THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY GODSHALL, PRESTON, AUMENT, BEAR, BRENNAN, BUXTON, CARROLL, CLYMER, D. COSTA, P. COSTA, CUTLER, DALEY, DAVIDSON, DELOZIER, ELLIS, GRELL, GROVE, HARHART, W. KELLER, KORTZ, KOTIK, MANN, McGEEHAN, MILLARD, NEUMAN, D. O'BRIEN, M. O'BRIEN, PAYNE, PAYTON, PEIFER, PERRY, PYLE, QUIGLEY, READSHAW, REICHLEY, SAINATO, SAYLOR, SCAVELLO, SONNEY, VULAKOVICH, WILLIAMS, KULA, MILLER, GINGRICH, STEPHENS, DEASY, GIBBONS, M. SMITH, GERGELY, CHRISTIANA, KILLION, HANNA, BRIGGS, STABACK, WAGNER, OBERLANDER AND SABATINA, APRIL 6, 2011

AS REPORTED FROM COMMITTEE ON CONSUMER AFFAIRS, HOUSE OF REPRESENTATIVES, AS AMENDED, JUNE 8, 2011   

AN ACT

Amending Title 66 (Public Utilities) of the Pennsylvania

Consolidated Statutes, further providing for valuation of and

return on the property of a public utility; and providing for

alternative regulatory mechanisms.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Section 1311(c) of Title 66 of the Pennsylvania

Consolidated Statutes is amended and the section is amended by

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adding a subsection to read:

§ 1311.  Valuation of and return on the property of a public

utility.

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(c)  Segregation of property.--When any public utility

furnishes more than one of the different types of utility

service, the commission shall segregate the property used and

useful in furnishing each type of such service, and shall not

consider the property of such public utility as a unit in

determining the value of the rate base of such public utility

for the purpose of fixing rates. A utility that provides water

and wastewater service shall be exempt from this subsection and

may combine all components of its water and wastewater revenue

requirement for the purposes of fixing rates on a consolidated

basis.

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(e)  Definition.--As used in this section, the term "utility

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that provides both water and wastewater service" shall include

subsidiary companies that individually provide water or

wastewater service so long as the companies are wholly owned by

a common parent company.

Section 2.  Title 66 is amended by adding a section to read:

§ 1329.  Alternative regulatory mechanisms.

(a)  Declaration of policy.--Many fixed utilities and city

natural gas distribution operations in this Commonwealth have

incurred and will continue to incur significant costs to

maintain, enhance and or modernize their physical facilities in

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order to continue to provide customers with safe and reliable

service. Under traditional regulatory mechanisms developed under

this title, these utilities and distribution operations

experience delay in the recovery of the revenue requirements

associated with those costs. The opportunity for more timely

recovery of those costs, including the recovery of capital

costs, including return of and on capital investments, and,

where applicable, debt service and debt-service coverage, should

encourage investment to replace facilities for continued

reliability, should enhance the efficiency of the construction

cycle and should attract lower-cost debt, which would reduce the

overall cost of these investments and should create jobs in the

Commonwealth. Accordingly, it is in the public interest to

provide for alternative regulatory mechanisms as set forth under

this section.

(b)  Authority.--

(1)  Notwithstanding any other provision of this title, 

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including, but not limited to, sections 315 (relating to

burden of proof), 1307 (relating to sliding scale of rates;

adjustments), 1308 (relating to voluntary changes in rates)

and 1315 (relating to limitation on consideration of certain

costs for electric utilities), that would prohibit

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implementation of this section, upon petition by a fixed

utility or a city natural gas distribution operation, filed

in its sole discretion, the commission shall have the

authority to approve, but shall not require, modify or reject 

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additional regulatory procedures and mechanisms proposed by a

fixed utility or a city natural gas distribution operation to

provide for timely recovery of reasonable and prudently

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incurred costs prudent costs incurred for the improvement of

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physical facilities to maintain safety or reliability.

(2)  (i)  The additional procedures and mechanisms under

paragraph (1) shall include, but are not limited to:

(A)  The use of a fully projected future test

year in a general rate proceeding under section

1308(d).

(B)  An automatic adjustment clause to recover

capital costs and operating expenses related to the

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capital costs incremental expenditures accounted for

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as expense of certain projects, as approved by the

commission under this section that are placed into

service between base rate proceedings.

(ii)  For purposes of this paragraph, a fully

projected future test year shall be the 12-month period

beginning with the first month that the new rates could

be placed in effect after application of the full

suspension period permitted under section 1308(d).

(c)  Construction and interpretation.--Except as otherwise

expressly provided under this section, nothing under this

section shall be construed as limiting the existing ratemaking

authority of the commission, including, but not limited to, the

commission's existing authority to permit recovery of operating

expenses through an automatic adjustment clause, or as

indicating that the existing authority of the commission over

rate structure or design is limited.

(d)  Commission.--The commission, by regulation or order,

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shall prescribe the specific procedures to be followed in

establishing the alternative regulatory procedures and

mechanisms authorized in this section. An alternative regulatory

mechanism approved by the commission under this section shall:

(1)  Provide for reasonable allocation of costs to the

customer class responsible for those costs.

(2)  Provide for adjustment of the mechanism, including a

process to provide:

(i)  Credit to customer accounts for over collections

and collections for ineligible projects.

(ii)  Charges to customer accounts for under

collections.

(3)  Provide for a cap on the amount that may be

collected from customers through an alternative regulatory

mechanism authorized by subsection (b)(2)(i)(B).

Section 3.  This act shall take effect in 60 days.