuring the difference between electricity delivered by an electric distribution company and electricity generated by a renewable-net-metering facility and fed back to the distribution company.

“Renewable-net-metering facility”, a facility for the production of electrical energy that has a generating capacity of not more than two thousand (2,000) kilowatts, is located on or in the vicinity of a customer’s premise, is intended primarily to offset part or all of that customer’s requirements for electricity, and generates electricity using any of the following: (i) solar photovoltaic or solar thermal electric energy; (ii) wind energy; (iii) ocean thermal, wave, or tidal energy; (iv) fuel cells utilizing renewable fuels; (v) landfill gas; (vi) naturally flowing water and hydroelectric; or (vii) low-emission, advanced biomass power conversion technologies.

“Virtual billing”, enables the combination of all the meters under ownership or lease of a legally established entity in the Commonwealth for the purposes of net metering.

(b) A distribution company customer that uses electricity generated by a renewable-net-metering-facility may elect net metering.

(i) If the electricity generated by the renewable-net-metering facility during a billing period plus any generation credits carried forward from prior billing periods exceeds the customer’s kilowatt-hour usage during the billing period, the customer shall be billed for zero kilowatt-hour usage and the excess generation shall be credited to the customer’s account for the following billing period.

(ii) If the customer’s kilowatt-hour usage exceeds the electricity generated by the renewable-net-metering facility during the billing period plus any generation credits carried forward from prior billing periods, the customer shall be billed for the net kilowatt-hour usage at the applicable rate.

(c) Net metering shall apply to all charges calculated on a kilowatt-hour basis, including distribution, transmission, generation, and transition charges.

(d) Net metering shall be implemented using a single meter. Where an electro-mechanical meter is employed, the meter shall register the flow of electric power in both directions and shall display the net flow. Where a digital meter is employed, it shall be programmed to register the net flow as implemented in electro-mechanical meters, or shall separately register the inward flow to the customer and the outward flow to the distribution company to enable subsequent calculation of the net flow.

(e) Distribution companies are prohibited from imposing special fees or higher rates on net metering customers, such as backup charges, or additional controls or liability insurance as long as the renewable-net-metering facility complies with the applicable interconnection, safety, and power quality standards; provided, however, that distribution companies may charge a net metering customer with a renewable-net-metering facility with a generating capacity greater than 60 kilowatts for the actual cost of any additional metering equipment required to implement net metering.

(f) Virtual billing for municipalities and their associations, businesses and their associations, homeowner or condominium associations, educational or non-profit institutions and their associations shall be permitted.

SECTION 2. Chapter 164 of the General Laws is hereby amended by adding, after section 138, the following section:-

Section 139. Least Cost Planning

Section 139. (a) In this section, unless context otherwise requires, the following words shall have the following meanings:

“Least Cost Planning” (LCP), requires that all new power supplies and demand side management be prioritized for acceptance by the Department of Telecommunications and Energy according to the lowest combined financial, societal and environmental costs. The combined costs are to be used to prioritize the acquisition of sources of power, energy efficiency programs and demand side management programs and will be based on the assumptions in the following Power Supply Rankings Chart. Distribution companies and retail electricity suppliers will pay the penalties per megawatt hour listed in the Chart by purchasing new megawatts of renewable generation that meets requirements of MGL Chapter 125 A, Section 11 F.

(b) The Department of Telecommunications, Utilities and Energy will initiate proceedings at least every two years, or earlier at the discretion of the Chair, to adjust the Power Supply Rankings Chart listed below.

Power Supply Rankings Chart (in dollars per megawatt hour)

Coal combustion; $6.00

Clean Coal gasification; $4.5

Clean Coal gasification with carbon sequestration; $3.5

Oil #6: $5.00

Oil #2 combined cycle turbines; $4.00

Nuclear; $3.5

Natural gas combustion; $3.00

Natural gas combined cycle turbines; $2.00

Waste to energy; $2.00

Bio Mass Combustion; $1.00

Hydro; $0.5

Fuel cell; natural gas, $0.5; fuel cell with a renewable source of hydrogen, 0

Land-fill gas; 0

Bio Mass Composting; 0

Combined power and heat; 0

Wind; 0

Solar Thermal; 0

Solar Photovoltaic; 0

Energy Efficiency; minus $1

Demand side response management; minus $1;

peak demand side response management; minus $1.5

(c ) Within six months of the enactment of this act, all distribution companies and retail power suppliers shall submit to the Department a power supply procurement plan for all expected new demand of electric power supply in their service areas or regions of operation for a three year period. The Department will initiate proceedings to accept public comment on each plan.

(d) The Department’s approval of each plan will be contingent upon a determination that each utility and retail provider of electricity has demonstrated a reasonable attempt to purchase all available energy efficiency, demand side management and renewable energy supplies, as determined by a consultant under contract to the Department.

(e) The Department shall set a goal for each distribution company and retail provider of achieving zero growth of fossil fuel generated electricity based upon ISO New England’s projections for new demand of electric power supply growth within the three year time period.

(f) Contracts for renewables, efficiency and demand side management that have longer terms shall be given a higher priority by the Department.

(g) Within three years of the enactment of this legislation all distribution companies and retail suppliers of electricity shall submit a power supply procurement plan for their complete power supply portfolio to the Department for review and approval. Every five years from that time going forward the Department will undertake review of all distribution companies and retail power suppliers least cost power supply procurement plans for review and approval.

(h) The Department shall set a new goal after three years, for distribution companies and retail suppliers, that reduces the consumption of fossil fuel based electricity from levels of usage current at that time. The Department’s approval of the plans shall be based on how well the distribution companies and retail suppliers achieve the reduction of fossil fuel generated electricity in relation to the availability of non fossil fuel resources as determined by a consultant under contract and employ of the department.

(i) The consultant(s) under contract with the department shall be paid through an assessment of each utility that shall be recoverable through an increase in systems benefit charge for energy efficiency programs.

SECTION 3. Chapter 164 of the General Laws is hereby amended by adding, after section 139, the following section:-

Section 140. Adjustable Rate Cap

Section 140. (a) In this section, unless context otherwise requires, the following words shall have the following meanings:

“Adjustable Rate Cap” (ARC), requires that the Department of Telecommunications and Energy conduct hearings to determine the level of revenue necessary to cover a utility’s expenses and a reasonable return on investment or profit level. The Department then sets the rate to cover those expenses plus a reasonable profit. Positive or negative differences in that profit level will be reconciled in consumer rates in succeeding years.

(b) Within two months from the enactment of this act, The Department shall initiate proceedings to determine the appropriate level of revenue for each distribution company in the Commonwealth and a process to reconcile profits or losses at the end of the term. Rates for the succeeding term shall be adjusted to make up for the difference from the established level of revenue approved by the Department.

SECTION 4. Section 5B of Chapter 25 is hereby amended by adding the following:-

By December 1, 2008 the department shall establish regulations directing distribution companies serving customers in the Commonwealth to procure, through contracts of no less than fifteen years, certificates representing renewable electricity supply sufficient to comply with the renewable energy mandates established in section 11F of Chapter 25A.

The department shall, after holding a public hearing, report to the legislature, on the 30^th of July

of every year beginning in 2009, on the distribution companies’ compliance with this section.

SECTION 5. Chapter 111 of the General Laws, as appearing in the 2004 Official Edition, is hereby amended by inserting after section 142N the following section:-

Section 142O. Greenhouse Gas Emissions; Definitions; Regional Greenhouse Gas Initiative; Mandatory Greenhouse Gas Emissions Reporting

(a) As used in this section, the following words shall have the following meanings unless the context clearly requires otherwise:

“Allowance” an authorization to emit a fixed amount of carbon dioxide.

“Cap and trade program”, a policy approach to controlling large amounts of emissions from a group of electric generating stations at costs that are lower than if sources were regulated individually. The approach first sets an overall cap, or maximum amount of emissions per compliance period, that will achieve the desired environmental effects. Authorizations to emit in the form of emission allowances are then allocated to electric generating stations, and the total number of allowances cannot exceed the cap. Individual control requirements are not specified for electric generating stations. The only requirements are that sources completely and accurately measure and report all emissions and then turn in the same number of allowances as emissions at the end of the compliance period.

“Regional Greenhouse Gas Initiative” or “RGGI”, the terms and provisions described in the Memorandum of Understanding dated December 20, 2005, as may be amended, that established a cap and trade program within the northeast region of the United States.

“Regional Greenhouse Gas Registry” or “RGGR”, a registry designed by the Northeast States for Coordinated Air Use Managment in support of RGGI reporting, state-wide mandatory reporting, and voluntary reporting.

"Facility", a building, structure or installation located on any one or more contiguous or adjacent properties of commercial or industrial sites that are sources of greenhouse gas emissions.

"Greenhouse gas", any chemical or physical substance that is emitted into the air and that the Commissioner of Environmental Protection may reasonably anticipate will cause or contribute to climate change, including, but not limited to, carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulfur hexafluoride.

"Indirect emissions", emissions associated with the consumption of purchased electricity, steam and heating or cooling by an entity or facility.

“Major electricity generating station”, an electric generating facility with a capacity equal to or greater than 25 megawatts.

(b) The department of environmental protection shall, in consultation with department of telecommunications and energy, through appropriate rules and regulations, establish a carbon dioxide cap and trade program that will limit and then reduce the total carbon dioxide emissions released by major electric generating stations that generate electric power in Massachusetts by 10% as of January 1, 2018.

(1) The department of environmental protection’s rules and regulations establishing a carbon dioxide cap and trade program shall be designed so as to fully comply with the Regional Greenhouse Gas Initiative (RGGI) and permit the holders of carbon dioxide allowances to trade them in a regional market proposed to be established through the RGGI.

(2) The department of environmental protection shall facilitate an allowance auction for the purpose of selling all allowances under the carbon dioxide cap and trade program. Any monies received by the Commonwealth as a result of the sale of allowances may be spent for the purposes specified in this section, or purposes specified in the RGGI, without further appropriation. All who wish to participate in the allowance auction may do so. No less than twenty-five percent of funds recovered from the allowance auction shall be used for energy efficiency and renewable energy projects in municipalities. The remaining percentage of funds recovered from the allowance auction shall be used:

(i) for consumer benefit or strategic energy purposes, including the use of the

allowances to promote energy efficiency;

(ii) to directly mitigate electricity ratepayer impacts;

(iii) to promote renewable or non-greenhouse gas emitting energy technologies;

(iv) to stimulate or reward investment in the development of innovative carbon

dioxide emission abatement technologies with significant carbon dioxide

reduction potential; and

(v) to provide job training opportunities in renewable energy generation for

individuals working in the fossil-fuel energy generation industry.

(3) The responsibilities created by establishing a carbon dioxide cap and trade program shall be in addition to all other responsibilities imposed by any other general or special law or rule or regulation and shall not diminish or reduce any power or authority of the department of environmental protection including the authority to adopt standards and regulations necessary for the Commonwealth to join and fully participate in any multi-state program, at any stage in the development and implementation of such a program, intended to control emissions of carbon dioxide and/or other substances that are determined by the department of environmental protections to be damaging and/or altering the climate.

(4) The department of environmental protection shall promulgate regulations that comply with RGGI so long as the cap in RGGI requires at minimum a 10% reduction in carbon dioxide emissions from major electric generating stations by 2018. If RGGI is amended so as to lower the cap to any amount less than 10%, the department of environmental protection shall maintain the requirement that major electric generating stations reduce carbon dioxide emissions by 10% by January 1, 2018.

(c) The department of environmental protection shall establish a Regional Greenhouse Gas Registry (RGGR) for greenhouse gas emissions and a regional reporting system in conjunction with other states or a regional consortium.

Not later than April 15, 2007, and annually thereafter, the owner or operator of any facility that is required to report air emissions data to the Department of Environmental Protection pursuant to Title V of the federal Clean Air Act, 42 U.S.C.A. § 7401 et seq., and that has stationary emissions sources that emit greenhouse gases shall report to the regional registry direct stack emissions of greenhouse gases from such sources. The owner or operator shall report all greenhouse gas emissions in a type and format that the regional registry can accommodate.

The department of environmental protection shall consider, on an annual basis, requiring the expansion of reporting to the regional greenhouse gas registry to include, but not be limited to, other facilities or sectors, greenhouse gases, or direct and indirect emissions. A decision for or against an expansion of reporting and an explanation of such decision shall be included in an annual report.

Not later than June 30, 2007, the department of environmental protection shall provide for the voluntary reporting of emissions of greenhouse gas to RGGR by owners and operators of facilities that are not required to submit information pursuant to subsections (b) and (c) of this section but which do so on a voluntary basis. The greenhouse gas emissions reported shall be of a type and format that the regional greenhouse gas registry can accommodate.

If a regional greenhouse gas registry is not developed and implemented by April 15, 2008, the department of environmental protection shall evaluate the feasibility of establishing and administering a state-wide greenhouse gas registry for the collection of emissions data pursuant to subsections (b) and (c) of this section. If a regional greenhouse gas registry is developed after the department of environmental protection establishes a Commonwealth-wide greenhouse gas registry, the reporting requirements in subsections (b) and (c) of this section shall revert to the regional greenhouse gas registry in accordance with said subsections (b) and (c).

Not later than June 30, 2007, and triennially thereafter, the department of environmental protection shall publish a state greenhouse gas emissions inventory that includes comprehensive estimates of the quantity of greenhouse gas emissions in the state for the last three years in which data is available.

The department of environmental protection may adopt regulations to implement the provisions of this section.

SECTION 6. Chapter 25 of General Laws is hereby amended by adding, after section 21, the following sections:

Section 22. Energy Resources Procurement Board

(a) There is established an Energy Resources Procurement Board which shall consist of representatives appointed by the Governor of (i) a state-wide manufacturing association, (ii) a state-wide business association, (iii) a chamber of commerce, (iv) residential customers, (v) low income customers, (vi) an environmental organization knowledgeable in energy efficiency and energy procurement programs, (vii) the Division of Energy Resources, (viii) the Department of Environmental Protection, (ix) and the Attorney General. Representatives of the Department of Telecommunications and Energy and of each of the electric and natural gas distribution companies shall be non-voting, ex-officio members of the board. The board may retain expert consultants provided such consultants may not have any contractual relationship with an electric or natural gas distribution company or electricity or natural gas provider. The board shall annually submit to the Department of Telecommunications and Energy a proposal regarding the level of funding required for the discharge of its duties, which proposal shall be approved by the department either as submitted or as modified by the department.

Section 23. Comprehensive Electric Resources Procurement Plan

(a) The electric distribution companies, in coordination with the board, shall develop a comprehensive plan for the procurement of electric energy resources, including, but not limited to, conventional and renewable generating facilities, energy efficiency, load management, demand response, combined heat and power facilities, and distributed generation, to meet the projected requirements of their customers in a manner which minimizes the cost of such resources to customers over time consistent with the state’s environmental goals and standards. On or before October 1, 2007, and every three years thereafter, the companies will submit to the board an assessment of (i) the energy and capacity requirements of the customers for each of the next ten years, (ii) the impact of current and projected environmental standards, including, but not limited to, those related to greenhouse gas emissions and the federal Clean Air Act goals, and how different resources could assist in achieving those standards and goals, (iii) energy security and economic risks associated with potential energy resources, and (iv) the estimated lifetime cost and availability of potential energy resources. The board will review the assessment and provide comments to the companies within two months thereafter.

(b) Based on the assessment and the comments of the board, the electric distribution companies shall submit proposed comprehensive electric resources procurement plan(s) to the board within three months after receiving the comments of the Board. Resource needs shall first be met through all available energy efficiency and demand reduction resources that are cost effective, reliable and feasible. The plan shall specify (i) the total amount of energy and capacity resources that are needed to meet the requirements of all customers, (ii) the extent to which demand side measures, including efficiency, conservation, demand response, and load management can cost-effectively meet these needs, (iii) needs for generating capacity and transmission and distribution improvements, (iv) how the development of said resources will reduce and stabilize the costs of electricity to consumers and (v) the manner in which each of the proposed resources should be procured, including the optimal contract periods for various resources (vi) the manner in which the plan will further air quality goals and reduce greenhouse gas emissions. The plan shall consider: (a) approaches to maximize the impact of demand side measures, (b) the extent to which generation needs can be met by renewable and combined heat and power facilities and by the impact of regional market incentives, (c) types and locations for generation that would optimize the generation portfolio within the state, (d) fuel types, diversity, availability, firmness of supply, and security and environmental impacts thereof, including impacts on meeting the state’s greenhouse gas emission goals; (e) reliability, peak load and energy forecasts, system contingencies, and existing resource availabilities; (f) import limitations and the appropriate reliance on such imports; (g) the costs and benefits of options for the ownership of energy resources, including ownership by an electric distribution company, (h) if it is in the best interest of customers, how new resources could be integrated into the standard service provided pursuant to Chapter 25 of the general laws; and (i) the impact of the electric resources procurement plan on the costs of electric customers, including, but not limited to, effects on capacity and energy costs, rate stability, and affordability for low-income customers. The electric resources procurement plan shall include a summary of the savings secured by the plan for electric customers.

(c) The proposed electric resources procurement plan shall be reviewed by the board and approved as submitted or as modified by the board within four months after receipt. The companies shall provide any additional information requested by the board which is relevant to the consideration of the electric resources procurement plan. The board shall submit the approved plan, together with a statement of any unresolved issues to the Department of Telecommunications and Energy. The department shall consider the plan in an uncontested docket and shall provide an opportunity for interested parties to submit comments regarding the plan. Not later than one hundred twenty days after submission of the plan, the department shall approve or modify and approve the plan.

Section 24. Implementation of Comprehensive Electric Resources Procurement Plan

(a) The department shall implement the electric resources procurement plan by (i) issuing requests for proposals to meet specified electric energy resource needs set forth in the plan or by directing the Division of Energy Resources or the electric distribution companies to issue such requests for proposals, (ii) directing the electric distribution companies to incorporate additional demand-side measures set forth in the plan into the comprehensive conservation and load management plan prepared pursuant to Sec. 1.7 of this act for review by the Energy Efficiency Board, (iii) directing the distribution companies to submit proposals for specific transmission, distribution or generating facility improvements or projects set forth in the plan, or (iv) taking other actions within its authority to implement the electric resources procurement plan.

(b) If the department determines to implement provisions of the plan by issuing one or more requests for proposals, it shall conduct a contested case proceeding to develop and issue the request. The department shall publish requests for proposals under this section in one or more newspapers or periodicals, as selected by the department and shall post such request for proposals on its web site. The department may retain the services of a third-party entity with experience in the area of energy procurement to oversee the development of the requests for proposals and to assist the department in its approval of proposals pursuant to this section. The department may require the electric distribution companies to enter into contracts with entities whose proposals are approved by the department. The provisions of such contracts shall be consistent with the electric resources procurement plan and shall be approved by the department.

(c) The electric distribution companies shall provide quarterly implementation reports to the Board commencing two and half months after the approval of the electric resources procurement plan by the department. Such quarterly reports shall include: description of the extent to which the implementation of the plan is meeting the elements specified in the plan as required by Section 1.3 (b) of this act and a summary of the savings secured by the implementation thus far of the plan for electric customers. The quarterly reports shall also include the targets for each electric energy resource included in the plan approved by the department and the achieved percentages to date for each electric energy resource including the achieved percentages for efficiency, distributed generation, demand response, combined heat and power and renewables. The electric distribution companies shall provide annual implementation reports commencing one year after the approval of the electric resources procurement plan by the department that include all the same elements as the quarterly reports to the department, the board, and General Assembly.

(d) Effective January 1, 2008, until the comprehensive electric procurement plan is implemented by the department, the electric distribution companies shall include all available energy efficiency and demand reduction resources that are cost effective, reliable and feasible in a comprehensive conservation and load management plan prepared pursuant to Sec. 7 of this act for review by the Energy Conservation Board.

(e) All costs associated with the development and implementation of the electric plan which are not otherwise directly allocable shall be recoverable through electric distribution rates.

(f) The limitation on the assessment of additional charges relative to energy efficiency programs contained in Chapter 25, Sec. 19 of the General Laws shall not apply to charges required to implement the comprehensive electric procurement plan.

Section 25. Comprehensive Natural Gas Resources Procurement Plan

(a) The natural gas distribution companies, in coordination with the Energy Resources Procurement Board, shall develop a comprehensive plan for the procurement of natural gas energy resources, including, but not limited to, conventional supply and storage contracts, energy efficiency, load management, and combined heat and power facilities to meet the projected requirements of their customers in a manner which minimizes the cost of such resources to customers over time consistent with the state’s environmental goals and standards. On or before October 1, 2008, and every three years thereafter, the companies will submit to the board an assessment of (i) the volumetric natural gas and capacity requirements of the customers for each of the next ten years, (ii) the impact of current and projected environmental standards, including, but not limited to, those related to greenhouse gas emissions and the federal Clean Air Act goals, and how different resources could assist in achieving those standards and goals, (iii) energy security and economic risks associated with potential energy resources, and (iv) the estimated lifetime cost and availability of potential energy resources. The board will review the assessment and provide comments to the companies within two months thereafter.

(b) Based on the assessment and the comments of the board, the natural gas distribution companies shall submit a proposed comprehensive natural gas resources procurement plan to the board within three months after receiving the comments of the Board. Resource needs shall first be met through all available energy efficiency and demand reduction resources that are cost effective, reliable and feasible. The plan shall specify (i) the total amount of volumetric natural gas and capacity resources that are needed to meet the requirements of all customers, (ii) the extent to which demand side measures, including efficiency, conservation, and load management can cost-effectively meet these needs, (iii) needs for transmission and distribution improvements, (iv) how the development of said resources will reduce and stabilize the costs of natural gas consumers; (v) the manner in which each of the proposed resources should be procured, including the optimal contract periods for various resources and (vi) the manner in which the plan will further air quality goals and reduce greenhouse gas emissions. The plan shall consider: (a) approaches to maximizing the impact of demand side measures, (b) reliability, peak demand and energy forecasts, system contingencies, and existing resource availabilities; (c) pipeline and other supply limitations; and (d) the impact of the natural gas resources procurement plan on the costs of natural gas customers, including, but not limited to, effects on volumetric and capacity costs, rate stability, and affordability for low-income customers. The natural gas resources procurement plan shall include a summary of the savings secured by the plan for natural gas customers.

(c) The proposed natural gas resources procurement plan shall be reviewed by the board and approved as submitted or as modified by the board within four months after receipt. The companies shall provide any additional information requested by the board which is relevant to the consideration of the natural gas resources procurement plan. The board shall submit the approved plan, together with a statement of any unresolved issues to the Department of Telecommunications and Energy. The department shall consider the plan in an uncontested docket and shall provide an opportunity for interested parties to submit comments regarding the plan. Not later than one hundred twenty days after submission of the plan, the department shall approve or modify and approve the plan.

Section 26. Implementation of the Comprehensive Natural Gas Resources Procurement Plan

(a) The department shall implement the natural gas resources procurement plan by (i) issuing requests for proposals to meet specified natural gas energy resource needs set forth in the plan or by directing the Division of Energy Resources or the natural gas distribution companies to issue such requests for proposals, (ii) directing the natural gas distribution companies to incorporate additional demand-side measures set forth in the plan into the comprehensive conservation and load management plan prepared pursuant to Sec. 1.7 of this act for review by the Energy Efficiency Board, (iii) directing the distribution companies to submit proposals for specific transmission, distribution or generating facility improvements or projects set forth in the plan, or (iv) taking other actions within its authority to implement the natural gas resources procurement plan.

(b) If the department determines to implement provisions of the plan by issuing one or more requests for proposals, it shall conduct a contested case proceeding to develop and issue the request. The department shall publish requests for proposals under this section in one or more newspapers or periodicals, as selected by the department and shall post such request for proposals on its web site. The department may require the natural gas distribution companies to enter into contracts with entities whose proposals are approved by the department. The provisions of such contracts shall be consistent with the natural gas resources procurement plan and shall be approved by the department.

(c) The natural gas distribution companies shall provide quarterly implementation reports to the Board commencing two and half months after the approval of the natural gas resources procurement plan by the department. Such quarterly reports shall include: description of the extent to which the implementation of the plan is meeting the elements specified in the plan as required by Section 1.4 (b) of this act and a summary of the savings secured by the implementation thus far of the plan for electric customers. The quarterly reports shall also include the targets for each natural gas energy resource included in the plan approved by the department and the achieved percentages to date for each natural gas energy resource including but not limited to efficiency and load management. The natural gas distribution companies shall provide annual implementation reports commencing one year after the approval of the natural gas resources procurement plan by the department that include all the same elements as the quarterly reports to the department, the board, and the Massachusetts General Court.

(d) Effective January 1, 2008, until the comprehensive natural gas procurement plan is implemented by the department, the natural gas distribution companies shall include all available energy efficiency and demand reduction resources that are cost effective, reliable and feasible in a comprehensive conservation and load management plan prepared pursuant to Sec. 1.7 of this act for review by the Energy Efficiency Board, provided that funding for such energy efficiency and demand reduction resources shall be not less than 20 mills per therm for all consumers of natural gas in the commonwealth.

(e) All costs associated with the development and implementation of the natural gas plan which are not otherwise directly allocable shall be recoverable through natural gas distribution rates.

Section 27. Aligning Utility Incentives with Reducing Consumer Costs and Increased Energy Efficiency

(a) The department shall ensure that estimates of sales or demand elasticity do not result in material over or under collections by distribution, transmission, and gas companies organized and doing business in the commonwealth pursuant to the provisions of this chapter. On or after the issuance of a final decision in a proceeding on amendments to rate schedules for any electric or natural gas company, but not later than January 1, 2009, any purchased natural gas adjustment clause or energy adjustment clause approved by the department for such company shall include a provision that requires the electric or natural gas company to charge or reimburse customers for any under-recovery or over-recovery of overhead and fixed costs due solely to the deviation of actual retail sales of electricity or natural gas from projected retail sales of electricity or natural gas.

(b) On or before July 1, 2008, the department shall conduct an uncontested docket to establish a performance based incentive plan which allows for additional compensation for each electric and natural gas distribution company based on the level of success in mitigating and reducing the cost and variability of electric and natural gas services for customers through implementation of the electric and natural gas procurement plans and shall provide an opportunity for interested parties to submit comments regarding the plan.

Section 28. Energy Efficiency Program Oversight

(a) The Division of Energy Resources shall appoint and convene an Energy Efficiency Board which shall include representatives of: (i) a state-wide manufacturing association, (ii) a state-wide business association, (iii) a chamber of commerce, (iv) a heating oil industry representative (v) residential customers, (vi) low income customers, (vii) an environmental organization knowledgeable in energy efficiency and energy procurement programs, (viii) the Division of Energy Resources, (ix) the Department of Environmental Protection, (x) and the Attorney General. Representatives of the Department of Telecommunications and Energy and of each of the electric and natural gas distribution companies shall be non-voting, ex-officio members of the board.

(b)(1) The Energy Efficiency Board shall advise and assist the electric and natural gas distribution companies in the development and implementation of comprehensive plans, which plans shall be approved by the Department of Telecommunications and Energy, to implement cost-effective energy efficiency programs and market transformation initiatives. The plan shall be consistent with the comprehensive procurement plans approved by the Energy Resources Procurement Board pursuant to sections 1.2 and 1.4 of this act at the time of submission to the department. Each program contained in the plan shall be either accepted or rejected by the Energy Efficiency Board prior to submission to the department for approval. The Energy Efficiency Board shall, as part of its review, examine opportunities to offer joint programs providing similar efficiency measures that save more than one fuel resource or otherwise to coordinate programs targeted at saving ore than one fuel resource. Any costs for joint programs shall be allocated equitably among the efficiency programs.

(2) Programs included in the plan developed under subdivision (1) of this section shall be screened through cost-effectiveness testing which compares the value and payback period of program benefits to program costs to ensure that programs are designed to obtain energy savings and system benefits whose value is greater than the costs of the programs. Program cost-effectiveness shall be reviewed annually, or otherwise as is practicable. If a program is determined to fail the cost-effectiveness test as part of the review process, it shall either be modified to meet the test or shall be terminated. On or before March 1, 2008, and annually thereafter, the board shall provide a report to the Massachusetts House and Senate Ways and Means Committees that documents expenditures and fund balances and evaluates the cost-effectiveness of such programs conducted in the preceding year.

(3) Programs included in the plan developed under subdivision (1) of subsection (d) of this section may include, but not be limited to: (A) conservation and load management programs, including programs that benefit low-income individuals; (B) research, development and commercialization of products or processes which are more energy-efficient than those generally available; (C) development of markets for such products and processes; (D) support for energy use assessment, real-time monitoring systems, engineering studies and services related to new construction or major building renovation; (E) the design, manufacture, commercialization and purchase of energy-efficient appliances and heating, air conditioning and lighting devices; (F) program planning and evaluation; (G) joint fuel efficiency initiatives programs targeted at reducing consumption of more than one fuel resource; and (H) public education regarding efficiency. Such support may be by direct funding, manufacturers’ rebates, sale price and loan subsidies, leases and promotional and educational activities. The plan shall also provide for expenditures by the Energy Efficiency Board for the retention of expert consultants and reasonable administrative costs provided such consultants shall not be employed by, or have any contractual relationship with, an electric or natural gas distribution company. Such costs shall not exceed five per cent of the total costs of the plans.

Section 29. Heating Oil Use

(a) The Energy Efficiency Board shall develop programs to provide energy efficiency services for home heating oil consumers. The programs shall be developed with advice and input from heating oil dealers and service technicians. The Board shall ensure that input is solicited from heating oil dealers and service technicians located in different regions of the state.

(b) The Board will issue a request for proposals and select a program administrator(s) to develop and implement programs for cost effective heating and fuel oil efficiency. The elements of the plan, approval process, and implementation will be consistent with Section 1.7 of this act.

(c) A not for profit corporation shall be created, the Fuel Oil Efficiency Trust, with a board comprised of 5 representatives elected from the membership of the Board by the Board to collect and administer monies for heating and fuel oil conservation. Upon approval of an efficiency plan by the Board, the Fuel Oil Efficiency Trust shall pay the approved amount to the program administrator.

(d) The state shall impose a one cent per gallon tax on the sale of number 2 fuel oil (fuel and heating oil, use in electric generation and transportation exempt) at the wholesale level which shall be paid to the Fuel Oil Efficiency Trust. The state will create a corresponding one cent per gallon tax credit for wholesale distributors of fuel oil when they contribute one cent per gallon on the sale of number 2 fuel oil to the Fuel Oil Efficiency Trust.

Section 30. Combined Heat and Power

(a) The Department of Telecommunications and Energy shall develop a program utilizing incentives, competitive contracts, or a portfolio standard, after a review of the most cost-effective mechanisms, to increase the generation of electricity from combined heat and power systems in the state.

(b) Eligible combined heat and power systems shall be new, operational after January 1, 2007, and achieve an efficiency of seventy five percent or greater on an annual basis, with annual reporting to the Department.

(c) The program or policies developed by the Department shall supply one percent of the states total electric supply in 2010, and increase by one percent per year to six percent in 2015. The Department and the Division of Energy Resources shall assess the potential to increase the combined heat and power target in the years beyond 2015 and the Department shall have the authority to increase the percentages at any time if it is in the state’s economic and environmental interest to do so. The programs or policies shall be funded through electric distribution rates.

SECTION 7. Chapter 164 of General Laws, section 1E(a) is hereby amended by inserting “success in mitigating and reducing the cost and variability of electric and natural gas services for customers through implementation of the electric and natural gas procurement plans, effective delivery of energy efficiency and demand side management,” after the words “satisfaction services outages.”

SECTION 8. The Secretary of Environmental Affairs shall develop and submit to the Governor and the Legislature within twelve months from the effective date hereof a written plan to maximize the storage of carbon within the forested, agricultural, and other open lands of the Commonwealth. Such plan shall be developed in consultation with other interested persons chosen by the Secretary, including without limitation mangers of public lands, land trusts and other environmental groups, academic forestry experts, and private landowners and forestry experts. Such plan shall include, without limitation, the following elements:

(1) a strategy for so managing the forested, agricultural, and other open lands owned or managed by the Commonwealth, or any agency thereof, as to maximize the storage of carbon therein in trees, plants, and other natural resources;

(2) a strategy for acquisition by the Commonwealth, or any agency thereof, and for permanent conservation by private persons, of such additional lands as shall maintain the storage of carbon now existing thereon and permit the increase of such carbon storage to the extent practicable;

(3) guidelines for the management of forested, agricultural, and open lands held by private persons which will promote existing and increased storage of carbon thereon, together with recommended incentives, such as tax credits, to be adopted as law in order to encourage the implementation of such guidelines by such private landowners;

(4) a proposed method of measuring carbon storage upon the public and private lands of the Commonwealth and a recommendation as to how such storage might receive credit under any national or other system designed to regulate or control carbon emissions; and

(5) a description of such changes in law or regulation as may be necessary to effectively carry out the plan submitted by the Secretary hereunder.

Nothing contained herein shall prevent the Secretary, or any other agency of the Commonwealth, from carrying out any element of such a plan, or taking any other action with respect to carbon storage or land management, as may be permitted under existing law either before or after the submission of such plan.

SECTION 9. Chapter 21A of the General Laws, as appearing in the 2004 Official Edition, is hereby amended by adding the following section:-

Section 3F. (a) Within 30 days of the annual release of U.S. Environmental Protection Agency's and Department of Energy’s Fuel Economy Guide hereinafter referred to as “the Guide,” the commissioner of the department of environmental protection, in consultation with the commissioner of reveneue, shall establish annually three schedules of energy efficient light-duty passenger vehicles for the purposes of sales tax rebates and excise tax exemptions pursuant to section 25 of chapter 64H and section 1A of chapter 60A. The three schedules shall be grouped based on seating capacity and include 2-4 seat passenger vehicles (excluding motorcycles), 5-6 seat passenger vehicles, and vehicles that seat 7 or more passengers. Each schedule shall include each vehicle’s combined city and highway mileage per gallon of regular gasoline (or energy equivalent for clean diesel and alternative fuels) as determined by the United States Environmental Protection Agency and a figure representing the percentage of the vehicle that is American-made pursuant to Title 49 CFR Part 583, as amended.

(b The Commissioner shall have the discretion to create a formula that calculates what

vehicles receive rebates or excise exemptions, and the amounts of said rebates or

exemptions. In calculating the formula for eligible vehicles up to 20 per cent of the

calculation may be based on the percentage of the car’s American-made content.

(d) No sales tax rebate or excise tax exemption shall be applied to any vehicle previously

titled for sale and each vehicle must be legal for sale in Massachusetts pursuant to section

142K of chapter 111 and its implementing regulations

(e) The commissioner may promulgate guidance or regulations if necessary to carry out

the provisions of this section.

SECTION 10. Section 1 of Chapter 60A of the General Laws, as appearing in the 2004 Official Edition, is hereby amended by adding after the ninth paragraph the following new paragraph:-

The excise imposed by this section shall be reduced pursuant to the schedule of energy efficient vehicles pursuant to section 3F of chapter 21A. Within 30 days from close of public comment on the schedule of energy efficient vehicles prepared by the department of environmental protection pursuant to section 3F of chapter 21A, the department of revenue shall distribute the final schedule to boards of assessors and tax collectors within each municipality. The collector of taxes of a municipality shall forward to the commissioner an accounting of the reductions in excise made pursuant to this paragraph, with a list of vehicles accounting for such reduction.

SECTION 11. Said Chapter 60A, as so appearing, is hereby amended by adding the following new section:-

Section 1A. Subject to appropriation, the commissioner shall, upon receipt of the list referenced in paragraph 10 of section 1 of this chapter, reimburse cities and towns for excise tax reduced on vehicles eligible under section 3F of chapter 21A.

SECTION 12. Section 25 of chapter 64H of the General Laws, as appearing in the 2004 Official Edition, is hereby amended by adding at the end thereof the following:-

The commissioner of revenue shall rebate to consumers, upon proof of sale within the tax year of an eligible vehicle, as defined pursuant to section 3F of chapter 21 that portion of the sales tax eligible for rebate. Notwithstanding any general or special law to the contrary, the amounts rebated pursuant to this section shall not count as an abatement with respect to calculation of the share of state sales tax apportioned to the Massachusetts Bay Transportation Authority or School Modernization and Reconstruction Trust Fund.

SECTION 13. Section 9A of Chapter 7 is hereby amended by inserting after sub-section (d), the following new sub-section (e):-

(e) a complete listing of low-emission fuel-efficient state passenger vehicles and light duty trucks purchased in the preceding calendar year. The secretary shall only authorize and approve the purchase of replacement vehicles in accordance with section one hundred and forty-two J and K of chapter one hundred and eleven. No state vehicles may be purchased unless they meet or exceed fuel efficiency standards and emissions standards established by the commissioner of department of environmental protection.

SECTION 14. On or before January 1, 2008, the Division of Energy Resources shall determine the amount of state retail oil sales that constitutes the upper 25 percent of retail fuel sales and term any oil company that sells fuel at and beyond that threshold a “major integrated oil company.”

SECTION 15. The General Laws shall be amended to include after Chapter 161D the following Chapter:-

Chapter 161E. Motor Vehicle Fueling Stations

Section 1. Definitions

The term "alternative fuel" means methanol, denatured ethanol, and other alcohols; mixtures containing 85 percent or more (or such other percentage, but not less than 70 percent, as determined by the Secretary of Transportation, by rule, to provide for requirements relating to cold start, safety, or vehicle functions) by volume of methanol, denatured ethanol, and other alcohols with gasoline or other fuels; natural gas, including liquid fuels domestically produced from natural gas; liquefied petroleum gas; hydrogen; coal-derived liquid fuels; fuels (other than alcohol) derived from biological materials; electricity (including electricity from solar energy); and any other fuel the Secretary of Transportation determines, by rule, is substantially not petroleum and would yield substantial energy security benefits and substantial environmental benefits;

“Major integrated oil companies” are those companies whose retail sales are in the upper 25 percent of fuel sales, as determined by the Division of Energy Resources.

Section 2. Major Integrated Oil Companies

(a) All major integrated oil companies shall make available to retail consumers at least one (1) alternative fuel by January 1, 2010.

(b) All major integrated oil companies shall make available to retail consumers at least two (2) alternative fuels by January 1, 2011.

Section 3. Massachusetts Turnpike Motor Vehicle Fueling Stations

(a) Notwithstanding the provisions of the previous section, all motor vehicle fueling stations on the Massachusetts Turnpike shall make available at least one (1) alternative fuel by January 1, 2009.

(b) Notwithstanding the provisions of the previous section, all motor vehicle fueling stations on the Massachusetts Turnpike shall make available at least two (2) alternative fuels by July 1, 2010.

SECTION 16. The Massachusetts Highway Department shall evaluate highway lighting statewide to explore how money can be saved by replacing existing fixtures with lower-wattage full cut off fixtures or eliminating lighting altogether where appropriate and report back to DOER annually beginning on August 31, 2007.

SECTION 17. Section 6 of chapter 62 of the General Laws, as appearing in the 1998 Official Edition, is hereby amended by striking out the words “fifteen per cent”, in line 21, and inserting in place thereof the following:— 50 per cent.

SECTION 18. Said section 6 of said chapter 62, as so appearing, is hereby further amended by striking out the words “five thousand dollars”, in line 22, and inserting in place thereof the figure:— $5,000.

SECTION 19. Said section 6 of said chapter 62, as so appearing, is hereby further amended by inserting after line 52 the following clause:—
(iii) an energy bill summary for the previous 12 months from the utility or energy company, or actual bills, before the installation of the system and a 12 month summary of bills after the installation of the system, or bills, from the utility or energy company must be submitted as proof of a reduction in energy usage directly attributable to the new system with the tax credit form to qualify for the credit.

SECTION 20. Subsection (h) or Section 94 of Ch. 143 of the General Laws is hereby amended by inserting after the words “specialized codes referred to in section ninety six” the words “and including the energy conservation code.”

SECTION 21. Section 94 of Ch. 143 of the General Laws shall be amended to add after subsection (l) the following new subsection:-

(m) To adopt, at least once every three (3) years, the latest edition of the model energy conservation code, the International Energy Conservation Code (IECC), published by the International Code Council. No amendments to the Massachusetts energy conservation code shall be adopted that increase energy consumption in buildings. The Board of Building Regulations and Standards jointly with the Division of Energy Resources shall adopt regulations to certify and train qualified energy code inspectors and require that all new construction and major renovations pass inspections by certified energy code inspectors demonstrating full compliance with the Massachusetts energy conservation code.

SECTION 22. Section 6 of chapter 62 of the General Laws, as amended by sections 120 and 121 of chapter 159 of the acts of 2000, is hereby further amended by inserting the following paragraph:-

(l) A tenant or owner of property located in the commonwealth who is not a dependant of another taxpayer may take a tax credit against the income tax this chapter imposes in an amount equal to the sum of the credit components specified in section 31N of chapter 63 provided that:

(1) for the credit allowance year, a taxpayer shall obtain and file an initial credit

component certificate and an eligibility certificate the division of energy resources shall

issue pursuant to section 31O of chapter 63;

(2) for each of the four years succeeding the credit allowance year, a taxpayer shall obtain

and file an eligibility certificate pursuant to section 31O of chapter 63;

(3) the amount of each credit component does not exceed the limit set forth in the initial

credit component certificate the corporation obtains pursuant to section 31O of chapter

63;

(4) a taxpayer may use a particular cost paid or incurred to determine the amount of only

one credit component;

(5) where applicable, a taxpayer shall obtain a certificate of occupancy for the building

for which the taxpayer intends to take the credit;

(6) in the case of a fuel cell or photovoltaic module, the property for which the taxpayer

takes the credit remains in service;

(7) where the credit allowance year is the first taxable year in which a taxpayer may

claim the credit pursuant to the initial credit component certificate, the green building

remains in service during the year;

(8) a taxpayer shall not take a credit under this section unless the taxpayer complies with

the requirements of section 31O of chapter 63, relating to reports to the division of energy

resources;

(9) in the construction of a green building, a green base building, and a green tenant

space, or the rehabilitation of a building, base building or tenant space to make a green

building, green base building or green tenant space a taxpayer shall adhere to the

regulations the commissioner promulgates and adopts under section 31P of chapter 63;

(10) a tenant or owner shall take a tax credit pursuant to the provisions of paragraphs (b),

(11) a taxpayer shall not take a credit under this section if the taxpayer is eligible for the

credit under paragraph (a) of section 31M of chapter 63.

SECTION 23. Chapter 63 of the General Laws is hereby amended by inserting the following sections:-

Section 31L.

As used in this section and sections 31M, 31N, 31O and 31P of this chapter and section 6 paragraph (l) of chapter 62, the following terms shall have the following meanings:

(a) “Allowable costs” means amounts properly chargeable to a capital account, other than for land, which a tenant or owner pays or incurs for:

(1) construction or rehabilitation;

(2) commissioning costs;

(3) interest paid or incurred during the construction or rehabilitation period;

(4) legal, architectural, engineering and other professional fees allocable to construction

or rehabilitation;

(5) closing costs for construction, rehabilitation or mortgage loans;

(6) recording taxes and filing fees incurred in construction or rehabilitation;

(7) site costs, including but not limited to, temporary electric wiring, scaffolding,

demolition costs, and fencing and security facilities; and

(8) furniture, carpeting, partitions, walls, wall coverings, ceilings, drapes, blinds, lighting,

plumbing, electrical wiring and ventilation; but

(9) not including telephone systems, computers, fuel cells and photovoltaic modules.

(b) “Base building” means area of a building not intended for occupancy, including but not

limited to:

(1) structural components of the building;

(2) exterior walls;

(3) floors;

(4) windows;

(5) roofs;

(6) foundations;

(7) chimneys and stacks;

(8) parking areas;

(9) mechanical rooms, mechanical systems and owner controlled and operated service

spaces;

(10) sidewalks;

(11) main lobby;

(12) shafts and vertical transportation mechanisms;

(13) stairways; and

(14) corridors.

(1) the taxable year during which a tenant or owner place a green building, a green base

building or green tenant space in service or receives a final certificate of occupancy; or

(2) the first taxable year for which a tenant or owner may claim a credit pursuant to the

initial credit component certificate that the division of energy resources issues.

(d) “Commissioner” means the commissioner of the division of energy resources,

(e) “Commissioning” means the testing and fine-tuning of heat, ventilating, air conditioning and other systems to assure proper functioning and adherence to design criteria, the preparation of system operation manuals, and the instruction of maintenance personnel.

(f) “Division” means the Massachusetts division of energy resources.

(g) “Economic development area” means an area as defined by section 1 of chapter 121C, or an empowerment zone or enterprise community as defined by section 1391 of the Internal Revenue Code.

(h) “Eligible building” means a building located in the commonwealth that:

(1) contains at least 20,000 square feet of interior space;

(2) meets or exceeds or upon completion will meet or exceed all federal, state and local:

(i) zoning requirements;

(ii) building codes;

(iii) environmental laws, regulations and industry guidelines;

(iv) land use and erosion control requirements; and

(v) storm water management;

(3) the Massachusetts state building code or a subsequent code classifies as commercial

and has a ventilation system that:

(i) can replace 100 percent of air on any floor on a minimum of two floors at a

time; and

(ii) has fresh air intakes located a minimum of 25 feet away from loading areas,

building exhaust fans, cooling towers, and other points of source contamination;

(4) is a residential multi-family building with at least 12 units;

(5) is a residential multi-family building with at least 2 units that are part of a single or

phased construction project with at least 10,000 square feet under construction or

rehabilitation in any single phase; or

(6) is a combination of buildings described in (3), (4) and (5); and

(7) is not a building located on freshwater wetlands or tidal wetlands as defined by

section 40 and 40A of chapter 131, or on wetlands that require a permit for construction

pursuant to section 404 of the federal clean water act (33 U.S.C.A 1344).

(i) “Energy code” means a chapter within the Massachusetts state building code that addresses energy or energy related issues.

(j) “EPA” means the United States Environmental Protection Agency.

(k) “Fuel cell” means a device that produces electricity directly from hydrogen or hydrocarbon fuel through a non-combustive electrochemical process.

(l) “Green base building” means a base building that is part of an eligible building and meets the standards for energy efficiency, zoning, indoor air quality, and building material, finishes and furnishing uses the commissioner establishes through regulations under this section.

(m) “Green building” means a building in which the base building is a green base building and the tenant space is green tenant space.

(n) “Green tenant space” means tenant space in an eligible building that meets the standards for energy efficiency, code requirements, indoor air quality, and building material, finishes and furnishing uses the commissioner establishes through regulations under this section.

(o) “Incremental cost of building-integrated photovoltaic modules” means:

(1) the cost of a building-integrated photovoltaic module and associated inverter,

additional wiring or other electrical equipment or mounting or structural materials, less

the cost of spandrel glass or other building material the tenant or owner would have used

in the event that the building-integrated photovoltaic module was not installed;

(2) labor costs properly allocable to on-site preparation, assembly and original installation

of a photovoltaic module; and

(3) architectural and engineering services, designs and plans directly related to the construction or installation of the photovoltaic module.

(p) “LEED rating system” means the leadership in energy and environmental design green building rating system that the United States Green Building Council is developing

(q) “Tenant improvements” means necessary and appropriate improvements needed to support or conduct the business of a tenant or occupying owner.

(r) “Tenant space” means the portion of a building designed or intended for the occupancy of the tenant or owner.

Section 31M.

(a) A corporation subject to tax under this chapter may take a credit against the excise this chapter imposes, in an amount equal to the sum of the credit components specified in section 31N for the credit allowance year and each of the four succeeding years, provided that:

(1) for the credit allowance year, a taxpayer shall obtain and file an initial credit

component certificate and an eligibility certificate the division of energy resources shall

issue pursuant to section 31O;

(2) for each of the four years succeeding the credit allowance year, a taxpayer shall obtain

and file an eligibility certificate pursuant to section 31O;

(3) the amount of each credit component does not exceed the limit set forth in the initial

credit component certificate the corporation obtains pursuant to section 31O;

(4) a taxpayer may use a particular cost paid or incurred to determine the amount of only

one credit component;

(5) where applicable, a taxpayer shall obtain a certificate of occupancy for the building

for which the taxpayer intends to take the credit;

(6) in the case of a fuel cell or photovoltaic module, the property for which the taxpayer

takes the credit remains in service;

(7) where the credit allowance year is the first taxable year in which a taxpayer may

claim the credit pursuant to the initial credit component certificate, the green building

remains in service during the year;

(8) a taxpayer shall not take a credit under this section unless the taxpayer complies with

the requirements of section 310, relating to reports to the division of energy resources;

and

(9) in the construction of a green building, a green base building, and a green tenant

space, or the rehabilitation of a building, base building or tenant space to make a green

building, green base building or green tenant space a taxpayer shall adhere to the

regulations the commissioner promulgates and adopts under section 31P.

(b) A successor owner of property, for which the prior owner could have taken a tax credit pursuant to this section, may take a credit against the excise tax, provided that:

(1) the subsequent owner may take a credit for the period allowable had the prior owner

not sold the property; and

(2) for a taxable year, the prior and successor owners shall allocate the credit between

themselves based on the number of days during the year that each party held property.

(c) A successor tenant, assuming tenancy in place of a prior tenant who could have taken a taken a tax credit pursuant to this section, may take a credit against the excise take, provided that:

(1) the property upon which the successor tenant bases the credit remains in the building;

(2) the successor tenant may take a credit for the period allowable had the prior tenancy

not been terminated; and

(3) for a taxable year, the prior and successor tenants shall allocate the credit between

themselves based on the number of days during the year each party used the property.

(d) The commissioner may reveal to the successor owner or tenant information with respect to the credit of the prior owner or tenant that leads to the denial, in whole or part, of the credit the successor owner or tenant claims under paragraphs (b) or (c) of this section.

Section 31N.

(a) A tenant or owner of a green building may take a credit equal to the applicable percentage of the allowable costs the tenant or owner pays or incurs in constructing a green building or rehabilitating a building to make it a green building, provided that:

(1) the applicable percentage a tenant or owner shall use to calculate the credit is 1.4

percent, except where the building is located in an economic development area, in which

case the applicable percentage a tenant or owner shall use is 1.6 percent;

(2) a tenant or owner shall not claim a credit on costs in excess of 150 dollars per square

foot for the portion of the building that comprises the base building;

(3) a tenant or owner shall not claim a credit on cost in excess of 75 dollars per square

foot for the portion of the building that comprises tenant space.

(b) A tenant or owner of green tenant space may take a credit equal to the applicable percentage of the allowable costs a tenant or owner pays or incurs in constructing green tenant space or rehabilitating tenant space to make it green tenant space, provided that:

(1) a tenant or owner shall not claim a credit for green tenant space smaller than 10,000

feet unless the base building in which the tenant space is located is a green base building;

(2) the applicable percentage a tenant or owner shall use to calculate the credit is 1

percent, except where the building is located in an economic development area, in which

case the applicable percentage a taxpayer shall use is 1.2 percent;

(3) a tenant or owner shall not claim a credit on cost in excess of 75 dollars per square

foot; and

(4) where a tenant and an owner both incur costs for the creation of a green tenant space,

and such costs exceed 75 dollars per square foot, the owner shall have priority in

claiming the owner’s costs as the basis for the green tenant space credit component.

(c) A tenant or owner may take a credit equal to the applicable percentage of the allowable costs a tenant or owner pays or incurs in installing a fuel cell to serve a green building, green base building or green tenant space, provided that:

(1) the fuel cell is a qualifying alternate energy source;

(2) the applicable percentage a tenant or owner shall use to calculate the credit is 6

percent of the sum of the capitalized costs a taxpayer pays or incurs for a fuel cell,

including the cost of the foundation or platform and the labor cost associated with

installation;

(3) the tenant or owner shall not claim a credit for capitalized costs in excess of 1,000

dollars per kilowatt of installed dc rated capacity; and

(4) the tenant or owner shall not include as part of the cost paid or incurred, a federal,

state or local grant the tenant or owner receives for purchase and installation of a fuel

cell, unless the tenant or owner includes the amount of the grant as part of the tenant or

owner’s federal gross income.

(d) A tenant or owner may take a credit equal to the applicable percentage of the allowable costs a tenant or owner pays or incurs in installing a photovoltaic module to serve a green building, green base building or green tenant space, provided that:

(1) the photovoltaic module constitutes a qualifying alternate energy source;

(2) the applicable percentage a taxpayer shall use to calculate the credit is 20 percent of

the incremental cost a taxpayer pays or incurs for building integrated photovoltaic

modules;

(3) the applicable percentage a tenant or owner shall use to calculate the credit is 5

percent of the costs of non-building-integrated photovoltaic modules;

(4) the tenant or owner shall not claim a credit for costs in excess of the product of (1)

three dollars and (2) the number of watts included n the dc rated capacity of the

photovoltaic module;

(5) the tenant or owner shall not include as part of the cost paid or incurred, a federal,

state or local grant the tenant or owner receives for purchase and installation of a

photovoltaic module, unless the tenant or owner includes the amount of the grant as part

of the tenant or owner’s federal gross income.

(e) A tenant or owner of a green base building may take a credit equal to the applicable percentage of the allowable costs the tenant or owner pays or incurs in constructing a green base building or rehabilitating a building to make it a green base building, provided that:

(1) the applicable percentage a tenant or owner shall use to calculate the credit is 1

percent, except where the building is located in an economic development area, in which

case the applicable percentage a tenant or owner shall use is 1.2 percent;

(2) a tenant or owner shall not claim a credit on costs in excess of 150 dollars per square

foot for the portion of the building that comprises the base building.

Section 31O.

(a) Upon a tenant or owner’s application and showing that the tenant or owner is likely to place in service, in a reasonable time, property that qualifies for the tax credit under this section, the division shall issue an initial credit component certificate identifying:

(1) the first taxable year for which the tenant or owner may claim a credit;

(2) the expiration date of the certificate, which the division may extend to avoid hardship;

(3) the property to which the certificate applies; and

(4) the maximum amount of the credit component allowable for each of the five taxable

years for which the certificate allows the credit.

(b) In a taxable year for which a tenant or owner claims a tax credit under this section, the tenant or owner shall obtain an eligibility certificate from an architect or professional engineer licensed to practice in the commonwealth. The architect or engineer shall certify, under the seal of the architect or engineer, that, based upon the standards and guidelines in effect at the time in which the property was placed in service, the building, base building or tenant space for which the tenant or owner claims the credit is a green building, green base building or green tenant space, and that the fuel cell or photovoltaic module constitutes a qualifying energy source and remains in service. The architect or engineer shall set forth specific findings upon which the architect or engineer based certification and provide sufficient information to identify a building or space.

(c) Immediately following occupancy, and in a taxable year for which a tenant or owner claims a tax credit under this section, the tenant or owner shall hire to perform indoor air quality testing and record baseline readings, an engineer or industrial hygienist licensed or certified to practice in the commonwealth or other professional the commissioner may approve. The engineer, industrial hygienist or other professional shall monitor supply and return air and ambient air for carbon monoxide, carbon dioxide, total volatile organic compounds, radon and particulate matter; provided that once radon measurements meet the standards the commissioner establishes, annual testing is not required.

(d) For each taxable year for which a tenant or owner claims a tax credit under this section, the tenant or owner shall maintain records for:

(1) annual energy consumption for building, base building or tenant space;

(2) annual results of air monitoring for building, base building or tenant space;

(3) annual confirmation that the building, base building or tenant space continues to meet

requirements regarding smoking area;

(4) written notifications from tenants regarding, and requests to remedy indoor air

problems;

(5) monthly results of performance validation for photovoltaic modules and fuel cells;

and

(6) certification as to off-gassing and other contamination, as prescribed in subsection

paragraph 10 of this subsection.

(e) A tenant or owner claiming a tax credit under this section shall file the initial credit component certificate and the eligibility certificate with the department of revenue and shall file a duplicate with the division. In addition, when claiming a credit under this section, the tenant or owner shall provide the information collected pursuant to paragraph 3 of this subsection to the division. The commissioner shall specify the time and form in which the tenant or owner must provide the collected information.

(f) If the division has reason to believe that an architect or engineer engaged in professional misconduct when making a certification under this section, the division shall inform the board of registration of architects or the board of registration of engineers and land surveyors.

(g) An owner of a green tenant space claiming the tax credit under this section shall:

(1) prior to initial occupancy and upon a tenant’s request, provide a tenant with:

(i) written notification of the opportunity to apply for a tax credit pursuant to this

section; and

(ii) written guidelines regarding opportunities to improve the energy efficiency

and air quality of tenant space and reduce and recycle waste stream; and

(2) in an owner occupied building, make all tenant space green tenant space.

(h) A tenant or owner claiming the tax credit under this section shall provide separate waste disposal chutes or a carousel compactor system for recyclable materials or otherwise facilitate recycling by providing a readily accessible collection area with sufficient space to store recyclable materials between collection dates.

(i) If a tenant or owner claiming the tax credit under this section permits smoking, the tenant or owner shall provide separate air ventilation and circulation systems for smoking and non-smoking areas.

(j) Prior to occupancy or re-occupancy, a tenant or owner claiming the tax credit under this section shall purge the air for a period of one week on every floor. A tenant or owner may purge for less time if the tenant or owner obtains certification from an engineer, industrial hygienist or other professional verifying that off-gassing and other contamination can be reduced to acceptable levels in less than one week.

Section 31P.

(a) The commissioner may promulgate and adopt regulations that:

(1) encourage the development of green buildings, green base buildings and green tenant

space;

(2) establish high, commercially reasonable standards for obtaining the tax credits under

this section;

(3) establish a reasonable time or period of time for submission of an application;

(4) establish a method for allocating initial credit component certificates among eligible

applicants; and

(5) apply only to a green building, green base building, or green tenant space as defined

in this section.

(b) Within 6 months of the effective date of this section, the commissioner shall promulgate and adopt regulations that establish:

(1) standards for energy, including:

(i) standards for energy use for eligible buildings provided that;

(A) energy use for a newly constructed green building, green base

building or green tenant space cannot exceed 65 percent of the use

permitted under the energy code; and

(B) energy use for a building, base building or tenant space rehabilitated

to make a green building, green base building or tenant space cannot

exceed 75 percent of the use permitted under the energy code;

(ii) standards for appliances and heating, cooling and water heating equipment

for which, as of the effective date of this section, the United States department of

energy, the environmental protection agency or some other federal agency

provides specifications; and

(iii) standards for the commissioning of the mechanical plant of a building. The

commissioner shall use documents such as the American Society of Heating,

Refrigerating and Air Conditioning Engineers G-1 and the United States General

Services Administration “Model Commissioning Plan and Guide Specifications”

as a guide for the regulation;

(2) standards for indoor air quality in base buildings, including:

(i) ventilation and exchange of indoor and outdoor air;

(ii) indoor air quality management plans for the construction or rehabilitation

process, including provisions to protect ventilation system components and

pathways from contamination;

(iii) clean procedures for a project that fails to follow a proper air quality

management plan; and

(iv) levels of carbon monoxide, carbon dioxide and total volatile organic

compounds, radon and particulate matter for indoor air;

(3) the minimum percentage of recycled content and renewable source material and

maximum levels of toxicity and volatile organic compounds in building materials,

finishes and furnishings, including but not limited to concrete and concrete masonry

units, wood and wood products, millwork substrates, insulation, ceramic, glass and

cementitious tiles, ceiling tiles and panels, flooring and carpet, paints, coatings, sealants, adhesives, and furniture. The commissioner shall use the LEED rating system as a guide for the regulations;

(4) standards for a building located in an area where water use is not metered that require:

(i) a gray water system that recovers non-sewage waste water or uses roof or

ground storm water collection systems, or recovers ground water from a sump

pump;

(ii) a delimiter for cooling tower systems, to reduce drift and evaporation; and

(iii) exterior plants to be tolerant of climate, soils and natural water availability

and restricts the use of municipal potable water for watering exterior plants;

(5) standards for a building located in an area that does not have sewers or that has

designated storm sewers that require:

(i) an oil grit separator or water quality pond for pretreatment of runoff from any

surface parking area; or

(ii) at least 50 percent of non-landscape areas, including roadways, surface

parking area, plazas and pathways, must utilize pervious paving materials; and

(6) a methodology by which a tenant or owner shall demonstrate compliance with the

standards for energy efficiency, material use, water use, and storm water runoff included

in this section and developed by the commissioner.

(c) The commissioner shall review and update regulations promulgated under this section every two years from the date on which the commissioner adopts the regulations.

(d) The commissioner shall design and conduct state-wide, educational seminars and programs to assist developers, tenants, and others who may participate in the green building tax credit program. The commissioner shall also design written guidelines that owners of green tenant space can provide their tenants that explain opportunities to improve energy efficiency and air quality of tenant space and reduce and recycle waste stream.

(e) On or before April 1, 2008 the commissioner shall submit a written report to the governor, the president of the senate, the speaker of the house, the chairman of the senate finance committee and the chairman of the house ways and means committee, identifying:

(1) the number of certifications filed with the division;

(2) the number of taxpayers claiming the credit under this section;

(3) the amount of the credits taxpayers have claimed; and

(4) other information the commissioner believes meaningful and appropriate in

evaluating the tax credit under this section.

(f) Funding

(1) Sufficient funds shall be appropriated to the division to fill 3 full-time staff positions

at the division for the administration of this section.

(2) Additional funding of 150,000 dollars shall be appropriated to the division for state-

wide, educational seminars and programs to assist developers, tenants, and others who

may participate in the green building tax credit program.

(3) Upon application by a taxpayer, the Division shall issue an initial credit component certificate where the taxpayer has made a showing that the taxpayer is likely within a reasonable time to place in service property which would warrant the allowance of a credit under this section. Such certificate shall state the first taxable year for which the credit may be claimed and an expiration date, and shall apply only to property placed in service by such expiration date. Such expiration date may be extended at the discretion of the Division, in order to avoid unwarranted hardship. Such certificates may be issued in years 2006-2010. Such certificates shall state the maximum amount of credit component allowable for each of the five taxable years for which the credit component is allowed, under section 31N.

(i) Period one. Initial credit component certificates for period one may be issued in years

2006-2010. Such certificates for period one shall not be issued, in the aggregate, for more

than twenty-five million dollars worth of credit components. The total amount of credit

component allowable for the five taxable years for which the credit components are

allowed, as set forth on any one initial credit component certificate, shall be limited to

two million dollars. However, a taxpayer that is the owner or tenant of more than one

building that qualifies for the credits provided for under this section may be issued initial

credit component certificates with respect to each such building with the aggregate

amount of credit components permitted for each such certificate being two million

dollars. In addition, such certificates for period one shall be limited in their applicability,

as follows:

Credit components in With respect to taxable

the aggregate shall not years beginning in:

be allowed for more than:

$ 1 million 2007

$ 2 million 2008

$ 3 million 2009

$ 4 million 2010

$ 5 million 2011

$ 4 million 2012

$ 3 million 2013

$ 2 million 2014

$ 1 million 2015

(ii) Period two. Initial credit component certificates for period two may be issued in years 2011-2015. Such certificates for period two shall not be issued, in the aggregate, for more than twenty-five million dollars worth of credit components. The total amount of credit component allowable for the five taxable years for which the credit components are allowed, as set forth on any one initial credit component certificate, shall be limited to two million dollars. However, a taxpayer that is the owner or tenant of more than one building that qualifies for the credits provided for under this section may be issued initial credit component certificates with respect to each such building with the aggregate amount of credit components permitted for each such certificate being two million dollars. Provided further, a taxpayer that is the owner or tenant of a building for which an initial credit component certificate was issued for period one, shall not be issued an initial credit component certificate with respect to such building for period two. In addition, such certificates for period two shall be limited in their applicability, as follows:

Credit components in the With respect to taxable

aggregate shall not be years beginning in:

allowed for more than:

$ 1 million 2012

$ 2 million 2013

$ 3 million 2014

$ 4 million 2015

$ 5 million 2016

$ 4 million 2017

$ 3 million 2018

$ 2 million 2019

$ 1 million 2020

Provided, however, that if as of the end of a calendar year, certificates for credit component amounts totaling less than the amount permitted with respect to taxable years commencing in such calendar year have been issued, then the amount permitted with respect to taxable years commencing in the subsequent calendar year shall be augmented by the amount of such shortfall. Provided, further, that if at the end of calendar year two thousand nine, certificates for credit component amounts issued by the Division have totaled less than twenty-five million dollars for calendar years 2011-2015, then the period to issue initial credit component certificates shall be extended to the end of calendar year two thousand sixteen and the Division shall be permitted to issue in two thousand sixteen initial credit component certificates for amounts that equal the difference between the amounts issued for calendar years 2011-2015 and twenty-five million dollars.

SECTION 24. Section 548 of Chapter 26 of the 2003 Session Laws shall be amended to include after subsection (n) the following new subsection:

(o) The development and construction of solar- and wind-power generating facilities shall qualify as exceptional circumstances notwithstanding the further requirements of the Massachusetts Environmental Policy Act, Section 61 of Chapter 30 of the General Laws.

SECTION 25. Section 10 of Chapter 44 of the Massachusetts General Laws, as appearing in the 2006 Official Edition, is hereby amended by adding the following section: -

Cities and towns may design and install renewable energy facilities, as defined in Ch. 164, on parcels owned or leased by the municipality, prepare and improve the sites, acquire all equipment necessary for the renewable energy facilities, make improvements and extraordinary repairs to the facilities, and pay all other costs incidental and related thereto.

SECTION 26. Cities and towns may issue bonds or notes up to but not exceeding the sum of $2,000,000 in the aggregate in order to finance all or a portion of the costs of the renewable energy facility projects authorized pursuant to section 1. Notwithstanding Chapter 44 of the General Laws to the contrary, the maturities of any such bonds issued by the city or town under this act either shall be arranged so that for each issue the annual combined payments of principal and interest payable in each year, commencing with the first year in which a principal payment is required, shall be as nearly equal as practicable in the opinion of the city or town treasurer, or shall be arranged in accordance with a schedule providing for a more rapid amortization of principal. The first payment of principal of each issue of bonds or of any temporary notes issued in anticipation of the bonds shall be not later than 5 years from the estimated date of commencement of regular operation of the renewable energy facilities financed thereby, as determined by the city or town treasurer, and the last payment of principal of the bonds shall be not later than 25 years from the date of the bonds. Indebtedness incurred under this act shall not be included in determining the limit of indebtedness of the city or town under section 10 of said chapter 44, but, except as otherwise provided in this act, shall be subject to the provisions of said chapter 44.

SECTION 27. Notwithstanding any general or special law to the contrary, the city or town may operate any renewable energy facilities installed pursuant to section 1, sell any electricity generated from such facilities and sell any other marketable products resulting from its generation of renewable energy at such facilities or from its generation of any type of renewable energy at any renewable energy facility which the city or town is authorized by law to operate, including electronic certificates created to represent the "generation attributes" as such term is defined under 225 CMR 14.02 of each megawatt hour of energy generated by the renewable energy facilities or any such other renewable energy producing facilities. The mayor or board of selectman of the city or town may enter into 1 or more contracts on behalf of the city or town for the sale of electricity and other marketable products resulting from the generation of renewable energy at the renewable energy facilities with such parties and upon such terms and conditions as the mayor or board of selectman determines to be in the best interest of the city or town, but any such contract shall be subject to the approval of the city council or town meeting.

SECTION 28. The city or town shall procure any services required for the design, installation, improvement, repair and operation of the renewable energy facilities authorized pursuant to this act and the acquisition of any equipment necessary in connection therewith in accordance with the procurement requirements of chapter 30B of the General Laws, and the city or town may procure any such services and equipment together as one procurement or as separate procurements thereunder.

SECTION 29. The city or town may establish an enterprise fund pursuant to section 53F 1/2 of chapter 44 of the General Laws for the receipt authorized pursuant to this act and from any other renewable energy producing facilities which the city or town is authorized by law to operate and all moneys received for the benefit of the renewable energy facilities and any such other renewable energy facilities, other than the proceeds of bonds or notes issued therefor. Such receipts are to be used to pay costs of operation and maintenance of renewable energy facilities, to pay costs of future improvements and repairs thereto, and to pay the principal and interest on any bonds or notes issued thereof.

SECTION 30. Sections 9, 10, 11, and 12 shall take effect on August 1, 2007.

SECTION 31. Sections 26, 27, 28, and 29 shall take effect upon passage.