PRIOR PRINTER'S NO. 3089 PRINTER'S NO. 3176
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. A11L66GRH/20080H2200B3176 - 13 -