PRIOR PRINTER'S NOS. 1419, 1912, 1945         PRINTER'S NO. 1973

THE GENERAL ASSEMBLY OF PENNSYLVANIA


SENATE BILL

No. 1030 Session of 2004


        INTRODUCED BY ERICKSON, CONTI, WAUGH, ORIE, KUKOVICH, SCHWARTZ,
           MUSTO, EARLL, PIPPY, BOSCOLA, RAFFERTY, M. WHITE AND STACK,
           MARCH 15, 2004

        AS AMENDED ON THIRD CONSIDERATION, NOVEMBER 17, 2004

                                     AN ACT

     1  Providing for the sale of electric energy generated from
     2     renewable and environmentally beneficial sources, for the
     3     acquisition of electric energy generated from renewable and
     4     environmentally beneficial sources by electric distribution
     5     and supply companies and for the powers and duties of the
     6     Pennsylvania Public Utility Commission.

     7     The General Assembly of the Commonwealth of Pennsylvania
     8  hereby enacts as follows:
     9  Section 1.  Short title.
    10     This act shall be known and may be cited as the Alternative
    11  Energy Portfolio Standards Act.
    12  Section 2.  Definitions.
    13     The following words and phrases when used in this act shall
    14  have the meanings given to them in this section unless the
    15  context clearly indicates otherwise:
    16     "Alternative energy credit."  A tradable instrument that is
    17  used to establish, verify and monitor compliance with this act.
    18  A unit of credit shall equal one megawatt hour of electricity
    19  from an alternative energy source.


     1     "Alternative energy portfolio standards."  Standards
     2  establishing that a certain amount of energy sold from
     3  alternative energy sources is included as part of the sources of
     4  electric generation by electric utilities within this
     5  Commonwealth.
     6     "Alternative energy sources."  The term shall include the
     7  following EXISTING AND NEW sources for the production of          <--
     8  electricity:
     9         (1)  Solar photovoltaic OR OTHER SOLAR ELECTRIC energy.    <--
    10         (2)  Solar thermal energy.
    11         (3)  Wind power.
    12         (4)  Large-scale hydropower, WHICH SHALL MEAN THE          <--
    13     PRODUCTION OF ELECTRIC POWER BY HARNESSING THE HYDROELECTRIC
    14     POTENTIAL OF MOVING WATER IMPOUNDMENTS, INCLUDING PUMPED
    15     STORAGE THAT DOES NOT MEET THE REQUIREMENTS OF LOW-IMPACT
    16     HYDROPOWER UNDER PARAGRAPH (5).
    17         (5)  Low-impact hydropower, consisting of any technology
    18     that produces less than 50 megawatts of electric power and     <--
    19     that harnesses the hydroelectric potential of moving water
    20     impoundments, provided such incremental hydroelectric
    21     development:
    22             (i)  does not adversely change existing impacts to
    23         aquatic systems;
    24             (ii)  meets the certification standards established
    25         by the Low Impact Hydropower Institute and American
    26         Rivers, Inc., or their successors;
    27             (iii)  provides an adequate water flow for protection
    28         of aquatic life and for safe and effective fish passage;
    29             (iv)  protects against erosion; and
    30             (v)  protects cultural and historic resources.
    20040S1030B1973                  - 2 -     

     1         (6)  Geothermal energy, which shall mean electricity
     2     produced by extracting hot water or steam from geothermal
     3     reserves in the earth's crust and supplied to steam turbines
     4     that drive generators to produce electricity.
     5         (7)  Biomass energy, which shall mean the generation of
     6     electricity utilizing the following:
     7             (i)  organic material from a plant that is grown for
     8         the purpose of being used to produce electricity or is
     9         protected by the Federal Conservation Reserve Program
    10         (CRP) and provided further that crop production on CRP
    11         lands does not prevent achievement of the water quality
    12         protection, soil erosion prevention or wildlife
    13         enhancement purposes for which the land was primarily set
    14         aside; or
    15             (ii)  any solid nonhazardous, cellulosic waste
    16         material that is segregated from other waste materials,    <--
    17         by-products of the pulping process and wood manufacturing
    18         process including bark, wood chips, sawdust and lignin in
    19         spent pulping liquors, SUCH AS waste pallets, crates and   <--
    20         landscape or right-of-way tree trimmings or agricultural
    21         sources, including orchard tree crops, vineyards, grain,
    22         legumes, sugar and other crop by-products or residues.
    23         (8)  Biologically derived methane gas, which shall
    24     include methane from the anaerobic digestion of organic
    25     materials from yard waste, such as grass clippings and
    26     leaves, food waste, animal waste and sewage sludge. The term
    27     also includes landfill methane gas.
    28         (9)  Fuel cells, which shall mean any electrochemical
    29     device that converts chemical energy in a hydrogen-rich fuel
    30     directly into electricity, heat and water without combustion.
    20040S1030B1973                  - 3 -     

     1         (10)  Waste coal, which shall include the combustion of
     2     waste coal in facilities in which the waste coal was disposed
     3     or abandoned prior to July 31, 1982, or disposed of
     4     thereafter in a permitted coal refuse disposal site
     5     regardless of when disposed of, and used to generate
     6     electricity; or such other waste coal combustion meeting
     7     alternate eligibility requirements established by regulation.
     8     Facilities combusting waste coal shall use at a minimum a
     9     combined fluidized bed boiler and be outfitted with a
    10     limestone injection system and a fabric filter particulate
    11     removal system. Alternative energy credits shall be
    12     calculated based upon the proportion of waste coal utilized
    13     to produce electricity at the facility.
    14         (11)  Coal mine methane, which shall mean methane gas
    15     emitting from abandoned or working coal mines.
    16         (12)  Demand side management consisting of the management
    17     of customer consumption of electricity or the demand for
    18     electricity through the implementation of:
    19             (i)  energy efficiency technologies, management
    20         practices or other strategies in residential, COMMERCIAL,  <--
    21         institutional or government customers that reduce
    22         electricity consumption by those customers;
    23             (ii)  load management or demand response
    24         technologies, management practices or other strategies in
    25         residential, commercial, industrial, institutional and
    26         government customers that shift electric load from
    27         periods of higher demand to periods of lower demand,       <--
    28         including pump storage technologies; or
    29             (iii)  industrial by-product technologies consisting
    30         of the use of a by-product from an industrial process,
    20040S1030B1973                  - 4 -     

     1         including the reuse of energy from exhaust gases or other
     2         manufacturing by-products that are used in the direct
     3         production of electricity at the facility of a customer.
     4         (13)  Distributed generation system, which shall mean the
     5     small-scale power generation of electricity using an           <--
     6     alternative energy source at a site that does not use the
     7     facilities of an electric distribution company or a regional
     8     transmission organization to supply an end user. AND USEFUL    <--
     9     THERMAL ENERGY.
    10     "Alternative energy system."  A facility or energy system
    11  that uses a form of alternative energy source to generate
    12  electricity and delivers the electricity it generates to the
    13  distribution system of an electric distribution company or to
    14  the transmission system operated by a regional transmission
    15  organization.
    16     "Commission."  The Pennsylvania Public Utility Commission.
    17     "Cost recovery period."  The period during which competitive   <--
    18     "COST RECOVERY PERIOD."  THE LONGER OF:                        <--
    19         (1)  THE PERIOD DURING WHICH COMPETITIVE transition
    20     charges under 66 Pa.C.S § 2808 (relating to competitive
    21     transition charge) or intangible transition charges under 66
    22     Pa.C.S. § 2812 (relating to approval of transition bonds) are  <--
    23     recovered or the period during which an electric BONDS) ARE    <--
    24     RECOVERED; OR
    25         (2)  THE PERIOD DURING WHICH AN ELECTRIC distribution
    26     company operates under a Pennsylvania Public Utility
    27     Commission-approved generation rate plan that has been
    28     approved PRIOR TO OR within one year of the effective date of  <--
    29     this act, but in no case shall the cost recovery period under
    30     this act extend beyond December 31, 2010.
    20040S1030B1973                  - 5 -     

     1     "Customer-generator."  A nonutility owner or operator of a
     2  net metered distributed generation system with a nameplate
     3  capacity of not greater than 50 kilowatts if installed at a
     4  residential service or not larger than 1,000 kilowatts at other
     5  customer service locations, except for customers whose systems
     6  are above one megawatt and up to two megawatts who make their
     7  systems available to operate in parallel with the electric
     8  utility during grid emergencies as defined by the regional
     9  transmission organization, or where a microgrid is in place for
    10  the purpose of maintaining critical infrastructure, such as
    11  homeland security assignments, emergency services facilities,
    12  hospitals, traffic signals, wastewater treatment plants or
    13  telecommunications facilities, provided that technical rules for
    14  operating generators interconnected with facilities of an
    15  electric distribution company, electric cooperative or municipal
    16  electric system have been promulgated by the Institute of
    17  Electrical and Electronic Engineers and the Pennsylvania Public
    18  Utility Commission.
    19     "Department."  The Department of Environmental Protection of
    20  the Commonwealth.
    21     "Electric distribution company."  The term shall have the
    22  same meaning given to it in 66 Pa.C.S. Ch. 28 (relating to
    23  restructuring of electric utility industry).
    24     "Electric generation supplier."  The term shall have the same
    25  meaning given to it in 66 Pa.C.S. Ch. 28 (relating to
    26  restructuring of electric utility industry).
    27     "Force majeure."  An extended period for compliance which may  <--
    28  be granted by the commission, if the commission determines that
    29  additional response time is needed because of extreme deviations
    30  in expected renewable generation resulting from events that are
    20040S1030B1973                  - 6 -     

     1  impossible to control.
     2     "Large-scale hydropower."  The production of at least 51
     3  megawatts of electric power by harnessing the hydroelectric
     4  potential of moving water impoundments.
     5     "FORCE MAJEURE."  UPON ITS OWN INITIATIVE OR UPON A REQUEST    <--
     6  OF AN ELECTRIC DISTRIBUTION COMPANY OR AN ELECTRIC GENERATOR
     7  SUPPLIER, THE PENNSYLVANIA PUBLIC UTILITY COMMISSION, WITHIN 60
     8  DAYS, SHALL DETERMINE IF ALTERNATIVE ENERGY RESOURCES ARE
     9  REASONABLY AVAILABLE IN THE MARKETPLACE IN SUFFICIENT QUANTITIES
    10  FOR THE ELECTRIC DISTRIBUTION COMPANIES AND ELECTRIC GENERATION
    11  SUPPLIERS TO MEET THEIR OBLIGATIONS FOR THAT REPORTING PERIOD
    12  UNDER THIS ACT. IF THE COMMISSION DETERMINES THAT ALTERNATIVE
    13  ENERGY RESOURCES ARE NOT REASONABLY AVAILABLE IN SUFFICIENT
    14  QUANTITIES IN THE MARKETPLACE FOR THE ELECTRIC DISTRIBUTION
    15  COMPANIES AND ELECTRIC GENERATION SUPPLIERS TO MEET THEIR
    16  OBLIGATIONS UNDER THIS ACT, THEN THE COMMISSION SHALL MODIFY THE
    17  UNDERLYING OBLIGATION OF THE ELECTRIC DISTRIBUTION COMPANY OR
    18  ELECTRIC GENERATION SUPPLIER OR RECOMMEND TO THE GENERAL
    19  ASSEMBLY THAT THE UNDERLYING OBLIGATION BE ELIMINATED.
    20     "Municipal solid waste."  This will include energy from
    21  existing waste to energy facilities which the Department of
    22  Environmental Protection has determined are in compliance with
    23  current environmental standards, including, but not limited to,
    24  all applicable requirements of the Clean Air Act (69 Stat. 322,
    25  42 U.S.C. § 7401 et seq.) and associated permit restrictions,
    26  and all applicable requirements of the act of July 7, 1980
    27  (P.L.380, No.97), known as the Solid Waste Management Act.
    28     "Net metering."  The means of measuring the difference
    29  between the electricity supplied by an electric utility and the
    30  electricity generated by a customer-generator, when the
    20040S1030B1973                  - 7 -     

     1  renewable energy generating system is intended primarily to
     2  offset part or all of the customer-generator's requirements for
     3  electricity.
     4     "Regional transmission organization."  An entity approved by
     5  the Federal Energy Regulatory Commission (FERC) that is created
     6  to operate and manage the electrical transmission grids of the
     7  member electric transmission utilities as required under FERC
     8  Order 2000, Docket No. RM99-2-000, FERC Chapter 31.089 (1999) or
     9  any successor organization approved by the FERC.
    10     "Reporting period."  The 12-month period from June 1 through
    11  May 31. A reporting year shall be numbered according to the
    12  calendar year in which it begins and ends.
    13     "Retail electric customer."  The term shall have the same
    14  meaning given to it in 66 Pa.C.S Ch. 28 (relating to
    15  restructuring of electric utility industry).
    16     "Tier I alternative energy source."  Energy derived from:
    17         (1)  Solar photovoltaic energy.
    18         (2)  Wind power.
    19         (3)  Low-impact hydropower.
    20         (4)  Geothermal energy.
    21         (5)  Biologically derived methane gas.
    22         (6) Fuel cells.
    23         (7)  Biomass energy.
    24         (8)  COAL MINE METHANE.                                    <--
    25     "Tier II alternative energy source."  Energy derived from:
    26         (1)  Waste coal.
    27         (2)  Distributed generation systems.
    28         (3)  Demand-side management.
    29         (4)  Coal mine methane.                                    <--
    30         (5)  Large-scale hydropower.
    20040S1030B1973                  - 8 -     

     1         (6)  Municipal solid waste.
     2         (4)  LARGE-SCALE HYDROPOWER.                               <--
     3         (5)  MUNICIPAL SOLID WASTE.
     4         (6)  GENERATION OF ELECTRICITY UTILIZING BY-PRODUCTS OF
     5     THE PULPING PROCESS AND WOOD MANUFACTURING PROCESS INCLUDING
     6     BARK, WOOD CHIPS, SAWDUST AND LIGNIN IN SPENT PULPING
     7     LIQUORS.
     8         (7)  INTEGRATED COMBINED COAL GASIFICATION TECHNOLOGY.
     9     "True-up period."  The period each year from the end of the
    10  reporting year until September 1.
    11  Section 3.  Alternative energy portfolio standards.
    12     (a)  General rule.--From the effective date of this act        <--
    13     (A)  GENERAL COMPLIANCE AND COST RECOVER.--                    <--
    14         (1)  FROM THE EFFECTIVE DATE OF THIS ACT through and
    15     including the 15th year after enactment of this act, and each
    16     year thereafter, the electric energy sold by an electric
    17     distribution company or electric generation supplier to
    18     retail electric customers in this Commonwealth shall be
    19     comprised of electricity generated from alternative energy
    20     sources, and in the percentage amounts as described under
    21     subsections (b) and (c). Electric distribution companies and   <--
    22     SUBSECTIONS (B) AND (C).                                       <--
    23         (2)  ELECTRIC DISTRIBUTION COMPANIES AND electric
    24     generation suppliers shall satisfy both requirements set
    25     forth in subsections (b) and (c). Any cost for the purchase    <--
    26     of resources or credits to comply with this section shall be
    27     considered cost of generation supply by the commission,
    28     including the cost of generation supply to meet the
    29     obligation under 66 Pa.C.S § 2807 (relating to duties of
    30     electric distribution companies), by the commission.;          <--
    20040S1030B1973                  - 9 -     

     1     PROVIDED, HOWEVER, THAT AN ELECTRIC DISTRIBUTION COMPANY OR
     2     AN ELECTRIC GENERATION SUPPLIER SHALL BE EXCUSED FROM ITS
     3     OBLIGATIONS UNDER THIS SECTION TO THE EXTENT THAT THE
     4     COMMISSION DETERMINES THAT FORCE MAJEURE EXISTS.
     5         (3)  ALL COSTS FOR:
     6             (I)  THE PURCHASE OF ELECTRICITY GENERATED FROM
     7         ALTERNATIVE ENERGY SOURCES, INCLUDING THE COSTS OF THE
     8         REGIONAL TRANSMISSION ORGANIZATION, IN EXCESS OF THE
     9         REGIONAL TRANSMISSION ORGANIZATION REAL-TIME LOCATIONAL
    10         MARGINAL PRICING, OR ITS SUCCESSOR, AT THE DELIVERY POINT
    11         OF THE ALTERNATIVE ENERGY SOURCE FOR THE ELECTRICAL
    12         PRODUCTION OF THE ALTERNATIVE ENERGY SOURCES; AND
    13             (II)  PAYMENTS FOR ALTERNATIVE ENERGY CREDITS, IN
    14         BOTH CASES THAT ARE VOLUNTARILY ACQUIRED BY AN ELECTRIC
    15         DISTRIBUTION COMPANY DURING THE COST RECOVERY PERIOD ON
    16         BEHALF OF ITS CUSTOMERS
    17     SHALL BE DEFERRED AS A REGULATORY ASSET BY THE ELECTRIC
    18     DISTRIBUTION COMPANY AND FULLY RECOVERED, WITH A RETURN ON
    19     THE UNAMORTIZED BALANCE, PURSUANT TO AN AUTOMATIC ENERGY
    20     ADJUSTMENT CLAUSE UNDER 66 PA.C.S. § 1307 (RELATING TO
    21     SLIDING SCALE OF RATES; ADJUSTMENTS) AS A COST OF GENERATION
    22     SUPPLY UNDER 66 PA.C.S. § 2807 (RELATING TO DUTIES OF
    23     ELECTRIC DISTRIBUTION COMPANIES), IN THE FIRST YEAR AFTER THE
    24     EXPIRATION OF ITS COST RECOVERY PERIOD. AFTER THE COST
    25     RECOVERY PERIOD, ANY DIRECT OR INDIRECT COSTS FOR THE
    26     PURCHASE BY ELECTRIC DISTRIBUTION OF RESOURCES TO COMPLY WITH
    27     THIS SECTION, INCLUDING, BUT NOT LIMITED TO, THE PURCHASE OF
    28     ELECTRICITY GENERATED FROM ALTERNATIVE ENERGY SOURCES,
    29     PAYMENTS FOR ALTERNATIVE ENERGY CREDITS, COST OF CREDITS
    30     BANKED, PAYMENTS TO ANY THIRD PARTY ADMINISTRATORS FOR
    20040S1030B1973                 - 10 -     

     1     PERFORMANCE UNDER THIS ACT AND COSTS LEVIED BY A REGIONAL
     2     TRANSMISSION ORGANIZATION TO ENSURE THAT ALTERNATIVE ENERGY
     3     SOURCES ARE RELIABLE, SHALL BE RECOVERED ON A FULL AND
     4     CURRENT BASIS PURSUANT TO AN AUTOMATIC ENERGY ADJUSTMENT
     5     CLAUSE UNDER 66 PA.C.S. § 1307 AS A COST OF GENERATION SUPPLY
     6     UNDER 66 PA.C.S. § 2807.
     7     (b)  Tier I and solar photovoltaic shares.--
     8         (1)  Two years after the effective date of this act, at
     9     least 1.5% of the electric energy sold by an electric
    10     distribution company or electric generation supplier to
    11     retail electric customers in this Commonwealth shall be
    12     generated from Tier I alternative energy sources. Except as
    13     provided in this section, the minimum percentage of electric
    14     energy required to be sold to retail electric customers from
    15     alternative energy sources shall increase to 2% three years
    16     after the effective date of this act. The minimum percentage
    17     of electric energy required to be sold to retail electric
    18     customers from alternative energy sources shall increase by
    19     at least 0.5% each year so that at least 10% 8% of the         <--
    20     electric energy sold by an electric distribution company or
    21     electric generation supplier to retail electric customers in
    22     that certificated territory in the 15th year after the
    23     effective date of this subsection is sold from Tier I
    24     alternative energy resources.
    25         (2)  Of the electric energy required to be sold from Tier
    26     I sources, the TOTAL percentage that must be sold from solar   <--
    27     photovoltaic technologies is for:
    28             (i)  Years 1 through 4 - 0.0013%.
    29             (ii)  Years 5 through 9 - 0.0203%.
    30             (iii)  Years 10 through 14 - 0.2500%.
    20040S1030B1973                 - 11 -     

     1             (iv)  Years 15 and thereafter - 0.5000%.
     2         (3)  Upon commencement of the beginning of the 6th
     3     reporting year, the commission shall undertake a review of
     4     the compliance by electric distribution companies and
     5     electric generation suppliers with the requirements of this
     6     act. The review shall also include the status of alternative
     7     energy technologies within this Commonwealth and the capacity
     8     to add additional alternative energy resources. The
     9     commission shall use the results of this review to recommend
    10     to the General Assembly additional compliance goals beyond
    11     year 15. The commission shall work with the department in
    12     evaluating the future alternative energy resource potential.
    13     (c)  Tier II share.--Of the electrical energy required to be
    14  sold from alternative energy sources identified in Tier II, the
    15  percentage that must be from these technologies is for:
    16         (1)  Years 1 through 4 - 2.2%.                             <--
    17         (2)  Years 5 through 9 - 3.2%.
    18         (3)  Years 10 through 14 - 4.2%.
    19         (4)  Years 15 and thereafter - 5.0%.
    20         (1)  YEARS 1 THROUGH 4 - 4.2%.                             <--
    21         (2)  YEARS 5 THROUGH 9 - 6.2%.
    22         (3)  YEARS 10 THROUGH 14 - 8.2%.
    23         (4)  YEARS 15 AND THEREAFTER - 10.0%.
    24     (d)  Exemption during cost-recovery period.--Compliance with
    25  subsections (a), (b) and (c) shall not be required for any
    26  electric distribution company that has not reached the end of
    27  its cost-recovery period or for electric generation supplier
    28  sales in the service territory of an electric distribution
    29  company that has not reached the end of its cost-recovery
    30  period. At the conclusion of an electric distribution company's
    20040S1030B1973                 - 12 -     

     1  cost-recovery period, this exception shall no longer apply, and
     2  compliance shall be required at the percentages in effect at
     3  that time. Electric distribution companies and electric
     4  generation suppliers whose sales are exempted under this
     5  subsection and who voluntarily sell electricity generated from
     6  Tier I and Tier II sources during the cost-recovery period may
     7  bank credits consistent with subsection (e)(7).
     8     (e)  Alternative energy credits.--
     9         (1)  The commission shall establish an alternative energy
    10     credits program as needed to implement this act. The
    11     provision of services pursuant to this section shall be
    12     exempt from the competitive procurement procedures of 62
    13     Pa.C.S. (relating to procurement).
    14         (2)  The commission shall approve an independent entity
    15     to serve as the alternative energy credits program
    16     administrator. The administrator shall have those powers and
    17     duties assigned by commission regulations. Such powers and
    18     duties shall include, but not be limited to, the following:
    19             (i)  To create and administer an alternative energy
    20         credits certification, tracking and reporting program.
    21         This program should include, at a minimum, a process for
    22         qualifying alternative energy systems and determining the
    23         manner credits can be created, accounted for, transferred
    24         and retired.
    25             (ii)  To submit reports to the commission at such
    26         times and in such manner as the commission shall direct.
    27         (3)  All qualifying alternative energy systems must
    28     include a qualifying meter to record the cumulative electric
    29     production to verify the advanced energy credit value.
    30     Qualifying meters will be approved by the commission as
    20040S1030B1973                 - 13 -     

     1     defined in paragraph (4).
     2         (4)  (i)  An electric distribution company or electric
     3         generation supplier shall comply with the applicable
     4         requirements of this section by purchasing sufficient
     5         alternative energy credits and submitting documentation
     6         of compliance to the program administrator.
     7             (ii)  For purposes of this subsection, one
     8         alternative energy credit shall represent one megawatt
     9         hour of qualified alternative electric generation,
    10         whether self-generated, purchased along with the electric
    11         commodity or separately through a tradable instrument and
    12         otherwise meeting the requirements of commission
    13         regulations and the program administrator.
    14         (5)  The alternative energy credits program shall include
    15     provisions requiring a reporting period as defined in section
    16     2 for all covered entities under this act. The alternative
    17     energy credits program shall also include a true-up period as
    18     defined in section 2. The true-up period shall provide
    19     entities covered under this act the ability to obtain the
    20     required number of alternative energy credits or to make up
    21     any shortfall of the alternative energy credits they may be
    22     required to obtain to comply with this act. A force majeure
    23     provision shall also be provided for under the true-up period
    24     provisions.
    25         (6)  An electric distribution company and electric
    26     generation supplier may bank or place in reserve alternative
    27     energy credits produced in one reporting year for compliance
    28     in either or both of the two subsequent reporting years,
    29     subject to the limitations set forth in this subsection and
    30     provided that the electric distribution company and electric
    20040S1030B1973                 - 14 -     

     1     generation supplier are in compliance for all previous
     2     reporting years. In addition, the electric distribution
     3     company and electric generation supplier shall demonstrate to
     4     the satisfaction of the commission that such credits:
     5             (i)  were in excess of the alternative energy credits
     6         needed for compliance in the year in which they were
     7         generated and that such excess credits have not
     8         previously been used for compliance under this act;
     9             (ii)  do not exceed 30% of the credits needed by the   <--
    10         electric distribution company and electric generation
    11         supplier for compliance in the year they were generated;
    12             (iii) (II) were produced by the generation of          <--
    13         electrical energy by alternative energy sources and sold
    14         to retail customers during the year in which they were
    15         generated; and
    16             (iv) (III)  have not otherwise been nor will be sold,  <--
    17         retired, claimed or represented as part of satisfying
    18         compliance with alternative or renewable energy portfolio
    19         standards in other states.
    20         (7)  An electric distribution company or an electric
    21     generation supplier with sales that are exempted under
    22     subsection (d) may bank credits for retail sales of
    23     electricity generated from Tier I and Tier II sources made
    24     prior to the end of the cost-recovery period and after the
    25     effective date of this act. Bankable credits shall be limited
    26     to credits associated with electricity sold from Tier I and
    27     Tier II sources during a reporting year which exceeds the
    28     volume of sales from such sources by an electric distribution
    29     company or electric generation supplier during the 12-month
    30     period immediately preceding the effective date of this act.
    20040S1030B1973                 - 15 -     

     1     All credits banked under this subsection shall be available
     2     for compliance with subsections (b) and (c) for no more than
     3     two reporting years following the conclusion of the cost-
     4     recovery period.
     5         (8)  The commission or its designee shall develop a
     6     registry of pertinent information regarding all available
     7     alternative energy credits, credit transactions among
     8     electric distribution companies and electric generation
     9     suppliers, the number of alternative energy credits sold or
    10     transferred and the price paid for the sale or transfer of
    11     the credits. The registry shall provide current information
    12     to electric distribution companies, electric generation
    13     suppliers and the general public on the status of alternative
    14     energy credits created, sold or transferred within this
    15     Commonwealth.
    16         (9)  The commission may impose an administrative fee on
    17     an alternative energy credit transaction. The amount of this
    18     fee may not exceed the actual direct cost of processing the
    19     transaction by the alternative energy credits administrator.
    20     The commission is authorized to utilize up to 5% of the
    21     alternative compliance fees generated under subsection (f)
    22     for administrative expenses directly associated with this
    23     act.
    24         (10)  The commission shall establish regulations
    25     governing the verification and tracking of energy efficiency
    26     and demand-side management measures pursuant to this act,
    27     which shall include benefits to all utility customer classes.
    28     When developing regulations, the commission must give
    29     reasonable consideration to existing and proposed regulations
    30     and rules in existence in the regional transmission
    20040S1030B1973                 - 16 -     

     1     organizations that manage the transmission system in any part
     2     of this Commonwealth. All verified reductions shall accrue
     3     credits starting with the passage of this act.
     4         (11)  The commission shall within 120 days of the
     5     effective date of this act develop a depreciation schedule
     6     for alternative energy credits created through demand side
     7     management, energy efficiency and load management
     8     technologies and shall develop standards for tracking and
     9     verifying savings from energy efficiency, load management and
    10     demand-side management measures. The commission shall allow
    11     for a 60-day public comment period and shall issue final
    12     standards within 30 days of the close of the public comment
    13     period.
    14     (f)  Alternative compliance payment.--
    15         (1)  At the end of each program year, the program
    16     administrator shall provide a report to the commission and to
    17     each covered electric distribution company showing their
    18     status level of alternative energy acquisition.
    19         (2)  The commission shall conduct a review of each
    20     determination made under subsections (b) and (c). If, after
    21     notice and hearing, the commission determines that an
    22     electric distribution company or electric generation supplier
    23     has failed to comply with subsections (b) and (c), the
    24     commission shall impose an alternative compliance payment on
    25     that company or supplier.
    26         (3)  The alternative compliance payment, with the
    27     exception of the solar photovoltaic share compliance
    28     requirement set forth in subsection (b)(2), shall be $45
    29     times the number of additional alternative energy credits
    30     needed in order to comply with subsection (b) or (c).
    20040S1030B1973                 - 17 -     

     1         (4)  The alternative compliance payment for the solar
     2     photovoltaic share shall be 200% of the average market share   <--
     3     of the solar photovoltaic credits sold during the reporting
     4     period. VALUE OF SOLAR RENEWABLE ENERGY CREDITS SOLD DURING    <--
     5     THE REPORTING PERIOD WITHIN THE SERVICE REGION OF THE
     6     REGIONAL TRANSMISSION ORGANIZATION.
     7         (5)  The commission shall establish a process to provide
     8     for, at least annually, a review of the alternative energy
     9     market within this Commonwealth and the service territories
    10     of the regional transmission organizations that manage the
    11     transmission system in any part of this Commonwealth. The
    12     commission will use the results of this study to identify any
    13     needed changes to the cost associated with the alternative
    14     compliance payment program. The commission may raise the cost  <--
    15     of the alternative compliance payments to maintain the
    16     integrity of the payments program and to ensure that it is
    17     not used to meet compliance with this act in lieu of
    18     acquiring energy from actual alternative energy sources as
    19     defined in this act. If the commission finds that the costs
    20     associated with alternative compliance payment program must
    21     be lowered CHANGED, the commission shall present these         <--
    22     findings to the General assembly for legislative enactment.
    23     (g)  Transfer to sustainable development funds.--
    24         (1)  Notwithstanding the provisions of 66 Pa.C.S. §§ 511
    25     (relating to disposition, appropriation and disbursement of
    26     assessments and fees) and 3315 (relating to disposition of
    27     fines and penalties), alternative compliance payments imposed
    28     pursuant to this act shall be paid into the sustainable        <--
    29     development funds, created under the commissions
    30     restructuring orders under 66 Pa.C.S. Ch. 28 (relating to
    20040S1030B1973                 - 18 -     

     1     restructuring of electric utility industry). Alternative
     2     compliance payments will be paid into the appropriate fund
     3     based upon which electric distribution company or electric
     4     generation supplier incurred the alternative compliance
     5     payment. PENNSYLVANIA'S SUSTAINABLE ENERGY FUNDS, CREATED      <--
     6     UNDER THE COMMISSION'S RESTRUCTURING ORDERS UNDER 66 PA.C.S.
     7     CH. 28 (RELATING TO RESTRUCTURING OF ELECTRIC UTILITY
     8     INDUSTRY). ALTERNATIVE COMPLIANCE PAYMENTS SHALL BE PAID INTO
     9     A SPECIAL FUND OF THE PENNSYLVANIA SUSTAINABLE ENERGY BOARD,
    10     ESTABLISHED BY THE COMMISSION UNDER DOCKET M-00031715, AND
    11     MADE AVAILABLE TO THE REGIONAL SUSTAINABLE ENERGY FUNDS UNDER
    12     PROCEDURES AND GUIDELINES APPROVED BY THE PENNSYLVANIA ENERGY
    13     BOARD.
    14         (2)  The alternative compliance payments shall be
    15     utilized solely for projects that will increase the amount of
    16     electric energy generated from alternative energy resources
    17     for purposes of compliance with subsections (b) and (c).
    18     (H)  NONSEVERABILITY.--THE PROVISIONS OF SUBSECTION (A) ARE    <--
    19  DECLARED TO BE NONSEVERABLE. IF ANY PROVISION OF SUBSECTION (A)
    20  IS HELD INVALID, THE REMAINING PROVISIONS OF THIS ACT SHALL BE
    21  VOID.
    22  Section 4.  Portfolio requirements in other states.
    23     If an electric distribution supplier or electric generation
    24  company provider sells electricity in any other state and is
    25  subject to renewable energy portfolio requirements in that
    26  state, they shall list any such requirement and shall indicate
    27  how it satisfied those renewable energy portfolio requirements.
    28  To prevent double-counting, the electric distribution supplier
    29  or electric generation company shall not satisfy Pennsylvania's
    30  alternative energy portfolio requirements using alternative
    20040S1030B1973                 - 19 -     

     1  energy used to satisfy another state's portfolio requirements.
     2  Energy derived only from alternative energy sources inside the
     3  geographical boundaries of this Commonwealth or within the
     4  service territory of any regional transmission organization that
     5  manages the transmission system in any part of this Commonwealth
     6  shall be eligible to meet the compliance requirements under this
     7  act. Electric distribution companies and electric generation
     8  suppliers shall document that this energy was not used to
     9  satisfy another state's renewable energy portfolio standards.
    10  Section 5.  Interconnection standards for customer-generator
    11                 facilities.
    12     The commission shall develop technical and net metering
    13  interconnection rules for customer-generators intending to
    14  operate renewable onsite generators in parallel with the
    15  electric utility grid, consistent with rules defined in other
    16  states within the service region of the regional transmission
    17  organization that manages the transmission system in any part of
    18  this Commonwealth. The commission shall convene a stakeholder
    19  process to develop Statewide technical and net metering rules
    20  for customer-generators. The commission shall develop these
    21  rules within nine months of the effective date of this act.
    22  Section 6.  Health and safety standards.
    23     The department shall cooperate with the Department of Labor
    24  and Industry as necessary in developing health and safety
    25  standards, as needed, regarding facilities generating energy
    26  from alternative energy sources. The department shall establish
    27  appropriate and reasonable health and safety standards to ensure
    28  uniform and proper compliance with this act by owners and
    29  operators of facilities generating energy from alternative
    30  energy sources as defined in this act.
    20040S1030B1973                 - 20 -     

     1  Section 7.  Interagency responsibilities.
     2     (a)  Commission responsibilities.--The commission will carry
     3  out the responsibilities delineated within this act. The
     4  commission also shall, in cooperation with the department,
     5  conduct an ongoing alternative energy resources planning
     6  assessment for this Commonwealth. This assessment will, at a
     7  minimum, identify current and operating alternative energy
     8  facilities, the potential to add future alternative energy
     9  generating capacity, and the conditions of the alternative
    10  energy marketplace. The assessment will identify needed methods
    11  to maintain or increase the relative competitiveness of the
    12  alternative energy market within this Commonwealth.
    13     (b)  Department responsibilities.--The department shall
    14  ensure that all qualified alternative energy sources meet all
    15  applicable environmental standards and shall verify that an
    16  alternative energy source meets the standards set forth in
    17  section 2.
    18     (c)  Cooperation between commission and department.--The
    19  commission and the department shall work cooperatively to
    20  monitor the performance of all aspects of this act and will
    21  provide an annual report to the chairman and minority chairman
    22  of the Environmental Resources and Energy Committee of the
    23  Senate and the chairman and minority chairman of the
    24  Environmental Resources and Energy Committee of the House of
    25  Representatives. The report shall include at a minimum:
    26         (1)  The status of the compliance with the provisions of
    27     this act by electric distribution companies and electric
    28     generations suppliers.
    29         (2)  Current costs of alternative energy on a per
    30     kilowatt hour basis for all alternative energy technology
    20040S1030B1973                 - 21 -     

     1     types.
     2         (3)  Costs associated with the alternative energy credits
     3     program under this act, including the number of alternative
     4     compliance payments.
     5         (4)  The status of the alternative energy marketplace
     6     within this Commonwealth.
     7         (5)  Recommendations for program improvements.
     8  Section 8.  Rural electric cooperatives.
     9     Each rural electric cooperative operating within this
    10  Commonwealth shall offer to its retail customers a voluntary
    11  program of energy efficiency and demand-side management
    12  programs, as a means to satisfy compliance with the requirements
    13  of this act.
    14  Section 9.  Effective date.
    15     This act shall take effect in 90 days.










    B13L66MEP/20040S1030B1973       - 22 -
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