SENATE AMENDED
PRIOR PRINTER'S NOS. 146, 956 PRINTER'S NO. 2725
No. 132 Session of 1983
INTRODUCED BY LAUGHLIN, BURNS, KUKOVICH, LLOYD, DEAL, VAN HORNE,
TRUMAN, WAMBACH, FREEMAN, McHALE, RYBAK, GRUITZA, STEIGHNER,
DURHAM, BELFANTI, WILSON, KOSINSKI, CORDISCO, EVANS, CAWLEY,
BLAUM, BELARDI, DOMBROWSKI, IRVIS, BOYES AND DeWEESE,
FEBRUARY 7, 1983
SENATOR BELL, CONSUMER PROTECTION AND PROFESSIONAL LICENSURE,
IN SENATE, AS AMENDED, MARCH 26, 1984
AN ACT
1 Amending Title 66 (Public Utilities) of the Pennsylvania
2 Consolidated Statutes, prohibiting natural gas utilities from
3 utilizing a sliding scale of rates to recover natural gas
4 costs; and further providing for procedures and standards for
5 regulating the rates of natural gas utilities.
6 The General Assembly of the Commonwealth of Pennsylvania
7 hereby enacts as follows:
8 Section 1. Section 1307(a) and (b) of Title 66 of the
9 Pennsylvania Consolidated Statutes are amended and a subsection
10 is added to read:
11 § 1307. Sliding scale of rates; adjustments.
12 (a) General rule.--Any public utility, except [a common
13 carrier] common carriers and natural gas distributors with <--
14 respect to the gas costs of such natural gas distributors COMMON <--
15 CARRIERS AND THOSE NATURAL GAS DISTRIBUTORS WITH GROSS
16 INTRASTATE ANNUAL OPERATING REVENUES IN EXCESS OF $40,000,000
17 WITH RESPECT TO THE GAS COSTS OF SUCH NATURAL GAS DISTRIBUTORS,
1 may establish a sliding scale of rates or such other method for
2 the automatic adjustment of the rates of the public utility as
3 shall provide a just and reasonable return on the fair value of
4 the property used and useful in the public service, to be
5 determined upon such equitable or reasonable basis as shall
6 provide such fair return. A tariff showing the scale of rates
7 under such arrangement shall first be filed with the commission,
8 and such tariff, and each rate set out therein, approved by it.
9 The commission may revoke its approval at any time and fix other
10 rates for any such public utility if, after notice and hearing,
11 the commission finds the existing rates unjust or unreasonable.
12 (b) Mandatory system for automatic adjustment.--The
13 commission, by regulation or order, upon reasonable notice and
14 after hearing, may prescribe for any class of public utilities,
15 except [a common carrier] common carriers and natural gas <--
16 distributors COMMON CARRIERS AND THOSE NATURAL GAS DISTRIBUTORS <--
17 WITH GROSS INTRASTATE ANNUAL OPERATING REVENUES IN EXCESS OF
18 $40,000,000, a mandatory system for the automatic adjustment of
19 their rates, by means of a sliding scale of rates or other
20 method, on the same basis as provided in subsection (a), to
21 become effective when and in the manner prescribed in such
22 regulation or order. Every such public utility shall, within
23 such time as shall be prescribed by the commission, file tariffs
24 showing the rates established in accordance with such regulation
25 or order.
26 * * *
27 (f) Definition.--As used in this section the term "natural
28 gas" includes natural gas, liquified natural gas, synthetic
29 natural gas and any natural gas substitutes.
30 Section 2. Title 66 is amended by adding sections to read:
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1 § 1316. Regulation of natural gas costs.
2 (a) General rule.--In every general rate proceeding
3 instituted by a natural gas distribution utility, pursuant to
4 section 1308(d) (relating to voluntary changes in rates), each
5 such utility shall provide to the commission, in addition to <--
6 such other materials as are required by the commission, the
7 following information:
8 (1) The sources, amounts, prices and total cost of
9 natural gas available and identify those purchased or
10 projected to be purchased by the utility during the relevant
11 test year or years.
12 (2) The sources, amounts, prices and total cost of
13 natural gas available and identify those projected to be
14 purchased by the utility during the 12-month period and 24-
15 month period following the end of the relevant test year or
16 years.
17 (3) A statement setting forth the specific reasons why
18 the utility has purchased or intends to purchase the natural
19 gas supplies identified in response to paragraphs (1) and
20 (2).
21 (4) A statement setting forth the specific efforts made
22 by the utility to reduce the cost of natural gas supplies
23 purchased by the utility and efforts made to obtain less
24 costly supplies.
25 (5) A statement setting forth the specific efforts made
26 by the utility to secure less costly gas supplies from
27 sources within the Commonwealth.
28 (6) Copies of all contractual agreements and other
29 documents to which such contractual agreements make reference
30 under which the utility obtains natural gas including, but
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1 not limited to, contracts for natural gas, liquified natural
2 gas, synthetic natural gas and any natural gas substitutes.
3 (7) A statement identifying the sources and amounts of
4 all gas supplies which have been withheld from the market by
5 the utility or any affiliated interest. SUCH UTILITY SHALL BE <--
6 REQUIRED TO PROVIDE TO THE COMMISSION SUCH INFORMATION, TO BE
7 ESTABLISHED BY COMMISSION REGULATION WITHIN 120 DAYS OF THE
8 PASSAGE OF THIS ACT, THAT WILL PERMIT THE COMMISSION TO MAKE
9 SPECIFIC FINDINGS AS TO WHETHER THE UTILITY IS PURSUING A
10 LEAST COST FUEL PROCUREMENT POLICY, CONSISTENT WITH THE
11 UTILITY'S OBLIGATION TO PROVIDE SAFE, ADEQUATE AND RELIABLE
12 SERVICE TO ITS CUSTOMERS. SUCH INFORMATION SHALL INCLUDE, BUT
13 NEED NOT BE LIMITED TO, INFORMATION, DATA AND STATEMENTS
14 REGARDING:
15 (1) THE UTILITY'S PARTICIPATION IN RATE PROCEEDINGS
16 BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION WHICH AFFECT
17 THE UTILITY'S GAS COSTS.
18 (2) THE UTILITY'S EFFORTS TO NEGOTIATE FAVORABLE
19 CONTRACTS WITH GAS SUPPLIERS AND TO RENEGOTIATE EXISTING
20 CONTRACTS WITH GAS SUPPLIERS OR TAKE LEGAL ACTIONS NECESSARY
21 TO RELIEVE THE UTILITY FROM EXISTING CONTRACT TERMS WHICH ARE
22 OR MAY BE ADVERSE TO THE INTERESTS OF THE UTILITY'S
23 RATEPAYERS.
24 (3) THE UTILITY'S EFFORTS TO SECURE LOWER COST GAS
25 SUPPLIES BOTH WITHIN AND OUTSIDE OF THE COMMONWEALTH,
26 INCLUDING THE USE OF TRANSPORTATION ARRANGEMENTS WITH
27 PIPELINES AND OTHER GAS DISTRIBUTION COMPANIES.
28 (4) THE SOURCES AND AMOUNTS OF ALL GAS SUPPLIES WHICH
29 HAVE BEEN WITHHELD OR HAVE BEEN CAUSED TO BE WITHHELD FROM
30 THE MARKET BY THE UTILITY AND THE REASONS WHY SUCH GAS IS NOT
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1 TO BE UTILIZED.
2 (b) Integrated gas companies.--In the case of a natural gas
3 distribution utility which purchases all or part of its gas
4 supplies from an affiliated interest, as that term is defined in
5 section 2101 (relating to definition of affiliated interest),
6 such utility shall, in addition to the materials required in
7 subsection (a), provide the following information: <--
8 (1) A statement setting forth the efforts made by the
9 utility to obtain gas supplies from nonaffiliated interests.
10 (2) A statement setting forth the actual and projected
11 prices for gas supplies which could have been obtained from
12 nonaffiliated interests.
13 (3) A statement setting forth the specific reasons why
14 the utility has purchased gas supplies from an affiliated
15 interest and demonstrating that less costly supplies were not
16 available for use during the period in question.
17 (4) A statement identifying the sources and amounts of
18 all gas supplies which have been withheld from the market by
19 the utility or any affiliated interest. SUBSECTION (A), BE <--
20 REQUIRED TO PROVIDE TO THE COMMISSION SUCH INFORMATION, TO BE
21 ESTABLISHED BY COMMISSION REGULATION WITHIN 120 DAYS OF THE
22 PASSAGE OF THIS ACT, THAT WILL PERMIT THE COMMISSION TO MAKE
23 SPECIFIC FINDINGS AS TO WHETHER ANY PURCHASES OF GAS FROM AN
24 AFFILIATED INTEREST ARE CONSISTENT WITH A LEAST COST FUEL
25 PROCUREMENT POLICY, CONSISTENT WITH THE UTILITY'S OBLIGATION
26 TO PROVIDE SAFE, ADEQUATE AND RELIABLE SERVICE TO ITS
27 CUSTOMERS. SUCH INFORMATION SHALL INCLUDE, BUT NEED NOT BE
28 LIMITED TO, STATEMENTS REGARDING:
29 (1) EFFORTS MADE BY THE UTILITY TO OBTAIN GAS SUPPLIES
30 FROM NONAFFILIATED INTERESTS.
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1 (2) THE SPECIFIC REASONS WHY THE UTILITY HAS PURCHASED
2 GAS SUPPLIES FROM AN AFFILIATED INTEREST AND DEMONSTRATION
3 THAT SUCH PURCHASES ARE CONSISTENT WITH A LEAST COST FUEL
4 PROCUREMENT POLICY.
5 (3) THE SOURCES AND AMOUNTS OF ALL GAS SUPPLIES WHICH
6 HAVE BEEN WITHHELD FROM THE MARKET BY THE UTILITY OR ANY
7 AFFILIATED INTEREST AND THE REASONS WHY SUCH GAS IS NOT BEING
8 UTILIZED.
9 (c) Definition.--As used in this section the term "natural
10 gas" includes natural gas, liquified natural gas, synthetic
11 natural gas and any natural gas substitutes.
12 § 1317. Determination of just and reasonable natural gas rates.
13 (a) General rule.--In establishing just and reasonable rates
14 for natural gas distribution utilities under section 1308(d) FOR <--
15 THOSE NATURAL GAS DISTRIBUTION UTILITIES WITH GROSS INTRASTATE
16 OPERATING REVENUES IN EXCESS OF $40,000,000 UNDER SECTION
17 1308(D) (relating to voluntary changes in rates), the commission
18 shall consider the materials provided by the utilities pursuant
19 to section 1316 (relating to regulation of natural gas costs).
20 No rates for a natural gas distribution utility shall be deemed
21 just and reasonable unless the commission finds that the utility
22 consistent with its obligation to provide safe and adequate <--
23 service to its customers has purchased the least costly natural
24 gas supplies available to the utility and has utilized to the
25 greatest extent possible any less expensive gas available to the
26 utility from sources located in the Commonwealth or elsewhere.
27 IS PURSUING A LEAST COST FUEL PROCUREMENT POLICY, CONSISTENT <--
28 WITH THE UTILITY'S OBLIGATION TO PROVIDE SAFE, ADEQUATE AND
29 RELIABLE SERVICE TO ITS CUSTOMERS. IN MAKING SUCH A
30 DETERMINATION, THE COMMISSION SHALL BE REQUIRED TO MAKE SPECIFIC
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1 FINDINGS WHICH SHALL INCLUDE, BUT NEED NOT BE LIMITED TO,
2 FINDINGS THAT:
3 (1) THE UTILITY HAS FULLY AND VIGOROUSLY REPRESENTED THE
4 INTERESTS OF ITS RATEPAYERS IN PROCEEDINGS BEFORE THE FEDERAL
5 ENERGY REGULATORY COMMISSION.
6 (2) THE UTILITY HAS TAKEN ALL PRUDENT STEPS NECESSARY TO
7 NEGOTIATE FAVORABLE GAS SUPPLY CONTRACTS AND TO RELIEVE THE
8 UTILITY FROM TERMS IN EXISTING CONTRACTS WITH ITS GAS
9 SUPPLIERS WHICH ARE OR MAY BE ADVERSE TO THE INTERESTS OF THE
10 UTILITY'S RATEPAYERS.
11 (3) THE UTILITY HAS TAKEN ALL PRUDENT STEPS NECESSARY TO
12 OBTAIN LOWER COST GAS SUPPLIES ON BOTH SHORT-TERM AND LONG-
13 TERM BASES BOTH WITHIN AND OUTSIDE THE COMMONWEALTH,
14 INCLUDING THE USE OF GAS TRANSPORTATION ARRANGEMENTS WITH
15 PIPELINES AND OTHER DISTRIBUTION COMPANIES.
16 (4) THE UTILITY HAS NOT WITHHELD FROM THE MARKET OR
17 CAUSED TO BE WITHHELD FROM THE MARKET ANY GAS SUPPLIES WHICH
18 SHOULD HAVE BEEN UTILIZED AS PART OF A LEAST COST FUEL
19 PROCUREMENT POLICY.
20 (b) Limitation on gas purchased from affiliates.--In any
21 instance in which a gas distribution utility purchases all or
22 part of its gas supplies from an affiliated interest, as that
23 term is defined in section 2101 (relating to definition of
24 affiliated interest), the commission shall be required to make <--
25 specific findings with regard to the justness and reasonableness
26 of all such purchases. Such costs shall be permitted to be
27 reflected in rates when such costs are determined to be just and
28 reasonable but in no case shall such costs be determined to be
29 just and reasonable when they exceed the costs incurred by
30 comparable companies for nonaffiliated purchases of gas under
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1 comparable conditions. AFFILIATED INTEREST), THE COMMISSION, IN <--
2 ADDITION TO THE DETERMINATIONS AND FINDINGS SET FORTH IN
3 SUBSECTION (A), SHALL BE REQUIRED TO MAKE SPECIFIC FINDINGS WITH
4 REGARD TO THE JUSTNESS AND REASONABLENESS OF ALL SUCH PURCHASES.
5 SUCH FINDINGS SHALL INCLUDE, BUT NOT BE LIMITED TO FINDINGS:
6 (1) THAT THE UTILITY HAS FULLY AND VIGOROUSLY ATTEMPTED
7 TO OBTAIN LESS COSTLY GAS SUPPLIES ON BOTH SHORT-TERM AND
8 LONG-TERM BASES FROM NONAFFILIATED INTERESTS.
9 (2) THAT EACH CONTRACT FOR THE PURCHASE OF GAS FROM ITS
10 AFFILIATED INTEREST IS CONSISTENT WITH A LEAST COST FUEL
11 PROCUREMENT POLICY.
12 (3) THAT NEITHER THE UTILITY NOR ITS AFFILIATED INTEREST
13 HAS WITHHELD FROM THE MARKET ANY GAS SUPPLIES WHICH SHOULD
14 HAVE BEEN UTILIZED AS PART OF A LEAST COST FUEL PROCUREMENT
15 POLICY.
16 (c) Shut-in gas; special rule.--In determining whether a gas
17 utility has purchased the least costly natural gas available,
18 the commission shall consider as available to the utility any
19 gas supplies that reasonably could have been brought to market
20 during the relevant period but which were voluntarily withheld
21 from the market by the utility or an affiliated interest of the
22 utility.
23 (d) Other regulatory approvals.--The fact that a contract or
24 rate has been approved by a Federal regulatory agency for
25 interstate ratemaking purposes shall not, in and of itself, be
26 adequate to satisfy the utility's burden of proof that gas
27 prices and volumes associated with such contract or rate are
28 just and reasonable for purposes of this section.
29 (e) Reports.--Each natural gas distribution utility shall <--
30 (E) REPORTS.--EACH NATURAL GAS DISTRIBUTION UTILITY WITH <--
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1 GROSS INTRASTATE ANNUAL OPERATING REVENUES IN EXCESS OF
2 $40,000,000 SHALL file with the commission and the Office of
3 Consumer Advocate, in accordance with regulations to be
4 prescribed by the commission, quarterly reports setting forth
5 the actual gas costs incurred by the utility on a monthly basis.
6 Actual gas costs shall be reviewed for their accuracy by the
7 Bureau of Audits at least annually and the results of that
8 review shall be submitted to the commission.
9 (f) Definition.--As used in this section the term "natural
10 gas" includes natural gas, liquified natural gas, synthetic
11 natural gas and any natural gas substitutes.
12 Section 3. Section 2107 of Title 66 is amended to read:
13 § 2107. Federal regulatory agencies.
14 The provisions of this chapter shall not be applicable to the
15 rates and related terms and conditions for the interstate
16 transmission of electricity, natural gas, liquified natural gas,
17 substitute natural gas, liquified propane gas or naphtha which
18 have been submitted to and approved by a Federal regulatory
19 agency having jurisdiction thereof, except that the commission
20 may regulate the volume of such purchases. This section shall
21 not apply to any proceeding under section 1316 (relating to
22 regulation of natural gas costs) or 1317 (relating to
23 determination of just and reasonable natural gas rates).
24 Section 4. The provisions of this act shall be applicable to
25 each natural gas distribution utility under commission
26 jurisdiction at the time such utility requests its next general
27 rate increase but in no case later than January 1, 1985. Until
28 such time, such utilities shall remain subject to the provisions
29 of 66 Pa.C.S. § 1307 (relating to sliding scale of rates;
30 adjustments) in effect prior to this amendatory act and the
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1 regulations issued by the commission pursuant to that section
2 for natural gas distribution utilities.
3 Section 5. This act shall take effect in 60 days.
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