Regular Session 2019-2020 House Bill 0011 P.N. 0864

PRINTER'S NO. 864

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

No.

Session of

2019

INTRODUCED BY MEHAFFIE, HICKERNELL, MILLARD, TOOHIL, RADER,

HERSHEY, YOUNGBLOOD, BARRAR, ZIMMERMAN, HILL-EVANS,

GILLESPIE, KAUFER, PASHINSKI, NEILSON, DEASY, DiGIROLAMO,

SOLOMON, KORTZ, GREGORY AND MARSHALL, MARCH 12, 2019

REFERRED TO COMMITTEE ON CONSUMER AFFAIRS, MARCH 12, 2019

AN ACT

Amending the act of November 30, 2004 (P.L.1672, No.213),

entitled, "An act providing for the sale of electric energy

generated from renewable and environmentally beneficial

sources, for the acquisition of electric energy generated

from renewable and environmentally beneficial sources by

electric distribution and supply companies and for the powers

and duties of the Pennsylvania Public Utility Commission,"

further providing for definitions, for alternative energy

portfolio standards, for portfolio requirements in other

states, for health and safety standards and for interagency

responsibilities; and providing for Tier III alternative

energy sources and for capacity payments to alternative

energy sources.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1. The definitions of "alternative energy credit,"

"alternative energy sources," "force majeure" and "reporting

period" in section 2 of the act of November 30, 2004 (P.L.1672,

No.213), known as the Alternative Energy Portfolio Standards

Act, are amended and the section is amended by adding

definitions to read:

Section 2. Definitions.

The following words and phrases when used in this act shall

have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Alternative energy credit." A tradable instrument that is

used to establish, verify and monitor compliance with this act.

A unit of credit shall equal one megawatt hour of electricity

from an alternative energy source and shall only be used to

satisfy the requirement to purchase Tier I, Tier II or Tier III

alternative energy credits. The alternative energy credit shall

remain the property of the alternative energy system until the

alternative energy credit is voluntarily transferred by the

alternative energy system.

* * *

"Alternative energy sources." The term shall include the

following existing and new sources for the production of

electricity:

(1) Solar photovoltaic or other solar electric energy.

(2) Solar thermal energy.

(3) Wind power.

(4) Large-scale hydropower, which shall mean the

production of electric power by harnessing the hydroelectric

potential of moving water impoundments, including pumped

storage that does not meet the requirements of low-impact

hydropower under paragraph (5).

(5) Low-impact hydropower consisting of any technology

that produces electric power and that harnesses the

hydroelectric potential of moving water impoundments,

provided such incremental hydroelectric development:

(i) does not adversely change existing impacts to

aquatic systems;

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(ii) meets the certification standards established

by the Low Impact Hydropower Institute and American

Rivers, Inc., or their successors;

(iii) provides an adequate water flow for protection

of aquatic life and for safe and effective fish passage;

(iv) protects against erosion; and

(v) protects cultural and historic resources.

(6) Geothermal energy, which shall mean electricity

produced by extracting hot water or steam from geothermal

reserves in the earth's crust and supplied to steam turbines

that drive generators to produce electricity.

(7) Biomass energy, which shall mean the generation of

electricity utilizing the following:

(i) organic material from a plant that is grown for

the purpose of being used to produce electricity or is

protected by the Federal Conservation Reserve Program

(CRP) and provided further that crop production on CRP

lands does not prevent achievement of the water quality

protection, soil erosion prevention or wildlife

enhancement purposes for which the land was primarily set

aside; or

(ii) any solid nonhazardous, cellulosic waste

material that is segregated from other waste materials,

such as waste pallets, crates and landscape or right-of-

way tree trimmings or agricultural sources, including

orchard tree crops, vineyards, grain, legumes, sugar and

other crop by-products or residues.

(8) Biologically derived methane gas, which shall

include methane from the anaerobic digestion of organic

materials from yard waste, such as grass clippings and

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leaves, food waste, animal waste and sewage sludge. The term

also includes landfill methane gas.

(9) Fuel cells, which shall mean any electrochemical

device that converts chemical energy in a hydrogen-rich fuel

directly into electricity, heat and water without combustion.

(10) Waste coal, which shall include the combustion of

waste coal in facilities in which the waste coal was disposed

or abandoned prior to July 31, 1982, or disposed of

thereafter in a permitted coal refuse disposal site

regardless of when disposed of, and used to generate

electricity, or such other waste coal combustion meeting

alternate eligibility requirements established by regulation.

Facilities combusting waste coal shall use at a minimum a

combined fluidized bed boiler and be outfitted with a

limestone injection system and a fabric filter particulate

removal system. Alternative energy credits shall be

calculated based upon the proportion of waste coal utilized

to produce electricity at the facility.

(11) Coal mine methane, which shall mean methane gas

emitting from abandoned or working coal mines.

(12) Demand-side management consisting of the management

of customer consumption of electricity or the demand for

electricity through the implementation of:

(i) energy efficiency technologies, management

practices or other strategies in residential, commercial,

institutional or government customers that reduce

electricity consumption by those customers;

(ii) load management or demand response

technologies, management practices or other strategies in

residential, commercial, industrial, institutional and

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government customers that shift electric load from

periods of higher demand to periods of lower demand; or

(iii) industrial by-product technologies consisting

of the use of a by-product from an industrial process,

including the reuse of energy from exhaust gases or other

manufacturing by-products that are used in the direct

production of electricity at the facility of a customer.

(13) Distributed generation system, which shall mean the

small-scale power generation of electricity and useful

thermal energy.

(14) Energy from nuclear fission used to generate

electricity.

* * *

"Force majeure." Upon its own initiative or upon a request

of an electric distribution company or an electric generator

supplier, the Pennsylvania Public Utility Commission, within 60

days, shall determine if alternative energy resources are

reasonably available in the marketplace in sufficient quantities

for the electric distribution companies and electric generation

suppliers to meet their obligations for that reporting period

under this act. In making this determination, the commission

shall consider whether electric distribution companies or

electric generation suppliers have made a good faith effort to

acquire sufficient alternative energy to comply with their

obligations. Such good faith efforts shall include, but are not

limited to, banking alternative energy credits during their

transition periods, seeking alternative energy credits through

competitive solicitations and seeking to procure alternative

energy credits or alternative energy through long-term

contracts. In further making its determination, the commission

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shall assess the availability of alternative energy credits in

the Generation Attributes Tracking System (GATS) or its

successor and the availability of alternative energy credits

generally in Pennsylvania and other jurisdictions in [the PJM

Interconnection, L.L.C. regional transmission organization (PJM)

or its successor] PJM. The commission may also require

solicitations for alternative energy credits as part of default

service before requests of force majeure can be made. If the

commission further determines that alternative energy resources

are not reasonably available in sufficient quantities in the

marketplace for the electric distribution companies and electric

generation suppliers to meet their obligations under this act,

then the commission shall modify the underlying obligation of

the electric distribution company or electric generation

supplier or recommend to the General Assembly that the

underlying obligation be eliminated. Commission modification of

the electric distribution company or electric generation

supplier obligations under this act shall be for that compliance

period only. Commission modification shall not automatically

reduce the obligation for subsequent compliance years. If the

commission modifies the electric distribution company or

electric generation supplier obligations under this act, the

commission may require the electric distribution company or

electric generation supplier to acquire additional alternative

energy credits in subsequent years equivalent to the obligation

reduced due to a force majeure declaration if the commission

determines that sufficient alternative energy credits exist in

the marketplace.

"Load-serving entities." As follows:

(1) Entities or the duly designated agents of the

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entities, including load aggregators or power marketers,

that:

(i) serve end users within the PJM region; and

(ii) have been granted the authority or have an

obligation under a State law, local ordinance, regulation

or franchise to sell electric energy to end users located

within the PJM region.

(2) The term shall include end use customers that

qualify under State rules or utility retail tariffs to manage

directly their own supply of electric power and energy and

use of transmission and ancillary services.

* * *

"PJM." The PJM Interconnection, L.L.C. regional transmission

organization or its successor.

* * *

["Reporting period."] "Reporting period" or "reporting year."

The 12-month period from June 1 through May 31. A reporting year

shall be numbered according to the calendar year in which it

begins and ends.

* * *

"Tier I projected price." The Tier I projected price shall

equal the average of the Tier I futures price for the current

reporting year and the subsequent two reporting years. For the

purposes of calculating the Tier I projected price, the Tier I

futures price for each reporting year shall be the average of

the closing price on each trade date during the calendar year

that ends immediately prior to the start of the current

reporting year for alternative energy credits that are eligible

to meet the Tier I renewable energy requirement in this

Commonwealth.

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"Tier III alternative energy credit reporting period price."

As follows:

(1) Except as provided under paragraph (2), the Tier III

alternative energy credit reporting period price shall be

determined by the commission 60 days before the start of each

reporting year.

(2) For the first reporting period for the Tier III

program, the commission may determine the Tier III

alternative energy credit reporting period price no later

than 60 days after the start of the reporting year.

(3) The Tier III alternative energy credit reporting

period price shall be equal to the Tier I projected price and

shall not be less than the Tier III price floor or greater

than the Tier III price cap.

"Tier III alternative energy source." A zero-emission

alternative energy source that:

(1) Is derived from:

(i) Solar photovoltaic and solar thermal energy.

(ii) Wind power.

(iii) Low-impact hydropower.

(iv) Geothermal energy.

(v) Nuclear fission.

(2) Satisfies all of the following:

(i) The alternative energy source is interconnected

with capacity injection rights within the regional

transmission organization with responsibility for this

Commonwealth.

(ii) If the alternative energy source were to cease

operation or fail to come in-service, all of the

following would occur:

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(A) The ability of this Commonwealth or regions

of this Commonwealth to maintain or decrease existing

levels of volatile organic compounds or to comply

with Federal or State air pollution control programs,

standards or goals is reduced.

(B) The carbon dioxide emissions that result

from electricity consumed in this Commonwealth are

negatively impacted.

or decrease existing levels of carbon monoxide, lead,

ground-level ozone, particulate matter, nitrogen

oxide or sulfur dioxide is negatively impacted.

(3) On or after January 1, 2017, satisfies any of the

following:

(i) Regardless of the alternative energy source's

location, did not receive tax exemptions, deferrals,

exclusions, allowances, payments, credits, deductions or

reimbursements from another state calculated in whole or

in part using a metric that provides value for emissions

not produced by the alternative energy source.

(ii) Is not wholly owned by a municipal or

cooperative corporation or a group, association or

consortium of a municipal or cooperative corporations.

(iii) Did not, at any point during the Tier III

program, recover some or all of the capital or operating

costs of the resource through cost-based rates regulated

by a state.

" Tier III price cap." As follows:

(1) Except as provided under paragraph (2), t he Tier III

price cap shall be initially equal to the product of 65% and

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the weighted average price of credits that were retired for

Tier I compliance for the reporting year ending May 31, 2017,

as reflected in the commission's 2017 Annual Report of

Alternative Energy Portfolio Standards Act of 2004.

(2) If the Commonwealth participates in a Statewide

emissions fee program or a regional multistate greenhouse gas

program, the initial Tier III price cap shall be adjusted

annually by the ratio of the average price for allowances

under the program for the previous reporting year in price

per ton divided by $15 per ton.

"Tier III price floor." As follows:

(1) Except as provided under paragraph (2), the Tier III

price floor shall be initially equal to the product of 50%

and the weighted average price of credits that were retired

for Tier I compliance for the reporting year ending May 31,

2017, as reflected in the commission's 2017 Annual Report of

Alternative Energy Portfolio Standards Act of 2004.

(2) If the Commonwealth participates in a Statewide

emissions fee program or a regional multistate greenhouse gas

program, the initial Tier III price floor shall be adjusted

annually by the ratio of the average price for allowances

under the program for the previous reporting year in price

per ton divided by $15 per ton.

"Tier III program." The period commencing at the beginning

of the 14th reporting year on June 1, 2019, to May 31, 2020.

* * *

Section 2. Section 3(a), (b), (e), (f) and (g) of the act

are amended and the section is amended by adding a subsection to

read:

Section 3. Alternative energy portfolio standards.

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(a) General compliance and cost recovery.--

(1) From the effective date of this act through and

including the 15th year after enactment of this act and each

year thereafter, the electric energy sold by an electric

distribution company or electric generation supplier to

retail electric customers in this Commonwealth shall be

comprised of electricity generated from alternative energy

sources and in the percentage amounts as described under

subsections (b) and (c).

(2) Electric distribution companies and electric

generation suppliers shall satisfy both requirements set

forth in subsections (b) and (c), provided, however, that an

electric distribution company or an electric generation

supplier shall be excused from its obligations under this

section to the extent that the commission determines that

force majeure exists.

(2.1) Beginning June 1, 2019, and each year thereafter,

Tier III alternative energy credits shall be purchased by

electric distribution companies as described under subsection

(c.1), provided, however, that an electric distribution

company shall be excused from its obligations under this

section to the extent that the commission determines that

force majeure exists.

(3) All costs for:

(i) the purchase of electricity generated from Tier

I and Tier II alternative energy sources, including the

costs of the regional transmission organization, in

excess of the regional transmission organization real-

time locational marginal pricing, or its successor, at

the delivery point of the alternative energy source for

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the electrical production of the alternative energy

sources; and

(ii) payments for Tier I and Tier II alternative

energy credits[, in both cases] that are voluntarily

acquired by an electric distribution company during the

cost recovery period on behalf of its customers shall be

deferred as a regulatory asset by the electric

distribution company and fully recovered, with a return

on the unamortized balance, pursuant to an automatic

energy adjustment clause under 66 Pa.C.S. § 1307

(relating to sliding scale of rates; adjustments) as a

cost of generation supply under 66 Pa.C.S. § 2807

(relating to duties of electric distribution companies)

in the first year after the expiration of its cost-

recovery period. After the cost-recovery period, any

direct or indirect costs for the purchase by electric

distribution companies of resources to comply with this

section, including, but not limited to, the purchase of

electricity generated from Tier I and Tier II alternative

energy sources, payments for alternative energy credits,

cost of credits banked, payments to any third party

administrators for performance under this act and costs

levied by a regional transmission organization to ensure

that Tier I and Tier II alternative energy sources are

reliable, shall be recovered on a full and current basis

pursuant to an automatic energy adjustment clause under

66 Pa.C.S. § 1307 as a cost of generation supply under 66

Pa.C.S. § 2807.

(4) Any direct and indirect costs incurred by electric

distribution companies to comply with subsection (c.1) and

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sections 8.1 and 8.2, including, but not limited to, the

purchase of Tier III alternative energy credits and payments

to any third-party administrators for performance under this

act shall be recovered on a full and current basis pursuant

to a nonbypassable adjustment clause under 66 Pa.C.S. § 1307.

(b) Tier I and solar photovoltaic shares.--

(1) Two years after the effective date of this act, at

least 1.5% of the electric energy sold by an electric

distribution company or electric generation supplier to

retail electric customers in this Commonwealth shall be

generated from Tier I alternative energy sources. Except as

provided in this section, the minimum percentage of electric

energy required to be sold to retail electric customers from

alternative energy sources shall increase to 2% three years

after the effective date of this act. The minimum percentage

of electric energy required to be sold to retail electric

customers from alternative energy sources shall increase by

at least 0.5% each year so that at least 8% of the electric

energy sold by an electric distribution company or electric

generation supplier to retail electric customers in that

certificated territory in the 15th year after the effective

date of this subsection is sold from Tier I alternative

energy resources.

(2) The total percentage of the electric energy sold by

an electric distribution company or electric generation

supplier to retail electric customers in this Commonwealth

that must be sold from solar photovoltaic technologies is:

(i) 0.0013% for June 1, 2006, through May 31, 2007.

(ii) 0.0030% for June 1, 2007, through May 31, 2008.

(iii) 0.0063% for June 1, 2008, through May 31,

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2009.

(iv) 0.0120% for June 1, 2009, through May 31, 2010.

(v) 0.0203% for June 1, 2010, through May 31, 2011.

(vi) 0.0325% for June 1, 2011, through May 31, 2012.

(vii) 0.0510% for June 1, 2012, through May 31,

2013.

(viii) 0.0840% for June 1, 2013, through May 31,

2014.

(ix) 0.1440% for June 1, 2014, through May 31, 2015.

(x) 0.2500% for June 1, 2015, through May 31, 2016.

(xi) 0.2933% for June 1, 2016, through May 31, 2017.

(xii) 0.3400% for June 1, 2017, through May 31,

2018.

(xiii) 0.3900% for June 1, 2018, through May 31,

2019.

(xiv) 0.4433% for June 1, 2019, through May 31,

2020.

(xv) 0.5000% for June 1, 2020, and thereafter.

(3) Upon commencement of the beginning of the 6th

reporting year, the commission shall undertake a review of

the compliance by electric distribution companies and

electric generation suppliers with the requirements of this

act. The review shall also include the status of alternative

energy technologies within this Commonwealth and the capacity

to add additional alternative energy resources. The

commission shall use the results of this review to recommend

to the General Assembly additional compliance goals beyond

year 15 for Tier I and Tier II shares. The commission shall

work with the department in evaluating the future alternative

energy resource potential.

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* * *

(c.1) Tier III share.--

(1) During t he Tier III program, electric distribution

companies shall purchase Tier III alternative energy credits

equal to 50% of the total electric energy, net of system

losses, sold in a reporting period in a service territory by

the electric distribution companies and electric generation

suppliers in accordance with section 8.1(c)(3).

Notwithstanding any other provision of law, the obligations

of electric distribution companies under this subsection

shall not be subject to 66 Pa.C.S. § 2807(e)(3.5) or (3.7).

Nothing in this subsection shall be construed to obligate an

electric distribution company to purchase electric energy

from a Tier III alternative energy source.

(2) This subsection shall expire after an effective cost

of carbon emissions exists in this Commonwealth that is equal

to no less than an average of $15 per ton over three

consecutive reporting periods as a result of the enactment of

a Statewide emissions fee program or participation by the

Commonwealth in a regional multistate greenhouse gas program.

(3) Upon the enactment of a Statewide emissions fee

program or participation by the Commonwealth in a regional

multistate greenhouse gas program, the commission shall

submit a notice to the Legislative Reference Bureau for

publication in the Pennsylvania Bulletin.

(4) This subsection shall expire on the date the notice

under paragraph (3) is published in the Pennsylvania

Bulletin.

* * *

(e) Alternative energy credits.--

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(1) The commission shall establish an alternative energy

credits program as needed to implement this act. The

provision of services pursuant to this section shall be

exempt from the competitive procurement procedures of 62

Pa.C.S. (relating to procurement).

(2) The commission shall approve an independent entity

to serve as the alternative energy credits program

administrator. The administrator shall have those powers and

duties assigned by commission regulations. Such powers and

duties shall include, but not be limited to, the following:

(i) To create and administer an alternative energy

credits certification, tracking and reporting program.

This program should include, at a minimum, a process for

qualifying alternative energy systems and determining the

manner credits can be created, accounted for, transferred

and retired.

(ii) To submit reports to the commission at such

times and in such manner as the commission shall direct.

(3) All qualifying alternative energy systems must

include a qualifying meter to record the cumulative electric

production to verify the [advanced] alternative energy credit

value. Qualifying meters will be approved by the commission

as defined in paragraph (4).

(4) (i) An electric distribution company or electric

generation supplier shall comply with the applicable

requirements of this section by purchasing sufficient

alternative energy credits and submitting documentation

of compliance to the program administrator.

(ii) For purposes of this subsection, one

alternative energy credit shall represent one megawatt

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hour of qualified alternative electric generation,

whether self-generated, purchased along with the electric

commodity or separately through a tradable instrument and

otherwise meeting the requirements of commission

regulations and the program administrator.

(5) The alternative energy credits program shall include

provisions requiring a reporting period as defined in section

2 for all covered entities under this act. The alternative

energy credits program shall also include a true-up period as

defined in section 2. The true-up period shall provide

entities covered under this act the ability to obtain the

required number of alternative energy credits or to make up

any shortfall of the alternative energy credits they may be

required to obtain to comply with this act. A force majeure

provision shall also be provided for under the true-up period

provisions.

(6) An electric distribution company and electric

generation supplier may bank or place in reserve Tier I and

Tier II alternative energy credits produced in one reporting

year for compliance in either or both of the two subsequent

reporting years, subject to the limitations set forth in this

subsection and provided that the electric distribution

company and electric generation supplier are in compliance

for all previous reporting years. In addition, the electric

distribution company and electric generation supplier shall

demonstrate to the satisfaction of the commission that such

credits:

(i) were in excess of the alternative energy credits

needed for compliance in the year in which they were

generated and that such excess credits have not

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previously been used for compliance under this act;

(ii) were produced by the generation of electrical

energy by alternative energy sources and sold to retail

customers during the year in which they were generated;

and

(iii) have not otherwise been nor will be sold,

retired, claimed or represented as part of satisfying

compliance with alternative or renewable energy portfolio

standards in other states.

(7) An electric distribution company or an electric

generation supplier with sales that are exempted under

subsection (d) may bank credits for retail sales of

electricity generated from Tier I and Tier II sources made

prior to the end of the cost-recovery period and after the

effective date of this act. Bankable credits shall be limited

to credits associated with electricity sold from Tier I and

Tier II sources during a reporting year which exceeds the

volume of sales from such sources by an electric distribution

company or electric generation supplier during the 12-month

period immediately preceding the effective date of this act.

All credits banked under this subsection shall be available

for compliance with subsections (b) and (c) for no more than

two reporting years following the conclusion of the cost-

recovery period.

(8) The commission or its designee shall develop a

registry of pertinent information regarding all available

alternative energy credits, credit transactions among

electric distribution companies and electric generation

suppliers, the number of alternative energy credits sold or

transferred and the price paid for the sale or transfer of

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the credits. The registry shall provide current information

to electric distribution companies, electric generation

suppliers and the general public on the status of alternative

energy credits created, sold or transferred within this

Commonwealth.

(9) The commission may impose an administrative fee on

an alternative energy credit transaction. The amount of this

fee may not exceed the actual direct cost of processing the

transaction by the alternative energy credits administrator.

The commission is authorized to utilize up to 5% of the

alternative compliance fees generated under subsection (f)

for administrative expenses directly associated with this

act.

(10) The commission shall establish regulations

governing the verification and tracking of energy efficiency

and demand-side management measures pursuant to this act,

which shall include benefits to all utility customer classes.

When developing regulations, the commission must give

reasonable consideration to existing and proposed regulations

and rules in existence in the regional transmission

organizations that manage the transmission system in any part

of this Commonwealth. All verified reductions shall accrue

credits starting with the passage of this act.

(11) The commission shall within 120 days of the

effective date of this act develop a depreciation schedule

for alternative energy credits created through demand-side

management, energy efficiency and load management

technologies and shall develop standards for tracking and

verifying savings from energy efficiency, load management and

demand-side management measures. The commission shall allow

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for a 60-day public comment period and shall issue final

standards within 30 days of the close of the public comment

period.

(12) Unless a contractual provision explicitly assigns

alternative energy credits in a different manner, the owner

of the alternative energy system or a customer-generator owns

any and all alternative energy credits associated with or

created by the production of electric energy by such facility

or customer, and the owner or customer shall be entitled to

sell, transfer or take any other action to which a legal

owner of property is entitled to take with respect to the

credits.

(f) Alternative compliance payment.--

(1) At the end of each program year, the program

administrator shall provide a report to the commission and to

each covered electric distribution company showing their

status level of alternative energy acquisition.

(2) The commission shall conduct a review of each

determination made under subsections (b) [and], (c) and

(c.1). If, after notice and hearing, the commission

determines that an electric distribution company or electric

generation supplier has failed to comply with subsections (b)

[and], (c) and (c.1), as applicable, the commission shall

impose an alternative compliance payment on that electric

distribution company or electric generation supplier.

(3) The alternative compliance payment, with the

exception of the solar photovoltaic share compliance

requirement set forth in [subsection] subsections (b)(2) and

(c.1), shall be $45 times the number of additional

alternative energy credits needed in order to comply with

20190HB0011PN0864 - 20 -

subsection (b) or (c).

(4) The alternative compliance payment for the solar

photovoltaic share shall be 200% of the average market value

of solar renewable energy credits sold during the reporting

period within the service region of the regional transmission

organization, including, where applicable, the levelized up-

front rebates received by sellers of solar renewable energy

credits in other jurisdictions in the PJM [Interconnection,

L.L.C. transmission organization (PJM) or its successor.]

region.

(4.1) The alternative compliance payment for the Tier

III share shall be 200% of the Tier III alternative energy

credit reporting period price for the applicable reporting

period times the number of additional alternative energy

credits needed in order to comply with subsection (c.1).

(5) The commission shall establish a process to provide

for, at least annually, a review of the alternative energy

market within this Commonwealth and the service territories

of the regional transmission organizations that manage the

transmission system in any part of this Commonwealth. The

commission will use the results of this study to identify any

needed changes to the cost associated with the alternative

compliance payment program. If the commission finds that the

costs associated with the alternative compliance payment

program must be changed, the commission shall present these

findings to the General Assembly for legislative enactment.

(g) Transfer to sustainable development funds.--

(1) Notwithstanding the provisions of 66 Pa.C.S. §§ 511

(relating to disposition, appropriation and disbursement of

assessments and fees) and 3315 (relating to disposition of

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fines and penalties), alternative compliance payments imposed

pursuant to this act for failure to comply with subsections

(b) and (c) shall be paid into Pennsylvania's Sustainable

Energy Funds created under the commission's restructuring

orders under 66 Pa.C.S. Ch. 28 (relating to restructuring of

electric utility industry). Alternative compliance payments

shall be paid into a special fund of the Pennsylvania

Sustainable Energy Board, established by the commission under

Docket M-00031715, and made available to the Regional

Sustainable Energy Funds under procedures and guidelines

approved by the Pennsylvania Energy Board.

(2) The alternative compliance payments for failure to

comply with subsections (b) and (c) shall be utilized solely

for projects that will increase the amount of electric energy

generated from alternative energy resources for purposes of

compliance with subsections (b) and (c).

(3) The alternative compliance payments for failure to

comply with subsection (c.1) shall be divided as follows:

(i) Fifty percent shall be paid consistent with

paragraphs (1) and (2).

(ii) Fifty percent shall be utilized by the

alternative energy credits program administrator to pay

Tier III alternative energy sources for Tier III

alternative energy credits that were otherwise not

purchased due to the failure to comply with subsection

(c.1).

* * *

Section 3. Sections 4 and 6 of the act are amended to read:

Section 4. Portfolio requirements in other states.

If an electric distribution [supplier] company or electric

20190HB0011PN0864 - 22 -

generation company [provider] supplier sells electricity in any

other state and is subject to renewable energy portfolio

requirements in that state, they shall list any such requirement

and shall indicate how it satisfied those renewable energy

portfolio requirements. To prevent double-counting, the electric

distribution [supplier] company or electric generation company

shall not satisfy Pennsylvania's alternative energy portfolio

requirements using alternative energy used to satisfy another

state's portfolio requirements or alternative energy credits

already purchased by individuals, businesses or government

bodies that do not have a compliance obligation under this act

unless the individual, business or government body sells those

credits to the electric distribution company or electric

generation supplier. Energy derived from alternative energy

sources inside the geographical boundaries of this Commonwealth

shall be eligible to meet the compliance requirements under this

act. Energy derived from alternative energy sources located

outside the geographical boundaries of this Commonwealth but

within the service territory of a regional transmission

organization that manages the transmission system in any part of

this Commonwealth shall only be eligible to meet the compliance

requirements of electric distribution companies or electric

generation suppliers located within the service territory of the

same regional transmission organization. For purposes of

compliance with this act, alternative energy sources located in

[the PJM Interconnection, L.L.C. regional transmission

organization (PJM) or its successor] PJM's service territory

shall be eligible to fulfill compliance obligations of all

Pennsylvania electric distribution companies and electric

generation suppliers. Energy derived from alternative energy

20190HB0011PN0864 - 23 -

sources located outside the service territory of a regional

transmission organization that manages the transmission system

in any part of this Commonwealth shall not be eligible to meet

the compliance requirements of this act. Electric distribution

companies and electric generation suppliers shall document that

this energy was not used to satisfy another state's renewable

energy portfolio standards.

Section 6. Health and safety standards.

The department shall cooperate with the Department of Labor

and Industry as necessary in developing health and safety

standards, as needed, regarding facilities generating energy

from Tier I and Tier II alternative energy sources. The

department shall establish appropriate and reasonable health and

safety standards to ensure uniform and proper compliance with

this act by owners and operators of facilities generating energy

from Tier I and Tier II alternative energy sources as defined in

this act.

Section 4. Section 7 of the act is amended by adding a

subsection to read:

Section 7. Interagency responsibilities.

* * *

(d) Enforcement.--In addition to any powers expressly

specified under this act, the commission may enforce the

provisions of this act in accordance with the commission's

regulations and orders and the commission may modify or rescind

the regulations or orders. Nothing in this subsection shall be

construed to exclude any authority which the commission would

otherwise have under this act or 66 Pa.C.S. (relating to public

utilities).

Section 5. The act is amended by adding sections to read:

20190HB0011PN0864 - 24 -

Section 8.1. Tier III alternative energy sources.

(a) Participation.--An a lternative energy source seeking to

apply for participation in the Tier III program shall file a

written notice with the commission. The written notice shall

contain all of the following information:

(1) The alternative energy source's qualifications as a

Tier III alternative energy source.

(2) The estimated generation of the alternative energy

resources consistent with subsection (b)(2).

(3) The alternative energy source's commitment to sell

the entire output of the alternative energy source as Tier

III credits for at least six reporting periods with the

commission no later than 90 days after the start of the first

Tier III program reporting period. The provisions of

subsection (b) shall apply for the entire first reporting

period if the alternative energy source is designated as a

Tier III alternative energy source by the commission.

(b) Review.--

(1) The alternative energy source shall submit the

notice filed under subsection (a) to the Legislative

Reference Bureau for publication in the Pennsylvania Bulletin

in the first available issue after filing the notice with the

commission. Any comments in response to the notice filed

under subsection (a) shall be submitted no later than 20 days

after the notice is published in the Pennsylvania Bulletin

and any reply comments shall be submitted no later than 10

days after the initial comments are submitted.

(2) The commission shall review each notice filed under

subsection (a) and all comments submitted under this

paragraph and rank each applicant for participation in the

20190HB0011PN0864 - 25 -

Tier III program from first to last based on how well the

alternative energy source satisfies the criteria specified

under this act. No later than 90 days after reviewing each

notice filed under subsection (a), the commission shall

select the applicants that will participate in the Tier III

program according to their ranking. Beginning with the top-

ranked applicant and continuing in rank order, the commission

shall select applicants up to the point at which the combined

sum of megawatt hours of estimated generation by all selected

applicants equals approximately 50% of the total number of

megawatt hours of electricity distributed by electric

distribution companies in this Commonwealth, net of system

losses, for the latest calendar year reported in the most

recent Electric Power Outlook or other report reviewing the

generation, transmission and distribution capacity in this

Commonwealth published by the commission. For the purposes of

this calculation, the estimated generation shall be as

follows:

(i) For existing alternative energy resources fueled

by nuclear fission, the estimated generation shall be

equal to the product of 77% multiplied by 8,760 hours per

year multiplied by the nameplate capacity of the plant.

(ii) For existing alternative energy resources not

fueled by nuclear fission, the estimated generation shall

be equal to the generation output of the resources in the

calendar year which concludes immediately prior to the

date upon which qualification applications are due.

(iii) For new alternative energy resources, the

estimated generation is equal to the product of 8,760

hours per year multiplied by the nameplate capacity of

20190HB0011PN0864 - 26 -

the resource multiplied by the average capacity factor of

similar existing resources.

(3) The commission shall select the marginal applicant

to participate in the Tier III program if the addition of 50%

of the estimated generation produced by the marginal

applicant does not cause the combined sum of megawatt hours

of estimated generation from all selected applicants,

including the marginal unit, to exceed 50% of the total

number of megawatt hours of electricity distributed by

electric distribution companies in this Commonwealth in the

calendar year which concludes immediately prior to the date

upon which qualification applications are due.

(4) Once designated as a Tier III alternative energy

source, an alternative energy source shall continue to be

considered a Tier III alternative energy source as long as

the alternative energy source continues to meet the criteria

specified under this act.

( c) Transfers and payments.--

(1) No later than 35 day s after the close of each

reporting period, each Tier III alternative energy source

shall transfer all Tier III alternative energy credits for

the reporting period to the alternative energy credit program

administrator. The program administrator shall hold the Tier

III alternative energy credits on behalf of the Tier III

alternative energy sources for the sole purpose of

administering the Tier III program.

(2) No later than seven days after all Tier III

alternative energy sources have transferred the credits under

paragraph (1), each electric distribution company shall

purchase Tier III alternative energy credits from the

20190HB0011PN0864 - 27 -

alternative energy credit program administrator at the Tier

III alternative energy credit reporting period price for the

reporting period to satisfy each electric distribution

company's Tier III obligations.

(3) No later than seven days after each electric

distribution company purchases Tier III alternative energy

credits under paragraph (2), the alternative energy credit

program administrator shall pay each Tier III alternative

energy source for the Tier III alternative energy credits

transferred to the alternative energy credit program

administrator under paragraph (1) in accordance with the

following:

(i) If the total quantity of Tier III alternative

energy credits transferred to the alternative energy

credit program administrator is less than the sum of the

Tier III shares for all electric distribution companies

in this Commonwealth, then each electric distribution

company's Tier III share for that delivery year shall be

each electric distribution company's proportional share

of transferred Tier III credits. An electric distribution

company's proportional share shall be a percentage equal

to the total electric energy sold in a service territory

by the electric distribution company and electric

generation suppliers divided by the total electric energy

sold by all electric distribution companies and electric

generation suppliers in this Commonwealth.

(ii) If the sum of Tier III alternative energy

credits transferred to the alternative energy credit

program administrator from all Tier III alternative

energy sources is greater than the sum of the Tier III

20190HB0011PN0864 - 28 -

shares for all electric distribution companies in this

Commonwealth, then each Tier III alternative energy

source shall be paid for each of the Tier III alternative

energy source's prorated share of transferred Tier III

credits. Tier III alternative energy credits transferred

to the program administrator that exceed the sum of the

Tier III shares for all electric distribution companies

in this Commonwealth shall be retired. An alternative

energy source's prorated share shall be a percentage

equal to the sum of Tier III shares for all electric

distribution companies in this Commonwealth divided by

the sum of Tier III alternative energy credits

transferred to the program administrator from all Tier

III alternative energy sources. Credits purchased by

electric distribution companies may not be transferred,

sold or assigned to any other entity.

(d) Suspension of operations.--

(1) A designated Tier III alternative energy source

shall be excused from the designated Tier III alternative

energy source's commitment to operate for at least six

reporting periods and shall no longer receive Tier III

alternative energy credits if any of the following apply:

(i) The designated Tier III alternative energy

source suspends or ceases operations, despite the

designated Tier III alternative energy source's

reasonable efforts to continue operations, due to an

event beyond the designated Tier III alternative energy

source's control, including, but not limited to, acts of

God, flood, drought, earthquake, storm, fire, lightning,

epidemic, war, riot, labor or material shortage, sabotage

20190HB0011PN0864 - 29 -

or explosion. The designated Tier III alternative energy

source shall no longer be excused from performance and

payment of Tier III alternative credits after the

conclusion of an event specified under this subparagraph.

(ii) The General Assembly enacts a new law imposing

a material new tax, special assessment or fee on the

generation of electricity, the ownership or leasehold of

a generating unit or the privilege or occupation of the

generation, ownership or leasehold of generation units by

a designated Tier III alternative energy source.

(iii) The Congress of the United States or General

Assembly enacts a law that materially reduces the Tier

III alternative energy credit reporting period price.

(iv) The Federal Government or the Commonwealth

takes final action relating to the provision of Tier III

alternative energy credits that has the effect of

eliminating a material portion of a designated Tier III

alternative energy source's anticipated future revenue,

taking into account the benefits to be provided to a

designated Tier III alternative energy source under the

Tier III program.

(v) The designated Tier III alternative energy

source requires capital expenditures in excess of

$40,000,000 that were not known or reasonably foreseeable

at the time of the submission of the alternative energy

source's qualifications under subsection (a) as a Tier

III alternative energy source and the capital

expenditures are expenditures that a prudent owner or

operator of a designated Tier III alternative energy

source would not undertake.

20190HB0011PN0864 - 30 -

(vi) The United States Nuclear Regulatory Commission

terminates the designated Tier III alternative energy

source's license.

(e) Expiration.--

(1) This section shall expire after an effective cost of

carbon emissions exists in this Commonwealth that is equal to

no less than an average of $15 per ton over three consecutive

reporting periods as a result of the enactment of a Statewide

emissions fee program or participation by the Commonwealth in

a regional multistate greenhouse gas program. Tier III

alternative energy sources shall receive payments for Tier

III alternative energy credits as provided under subsection

enactment of a Statewide emissions fee program or

participation by the Commonwealth in a regional multistate

greenhouse gas program.

(2) Upon the enactment of a Statewide emissions fee

program or participation by the Commonwealth in a regional

multistate greenhouse gas program, the commission shall

submit a notice to the Legislative Reference Bureau for

publication in the Pennsylvania Bulletin.

(3) This section shall expire on the date the notice

under paragraph (2) is published in the Pennsylvania

Bulletin.

Section 8.2. Capacity payments to alternative energy sources.

(a) Program.--The alternative energy credits program

administrator shall establish and administer a program in which

alt ernative energy systems may opt to supply and be paid for

capacity through a means other than the centralized base

residual auction for capacity operated by PJM as authorized by

20190HB0011PN0864 - 31 -

the Federal Energy Regulatory Commission. The duties of the

program administrator shall include, but not be limited to, all

of the following:

(1) Establishing a process by which an alternative

energy system is permitted to notify PJM, consistent with

requirements approved by the Federal Energy Regulatory

Commission, of the decision to opt out of the centralized

base residual auction for capacity and sell the alternative

energy system's capacity through other mechanisms.

(2) Providing any determinations required by PJM with

respect to an alternative energy system, including a

calculation of the commensurate amount of customer load that

will not participate in the centralized base residual auction

for capacity as a result of an alternative energy system's

decision to sell the alternative energy system's capacity

though other mechanisms. If consistent with requirements

approved by the Federal Energy Regulatory Commission, the

alternative energy system's capacity shall be calculated pro

rata across all load-serving entities in this Commonwealth.

(3) Determining the amount that will be paid for the

capacity of an alternative energy system that opts out of the

centralized base residual auction for capacity for each

applicable reporting period, which shall be equal to the

generation capacity of the alternative energy system as

determined in accordance with PJM requirements multiplied by

the locational delivery area price established by PJM in the

centralized base residual auction for capacity or successor

mechanism approved by the Federal Energy Regulatory

Commission for the location where the alternative energy

system is located.

20190HB0011PN0864 - 32 -

(b) Payments.--In th e event that PJM does not operate a

settlement mechanism under which alternative energy systems that

make elections under subsection (a) can receive payments from

load-serving entities, the alternative energy credits program

administrator shall calculate the total amount due to the

alternative energy system under subsection (a)(3) and notify the

electric distribution company of the electric distribution

company's share of the amount based upon the electric

distribution company's pro rata share of the electric energy

sold to retail electric customers in this Commonwealth during

the applicable reporting period. No later than seven days after

the electric distribution company receives the notice under this

subsection, the electric distribution company shall pay the

amount to the program administrator. The electric distribution

company shall then forward the amount due to the alternative

energy system under subsection (a)(3).

administrator shall establish the program under subsection (a)

within 90 days after the later of the following:

(1) The effective date of this section.

(2) The date when PJM rules that allow alternative

energy systems to opt out of the centralized base residual

auction are authorized by the Federal Energy Regulatory

Commission.

Section 6. This act shall take effect in 60 days.

20190HB0011PN0864 - 33 -