A06339
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
1782
Session of
2017
INTRODUCED BY DELOZIER, GREINER, KAUFER, M. K. KELLER,
MACKENZIE, THOMAS, WHEELAND, CARROLL, SCHWEYER AND ZIMMERMAN,
SEPTEMBER 14, 2017
REFERRED TO COMMITTEE ON CONSUMER AFFAIRS, SEPTEMBER 14, 2017
AN ACT
Amending Title 66 (Public Utilities) of the Pennsylvania
Consolidated Statutes, in rates and distribution systems,
providing for alternative ratemaking for natural gas and
electric distribution companies utilities.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Title 66 of the Pennsylvania Consolidated
Statutes is amended by adding a section to read:
§ 1330. Alternative ratemaking for natural gas and electric
distribution companies.
(a) Declaration of policy.--The General Assembly finds and
declares as follows:
(1) Innovations in energy and information technologies
are creating new energy options for all customers, and it is
in the public interest for the commission to approve just and
reasonable rates and rate mechanisms to facilitate customer
access to new energy options while ensuring that natural gas
and electric distribution infrastructure costs are reasonably
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allocated to and recovered from customers and market
participants consistent with the use of the infrastructure.
(2) It is the policy of the Commonwealth that utility
ratemaking should encourage and sustain investment in natural
gas and electric distribution systems through appropriate
cost-recovery mechanisms to enhance the safety, security,
reliability or availability of natural gas and electric
infrastructure and be consistent with the efficient
consumption of energy and the deployment of distributed
energy resources.
(b) Alternative rate mechanisms.--
(1) Any provision of law to the contrary
notwithstanding, the commission may approve an application by
a natural gas distribution company as defined in section 2202
(relating to definitions) or electric distribution company as
defined in section 2803 (relating to definitions) in a base
rate proceeding to establish alternative rates and rate
mechanisms, including, but not limited to, the following
mechanisms:
(i) decoupling mechanisms;
(ii) performance-based rates;
(iii) formula rates;
(iv) multiyear rate plans;
(v) cost-recovery mechanisms and rates to support
and fully recover the allocated costs to deploy
infrastructure and distributed energy resources; or
(vi) rates based on a combination of more than one
of the mechanisms in subparagraphs (i), (ii), (iii), (iv)
and (v) or other ratemaking mechanisms as provided under
this chapter.
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(2) An alternative rate mechanism established under this
section may include section 1307 (relating to sliding scale
of rates and adjustments) or 1308 (relating to voluntary
changes in rates) rates and may provide for recovery of
returns on and return of capital investments or, in the case
of city natural gas distribution operations, recovery under
the cash flow ratemaking method.
(c) Construction.--Nothing in this section shall be
construed as limiting the existing ratemaking authority of the
commission or be construed to invalidate or void any rate
mechanisms approved by the commission prior to the effective
date of this section.
(d) Definitions.--As used in this section, the following
words and phrases shall have the meanings given to them in this
subsection unless the context clearly indicates otherwise:
"Decoupling mechanism." A rate mechanism that adjusts or
reconciles authorized distribution rates or revenues for
differences between sales used to set rates and actual sales,
including, but not limited to, customer adjustments or other
adjustments deemed appropriate by the commission.
"Distributed energy resource." Any of the following:
(1) A distributed generation resource.
(2) Energy efficiency.
(3) Energy storage.
(4) Alternative fuel vehicles and associated
infrastructure.
(5) Demand response technology.
"Formula rates." Rates that are periodically adjusted based
on a predetermined formula without the need for a full base rate
proceeding.
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"Multiyear rate plan." A rate mechanism where periodic
changes in base rates are approved in advance by the commission
and without the need for base rate proceedings based on an
approved revenue requirement for the multiyear plan period,
which may include adjustments for inflation during the plan
period.
"Performance-based rates." Rates that are set or adjusted
based on a public utility's financial or operating performance.
Such mechanisms can be part of, or in addition to, existing rate
base/rate of return ratemaking or cash flow ratemaking method
and may include capital costs and return thereon.
§ 1330. Alternative ratemaking for utilities.
(a) Declaration of policy.--The General Assembly finds and
declares as follows:
(1) Innovations in utility operations and information
technologies are creating new opportunities for all
customers, and it is in the public interest for the
commission to approve just and reasonable rates and rate
mechanisms to facilitate customer access to these new
opportunities while ensuring that utility infrastructure
costs are reasonably allocated to and recovered from
customers and market participants consistent with the use of
the infrastructure.
(2) It is the policy of the Commonwealth that utility
ratemaking should encourage and sustain investment through
appropriate cost-recovery mechanisms to enhance the safety,
security, reliability or availability of utility
infrastructure and be consistent with the efficient
consumption of utility service.
(b) Alternative rate mechanisms.--
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(1) Notwithstanding any other provision of law,
including, but not limited to, sections 2806.1(k)(2)
(relating to energy efficiency and conservation program) and
2807(f)(4) (relating to duties of electric distribution
companies), the commission may approve an application by a
utility in a base rate proceeding to establish alternative
rates and rate mechanisms, including, but not limited to, the
following mechanisms:
(i) decoupling mechanisms;
(ii) performance-based rates;
(iii) formula rates;
(iv) multiyear rate plans; or
(v) rates based on a combination of more than one of
the mechanisms in subparagraphs (i), (ii), (iii) and (iv)
or other ratemaking mechanisms as provided under this
chapter.
(2) An alternative rate mechanism established under this
section may include rates under section 1307 (relating to
sliding scale of rates; adjustments) or 1308 (relating to
voluntary changes in rates) and may provide for recovery of
returns on and return of capital investments or, in the case
of city natural gas distribution operations, recovery under
the cash flow ratemaking method.
(3) Capital costs and expenses recovered through
alternative rates and rate mechanisms shall be reasonable and
prudently incurred and used and useful in providing service .
Nothing in this paragraph shall be construed to prohibit or
limit the recovery of revenue, as appropriate, under a
commission-approved performance-based rate plan.
(c ) Customer notice.--
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(1) A utility shall notify a customer of all of the
following:
(i) The filing of an application under subsection
(b)(1).
(ii) The commission's decision on the application.
(iii) A summary and, if applicable, a schedule of
the rate adjustments that will occur as a result of the
commission's approval of a utility application under
subsection (b) and the effective date of the adjustments.
(iv) Any other information required by the
commission by regulation or order.
(2) Notice shall be provided through customer bill
inserts and posted on the utility's publicly accessible
Internet website.
(d) Commission.--No later than six months after the
effective date of this subsection, the commission, by regulation
or order, shall prescribe the specific procedures for the
approval of an application to establish alternative rates.
(e) Construction.--Nothing in this section shall be
construed as limiting the existing ratemaking authority of the
commission or be construed to invalidate or void any rate
mechanisms approved by the commission prior to the effective
date of this section.
(f) Definitions.--As used in this section, the following
words and phrases shall have the meanings given to them in this
subsection unless the context clearly indicates otherwise:
"Decoupling mechanism." As follows:
(1) A rate mechanism that reconciles authorized
distribution rates or revenues for differences between the
projected sales used to set rates and actual sales, which may
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include, but not be limited to, adjustments resulting from
fluctuations in the number of customers served and other
adjustments deemed appropriate by the commission.
(2) In the case of water and wastewater, a rate
mechanism that adjusts or reconciles authorized rates or
revenues for differences between sales used to set rates and
actual sales, which may include, but not be limited to,
adjustments resulting from fluctuations in the number of
customers served and other adjustments deemed appropriate by
the commission.
"Formula rates." Rates that are periodically adjusted based
on a predetermined formula without the need for a full base rate
proceeding.
"Multiyear rate plan." A rate mechanism under which the
commission sets base rates and revenue requirements for a
multiyear plan period and authorizes periodic changes in base
rates , including, but not limited to, adjustments to account for
inflation and capital investments without the necessity for base
rate proceedings during the approved plan period.
"Performance-based rates." Rates that are set or adjusted
based on a public utility's financial or operating performance.
Such mechanisms can be part of, or in addition to, existing rate
base/rate of return ratemaking or cash flow ratemaking method
and may include capital costs and return thereon.
"Utility." As defined in section 1351 (relating to
definitions).
Section 2. This act shall take effect in 60 days.
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