PRIOR PRINTER'S NO. 3089                      PRINTER'S NO. 3176

THE GENERAL ASSEMBLY OF PENNSYLVANIA


HOUSE BILL

No. 2200 Session of 2008


        INTRODUCED BY GEORGE, McCALL, BELFANTI, CALTAGIRONE, CONKLIN,
           DALEY, GOODMAN, HARHAI, HARKINS, KULA, MANDERINO, McGEEHAN,
           VITALI, J. WHITE, WALKO, SURRA, DeLUCA, DERMODY, GRUCELA,
           JOSEPHS, JAMES, GINGRICH, FREEMAN AND K. SMITH,
           JANUARY 15, 2008

        AS REPORTED FROM COMMITTEE ON CONSUMER AFFAIRS, HOUSE OF
           REPRESENTATIVES, AS AMENDED, FEBRUARY 5, 2008

                                     AN ACT

     1  Amending Title 66 (Public Utilities) of the Pennsylvania
     2     Consolidated Statutes, further providing for definitions; and
     3     providing for adoption of energy efficiency and demand-side
     4     response.

     5     The General Assembly of the Commonwealth of Pennsylvania
     6  hereby enacts as follows:
     7     Section 1.  Section 2803 of Title 66 of the Pennsylvania
     8  Consolidated Statutes is amended by adding definitions to read:
     9  § 2803.  Definitions.
    10     The following words and phrases when used in this chapter
    11  shall have the meanings given to them in this section unless the
    12  context clearly indicates otherwise:
    13     "AFFILIATED INTEREST."  AS DEFINED IN SECTION 2101 (RELATING   <--
    14  TO DEFINITION OF AFFILIATED INTEREST).
    15     * * *
    16     "Cost effective."  In relation to a program being evaluated,
    17  satisfaction of the total resource cost test.

     1     * * *
     2     "Demand-side response."  Load management technologies,
     3  management practices or other strategies employed by retail
     4  customers that decrease peak electricity demand or shift demand
     5  from on-peak to off-peak periods provided that:
     6         (1)  The measure is installed on or after the effective
     7     date of this section at the service location of a retail
     8     customer.
     9         (2)  The measure reduces the consumption PEAK DEMAND OR    <--
    10     COST of energy by the retail customer.
    11         (3)  The costs of the acquisition or installation of the
    12     measure are directly incurred in whole or in part by the
    13     electric distribution company.
    14     * * *
    15     "Energy efficiency."  Technologies, management practices or
    16  other strategies or measures employed by retail customers that
    17  reduce electricity consumption provided that:
    18         (1)  The measure is installed on or after the effective
    19     date of this definition at the service location of a retail
    20     customer.
    21         (2)  The measure reduces the consumption of energy by the
    22     retail customer.
    23         (3)  The costs of the acquisition or installation of the
    24     measure are directly incurred in whole or in part by the
    25     electric distribution company.
    26     "INDEPENDENT ENTITY."  AN ENTITY WITH NO DIRECT OR INDIRECT    <--
    27  OWNERSHIP, PARTNERSHIP OR OTHER AFFILIATED INTEREST WITH AN
    28  ELECTRIC DISTRIBUTION COMPANY.
    29     "Peak demand."  The highest electrical requirement occurring
    30  during a specified period. For an electric distribution company,
    20080H2200B3176                  - 2 -     

     1  the term means the sum of the metered consumption for all retail
     2  customers over that period.
     3     * * *
     4     "Total resources cost test."  A standard test that is met if,
     5  over the effective life of the program, the avoided supply-side
     6  monetary costs are greater than the monetary costs of the
     7  demand-side programs borne by both the electric distribution
     8  company and the participants.
     9     * * *
    10     Section 2.  Title 66 is amended by adding a section to read:
    11  § 2806.1.  Adoption of procedures encouraging energy efficiency
    12             and demand-side response.
    13     (a)  Program.--The commission shall develop a program to
    14  provide for the implementation of cost-effective programs that
    15  reduce energy demand and consumption within the service
    16  territories of all electric distribution companies throughout
    17  this Commonwealth. The program shall include, but is not limited
    18  to, the following:
    19         (1)  Selecting a program administrator to develop and
    20     oversee the delivery of energy efficiency and demand-side
    21     response programs within the service territory of each
    22     electric distribution company within this Commonwealth.
    23         (2)  Implementing the necessary administrative and
    24     financial mechanisms that will enable the program
    25     administrator to develop and oversee the provision of energy
    26     efficiency and demand-side response programs within the
    27     service territory of each electric distribution company
    28     within this Commonwealth, including the levying of
    29     assessments in accordance with sections 510 (relating to
    30     assessment for regulatory expenses upon public utilities),
    20080H2200B3176                  - 3 -     

     1     1307 (relating to sliding scale of rates; adjustments) and
     2     1308 (relating to voluntary changes in rates). The commission
     3     shall not approve or implement and shall not assess or charge
     4     to customers the costs of energy efficiency or demand-
     5     response programs to the extent that the costs of such
     6     programs exceed 2% of the total annual revenues of the
     7     electric distribution company in whose service territory the
     8     programs are implemented. THIS FUNDING LIMIT SHALL NOT         <--
     9     INCLUDE AMOUNTS PROVIDED FOR BY THE LOW-INCOME USAGE
    10     REDUCTION PROGRAMS ESTABLISHED UNDER REGULATIONS AT 52 PA.
    11     CODE CH. 58 (RELATING TO RESIDENTIAL LOW INCOME USAGE
    12     REDUCTION PROGRAMS).
    13         (3)  Implementing the necessary administrative and
    14     financial mechanisms that facilitate a system of third-party
    15     entities to deliver all or portions of the energy efficiency
    16     and demand-side response programs within the service
    17     territory of each electric distribution company within this
    18     Commonwealth, including the levying of assessments in
    19     accordance with sections 510, 1307 and 1308. THE COMMISSION    <--
    20     MAY ORDER THE ELECTRIC DISTRIBUTION COMPANY TO PAY THE THIRD-
    21     PARTY ENTITY FOR SERVICES RENDERED IN AN ELECTRIC
    22     DISTRIBUTION COMPANY'S RESPECTIVE SERVICE TERRITORY PURSUANT
    23     TO THIS SECTION. The electric distribution company may be a
    24     third-party entity.
    25     (b)  Selection of program administrator.--The commission
    26  shall implement the following procedures when selecting a
    27  program administrator:
    28         (1)  The commission shall prepare a request for proposals
    29     for a program administrator to provide for the development
    30     and delivery of the energy efficiency and demand-side
    20080H2200B3176                  - 4 -     

     1     response programs in the service territories of all electric
     2     distribution companies and shall make the request for
     3     proposals available for public comment.
     4         (2)  The commission shall, within 60 days of the
     5     completion of the public comment period, issue the final
     6     request for proposals.
     7         (3)  The commission shall, based on a competitive bid
     8     process, select an independent entity to serve as the energy
     9     efficiency and demand-side response program administrator.
    10         (4)  The commission shall include as a part of its
    11     agreement with the program administrator a system of
    12     performance parameters and a financial mechanism that
    13     provides incentives for exceeding established performance
    14     parameters and penalties for third parties not meeting
    15     established performance parameters.
    16     (c)  Powers and duties of program administrator.--The program
    17  administrator shall have powers and duties assigned by the
    18  commission. The powers and duties shall include, but not be
    19  limited to:
    20         (1)  Soliciting through a competitive procurement process
    21     within each electric distribution company service territory a
    22     program of providing energy efficiency and demand-side
    23     response programs to residential, commercial and industrial
    24     customers utilizing third-party entities.
    25         (2)  Ensuring that each proposal includes, but is not
    26     limited to:
    27             (i)  A clear delineation of how the program will be
    28         conducted.
    29             (ii)  The types of specific program measures to be
    30         offered.
    20080H2200B3176                  - 5 -     

     1             (iii)  The cost and benefit of each program to be
     2         offered.
     3             (iv)  A process for monitoring and verifying results,
     4         data collection and management procedures, program
     5         evaluation processes and financial management strategies.
     6         (3)  In its review of each proposal received:
     7             (i)  Taking into account the unique circumstances of
     8         each electric distribution company's service territory.
     9             (ii)  Finding that each program is cost effective and
    10         that the portfolio of programs is designed to provide
    11         every affected customer class with the opportunity to
    12         participate and benefit economically.
    13             (iii)  Determining the cost-effectiveness of energy
    14         efficiency and demand-side response measures using the
    15         total resource cost test.
    16         (4)  Recommending to the commission those entities best
    17     suited to provide energy efficiency and demand-side response
    18     programs within the service territory of each electric
    19     distribution company.
    20         (5)  In the event no qualified proposals are received
    21     that meet the required plan goals in an electric distribution
    22     company service territory to conduct the program activities:
    23             (i)  Issuing a subsequent request for proposals with
    24         plan goals that are reduced no more than necessary to
    25         obtain qualified proposals to provide program activities.
    26         The lowered plan goals for energy efficiency and demand-
    27         side response shall only be in effect for that year.
    28             (ii)  In subsequent years, utilizing the plan goals
    29         unless no qualified proposals are received to conduct the
    30         program activities that meet the plan goals, the program
    20080H2200B3176                  - 6 -     

     1         administrator shall issue a subsequent request for
     2         proposals in accordance with the procedures identified in
     3         this subparagraph.
     4         (6)  Executing agreements ON BEHALF OF THE COMMISSION      <--
     5     with the selected entity in each electric distribution
     6     company service territory to conduct the energy efficiency
     7     and demand-side response program. As part of these agreements
     8     the program administrator shall ensure that:
     9             (i)  The programs offered by the selected entity are
    10         provided equitably across all customer classes.
    11             (ii)  The plan presents a portfolio of energy          <--
    12         efficiency measures targeted to households at or below
    13         150% of the poverty level at a level proportionate to
    14         those households' share of total annual utility revenues
    15         in this Commonwealth.
    16             (iii)  (II)  A clearly defined process for financial   <--
    17         compensation for the entity delivering the program which
    18         is tied to defined goals for performance regarding
    19         program activities accomplished, energy cost savings on a
    20         per-customer basis and utility-wide basis and overall
    21         energy and peak demand reduction is established.
    22             (iv)  (III)  A system of incentives and penalties for  <--
    23         performance of contractual activities above and below
    24         predetermined levels is in place.
    25             (v) (IV)  There is a set contract term which may       <--
    26         include an initial three-year term with renewal terms of
    27         varied length.
    28         (7)  Submitting reports to the commission at such times
    29     and in such manner as the commission directs.
    30     (d)  Commission review of recommendations.--The commission
    20080H2200B3176                  - 7 -     

     1  shall review the recommendations made by the program
     2  administrator regarding those entities best suited to provide
     3  energy efficiency and demand-side response programs within the
     4  service territory of each electric distribution company. The
     5  commission shall approve or disapprove the recommendations made
     6  by the program administrator.
     7         (1)  The commission review of the recommendations of the
     8     program administrator shall be limited to ensuring that:
     9             (i)  There is no evidence of fraud or market abuse.
    10             (ii)  Any costs entered into are borne by the
    11         appropriate parties and that costs, INCLUDING THE COSTS    <--
    12         OF SUBSECTION (C)(6)(IV) INCENTIVES, related to the
    13         provision of the contracted services are borne by the
    14         appropriate customer class.
    15             (iii)  There will be provided, in a cost-effective
    16         manner, a program that provides energy efficiency and
    17         demand-side response measures to all customer classes
    18         throughout the service territory of each electric
    19         distribution company.
    20         (2)  If the commission approves a third-party entity to
    21     conduct the program, the commission shall ensure the program
    22     administrator finalizes the agreement between the commission
    23     and the third-party entity selected to provide the program of
    24     energy efficiency and demand-side response.
    25         (3)  In the event the commission disapproves the
    26     recommendation of the program administrator, the commission
    27     shall provide a rationale for this decision and direct the
    28     program administrator on a course of action.
    29     (e)  Plan goals.--The program administrator shall ensure that
    30  each proposal submitted by a third-party entity to deliver a
    20080H2200B3176                  - 8 -     

     1  program of energy efficiency and demand-side response measures
     2  includes meeting the following energy saving goals:
     3         (1)  The following relate to energy efficiency goals:
     4             (i)  By May 31, 2013, total annual deliveries to
     5         retail customers of electric distribution companies shall
     6         be reduced by a minimum of 2.5%, WITH PROVISION MADE FOR   <--
     7         WEATHER ADJUSTMENTS AND EXTRAORDINARY LOAD THAT THE
     8         ELECTRIC DISTRIBUTION COMPANY MUST SERVE. This load
     9         reduction shall be measured against the expected load
    10         forecasted by the commission for June 1, 2012, through
    11         May 31, 2013, based on load for the period June 1, 2007,
    12         through May 31, 2008. The commission shall determine and
    13         make public the forecasts to be used for each electric
    14         distribution company no later than August 31, 2008. The
    15         program administrator shall ensure that a third-party
    16         entity meets the goals contained in this section through
    17         the implementation of a program of energy efficiency
    18         measures throughout the service territory of the electric
    19         distribution company.
    20             (ii)  By November 30, 2013, the program administrator
    21         shall evaluate the costs and benefits of these energy
    22         efficiency and conservation programs. If the benefits
    23         have been shown to exceed the costs, consistent with the
    24         total resource cost test, the program administrator, in
    25         consultation with the commission, shall set additional,
    26         incremental energy efficiency and conservation goals for
    27         the period ending May 31, 2018.
    28             (iii)  After May 31, 2018, the program administrator
    29         shall continue to evaluate the costs and benefits of
    30         efficiency and conservation measures and, in consultation
    20080H2200B3176                  - 9 -     

     1         with the commission, may adopt additional incremental
     2         load reduction standards for electric distribution
     3         companies.
     4         (2)  The following relate to demand-side response
     5     measures:
     6             (i)  Cost-effective demand-side response measures to
     7         reduce peak demand by a minimum of 4% in the 100 hours of
     8         highest demand with provision made for weather
     9         adjustments and extraordinary load that the electric
    10         distribution company must serve SHALL BE IMPLEMENTED IN    <--
    11         EACH ELECTRIC DISTRIBUTION COMPANY'S SERVICE TERRITORY.
    12         This reduction will be measured against the electric
    13         distribution company's peak demand in the 100 hours of
    14         greatest demand for June 1, 2007, through May 31, 2008.
    15         The reductions shall be accomplished by May 31, 2012.
    16             (ii)  By November 30, 2012, the program administrator
    17         shall compare the total costs of these demand-side
    18         response measures to the total savings in energy and
    19         capacity costs to retail customers of this Commonwealth.
    20         If the benefits have been shown to exceed the costs,
    21         consistent with the total resource cost test, the
    22         commission shall order additional peak demand reductions
    23         for the 100 hours of greatest demand or an alternative
    24         measure adopted by the commission. The reductions shall
    25         be measured from the electric distribution company's peak
    26         demand for the period from June 1, 2011, through May 31,
    27         2012. The mandated reductions shall be accomplished no
    28         later than May 31, 2017.
    29             (iii)  After May 31, 2017, the program administrator
    30         shall continue to evaluate the costs and benefits of
    20080H2200B3176                 - 10 -     

     1         demand-side response measures and may, in consultation
     2         with the commission, adopt additional incremental peak
     3         load reduction standards.
     4     (f)  Measurements and verification.--The commission shall
     5  establish standards by which the program administrator submits
     6  to the commission an annual report, which includes that
     7  information relating to the actions and results of the energy
     8  efficiency and demand-side response programs undertaken within
     9  each electric distribution service territory by each third-party
    10  entity.
    11         (1)  The report shall include, but not be limited to:
    12             (i)  Documentation of program expenditures.
    13             (ii)  Measurement and verification of savings
    14         resulting from programs.
    15             (iii)  Evaluation of the cost-effectiveness of
    16         expenditures.
    17             (iv)  Any other information the commission may
    18         require pursuant to its rulemaking authority.
    19         (2)  The program administrator, upon consultation with
    20     the commission, shall direct a third-party entity to modify
    21     or terminate a particular energy efficiency or a demand-side
    22     response program if, after an adequate period for
    23     implementation of the program, the commission determines the
    24     program is not sufficiently meeting its goals and purposes.
    25         (3)  In the event an energy efficiency or demand-side
    26     response program is terminated, the program administrator
    27     shall require the third-party entity to submit a revised
    28     program describing the actions to be undertaken to either
    29     offer a substitute program or increase the availability of
    30     existing programs to make up for the effect of the terminated
    20080H2200B3176                 - 11 -     

     1     program on its overall program goals.
     2     (g)  Responsibilities of electric distribution companies.--
     3  Each electric distribution company THAT DOES NOT SEEK TO BE A     <--
     4  THIRD-PARTY ENTITY shall:
     5         (1)  Cooperate with the program administrator as needed
     6     in its efforts to competitively procure the services of a
     7     third-party entity to provide an energy efficiency and
     8     demand-side response program within the service territory of
     9     the electric distribution company.
    10         (2)  Provide information necessary to effectively
    11     facilitate the work of the selected third-party entity in
    12     conducting the energy efficiency and demand-side response
    13     program.
    14         (3)  Provide assistance as may be requested by the
    15     program administrator in reviewing proposals from third-party
    16     entities seeking to provide energy efficiency and demand-side
    17     response programs within their service territories.
    18         (4)  Provide assistance as may be requested by the
    19     program administrator to facilitate the successful execution
    20     of the contract agreement with the third-party entities to
    21     provide an energy efficiency and demand-side response program
    22     within their service territories.
    23     (h)  Recovery of administrative AND PROGRAM costs.--An         <--
    24  electric distribution company may fully recover all
    25  administrative costs, INCLUDING, BUT NOT LIMITED TO, COSTS        <--
    26  INCURRED UNDER SUBSECTIONS (A)(3) AND (G)(1), (2), (3) AND (4),
    27  that the commission determines are prudently incurred AND         <--
    28  REASONABLE IN AMOUNT pursuant to implementing a program to
    29  deliver cost-effective energy efficiency and demand-side
    30  response activities through a third-party entity. PROGRAM AND     <--
    20080H2200B3176                 - 12 -     

     1  ADMINISTRATIVE COSTS SHALL BE RECOVERED ON A FULL AND CURRENT
     2  BASIS BY THE ELECTRIC DISTRIBUTION COMPANY FROM CUSTOMERS
     3  THROUGH A RECONCILABLE AUTOMATIC ADJUSTMENT CLAUSE PURSUANT TO
     4  SECTION 1307. ENERGY EFFICIENCY AND DEMAND-SIDE RESOURCE
     5  PROGRAMS SHALL BE DEEMED TO BE A NEW SERVICE OFFERED FOR THE
     6  FIRST TIME UNDER SECTION 2804(4)(VI) (RELATING TO STANDARDS FOR
     7  RESTRUCTURING OF ELECTRIC INDUSTRY).
     8     (i)  Reporting.--The commission shall submit an annual report
     9  to the General Assembly describing the results of the programs
    10  implemented by each of the electric distribution companies,
    11  including, but not limited to:
    12         (1)  The costs, benefits and reductions in energy costs.
    13         (2)  Energy use by customer class within this
    14     Commonwealth.
    15         (3)  Reductions in overall peak demand and projections
    16     toward complying with the overall target reduction goals of
    17     this section.
    18     (j)  Definitions.--For purposes of this section, the term
    19  "electric distribution company" shall mean a public utility
    20  providing facilities for the jurisdictional transmission and
    21  distribution of electricity to 100,000 or more retail customers
    22  in this Commonwealth.
    23     Section 3.  This act shall take effect immediately.





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