SENATE AMENDED

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, BRIGGS, STABACK, WAGNER, OBERLANDER, SABATINA, HENNESSEY, LONGIETTI AND EVERETT, APRIL 6, 2011

AS AMENDED ON SECOND CONSIDERATION, IN SENATE, JANUARY 24, 2012   

AN ACT

Amending Title 66 (Public Utilities) of the Pennsylvania

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Consolidated Statutes, further providing for valuation of and

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

alternative regulatory mechanisms.

Amending Title 66 (Public Utilities) of the Pennsylvania

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Consolidated Statutes, further providing for Law Bureau,

other bureaus, offices and positions, for the burden of

proof, for the recovery of the costs of distribution system

improvement projects and for civil penalties for violations.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

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

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Consolidated Statutes is amended and the section is amended by

adding a subsection to read:

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

utility.

* * *

(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.

* * *

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

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  or modernize their physical facilities in

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 

that would prohibit 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,  modify or

reject 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  prudent costs incurred for the improvement of

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  incremental expenditures accounted

for 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,

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.

Section 1.  Sections 308(b), 308.2(a)(11) and 315(e) of Title

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66 of the Pennsylvania Consolidated Statutes are amended to

read:

§ 308.  Bureaus and offices.

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(b)  Law Bureau.--The Law Bureau shall be a multifunction

legal staff, consisting of a prosecutory function, an advisory

function, a representational function and an enforcement

function. The Director of the Law Bureau shall be the chief

counsel of the commission and shall serve at the pleasure of the

commission. The commission may also, from time to time, appoint

such assistant counsel to the commission as may be required for

the proper conduct of the work of the Law Bureau. Assistant

counsel may be removed by the commission only for good cause.

The Law Bureau shall advise the commission on any and all

matters. No counsel shall in the same case or a factually

related case perform duties in the prosecutory and advisory

functions, if such performance would represent a conflict of

interest. Except for litigation referred to the Attorney General

or other appropriate outside counsel, the Law Bureau solely

shall be responsible to represent the commission upon appeals

and other hearings in the courts of common pleas and in the

Commonwealth Court, Supreme Court or other courts of this

Commonwealth or in any Federal court or agency and in actions

instituted to recover penalties and to enforce regulations and

orders of the commission. If necessary to protect the public

interest, the Law Bureau, pursuant to its prosecutorial

function, may initiate and participate in proceedings before the

commission [unless directed by the commission to do so in a

proceeding involving transportation, safety, eminent domain,

siting, service issues having no impact on rates or ability to

pay or assist the Office of Trial Staff in carrying out the

duties of the Office of Trial Staff, nor shall any member of the

Law Bureau receive assistance from the Office of Trial Staff in

the performance of his duties. Except as provided in this

section, the Law Bureau may receive assistance from any other

bureau or office of the commission as determined to be

necessary].

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§ 308.2.  Other bureaus, offices and positions.

(a)  Establishment of other bureaus, offices and positions.--

In addition to the specific bureaus established in this part,

the commission may establish other bureaus, offices and

positions to perform the following functions:

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(11)  Take appropriate enforcement actions, including

rate proceedings, service proceedings and [allocation]

application proceedings, necessary to insure compliance with

this title, commission regulations and orders.

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§ 315.  Burden of proof.

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(e)  Use of future test year.--In discharging its burden of

proof the utility may utilize a future test year or a fully

projected future test year, which shall be the 12-month period

beginning with the first month that the new rates will be placed

in effect after application of the full suspension period

permitted under section 1308(d) (relating to voluntary changes

in rates). The commission shall promptly adopt rules and

regulations regarding the information and data to be submitted

when and if a future test period or a fully projected future

test year is to be utilized. Whenever a utility utilizes a

future test year or a fully projected future test year in any

rate proceeding and such future test year or a fully projected

test year forms a substantive basis for the final rate

determination of the commission, the utility shall provide, as

specified by the commission in its final order, appropriate data

evidencing the accuracy of the estimates contained in the future

test year or a fully projected future test year, and the

commission may after reasonable notice and hearing, in its

discretion, adjust the utility's rates on the basis of such

data. Notwithstanding section 1315 (relating to limitation on

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consideration of certain costs for electric utilities), the

commission may permit facilities which are projected to be in

service during the fully projected future test year to be

included in the rate base.

Section 2.  The heading of Chapter 13 of Title 66 is amended

and the chapter is amended by adding a subchapter heading to

read:

CHAPTER 13 

RATES AND [RATE MAKING] DISTRIBUTION SYSTEMS

SUBCHAPTER A

RATES

Section 3.  Section 1307(g) of Title 66 is repealed:

§ 1307.  Sliding scale of rates; adjustments.

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[(g)  Recovery of costs related to distribution system

improvement projects designed to enhance water quality, fire

protection reliability and long-term system viability.--Water

utilities may file tariffs establishing a sliding scale of rates

or other method for the automatic adjustment of the rates of the

water utility as shall provide for recovery of the fixed costs

(depreciation and pretax return) of certain distribution system

improvement projects, as approved by the commission, that are

completed and placed in service between base rate proceedings.

The commission, by regulation or order, shall prescribe the

specific procedures to be followed in establishing the sliding

scale or other automatic adjustment method.]

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Section 4.  Section 1311(c) of Title 66 is amended and the

section is amended by adding a subsection to read:

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

utility.

* * *

(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 base rates. A utility that provides

water and wastewater service shall be exempt from this

subsection upon petition of a utility to combine water and

wastewater revenue requirements. The commission when setting

base rates, after notice and an opportunity to be heard, may

allocate a portion of the wastewater revenue requirement to the

combined water and wastewater customer base if in the public

interest.

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

that provides both water and wastewater service" shall include a 

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subsidiary company separate companies that individually provides 

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provide water or wastewater service if the company is so long as

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the companies are wholly owned by a common parent company.

Section 5.  Section 1327(b) introductory paragraph of Title

66 is amended to read:

§ 1327.  Acquisition of water and sewer utilities.

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(b)  Procedure.--The commission, upon application by a public

utility, person or corporation which has agreed to acquire

property from another public utility, municipal corporation or

person, may approve an inclusion in rate base in accordance with

subsection (a) prior to the acquisition and prior to a

proceeding under this [chapter] subchapter to determine just and

reasonable rates if:

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Section 6.  Chapter 13 of Title 66 is amended by adding a

subchapter to read:

SUBCHAPTER B

DISTRIBUTION SYSTEMS

Sec.

1350.  Scope of subchapter.

1351.  Definitions.

1352.  Long-term infrastructure improvement plan.

1353.  Distribution system improvement charge.

1354.  Customer notice.

1355.  Review.

1356.  Asset optimization plans.

1357.  Computation of charge.

1358.  Customer protections.

1359.  Projects.

1360.  Applicability.

§ 1350.  Scope of subchapter.

This subchapter shall provide an additional mechanism for a

distribution system to recover costs related to the repair,

improvement and replacement of eligible property.

§ 1351.  Definitions.

The following words and phrases when used in this subchapter

shall have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Capitalized cost."  Costs permitted to be capitalized

pursuant to the Uniform System of Accounts and Generally

Accepted Accounting Principles.

"Distribution system."  A system owned or operated by a

utility. The term includes a natural gas distribution company, a

city natural gas distribution operation, an electric

distribution company, a water utility and a collection system

for a wastewater utility.

"Distribution system improvement charge."  A charge imposed

by a utility to recover the reasonable and prudent costs

incurred to repair, improve or replace eligible property that is

part of the utility's distribution system.

"Eligible property."  Property that is part of a distribution

system and eligible for repair, improvement and replacement of

existing infrastructure under this subchapter. Included property

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shall be as follows:

(1)  For electric distribution companies, eligible

property shall include:

(i)  Poles and towers.

(ii)  Overhead and underground conductors.

(iii)  Transformers and substation equipment.

(iv)  Any fixture or device related to eligible

property under subparagraphs (i), (ii) and (iii),

including insulators, circuit breakers, fuses, reclosers,

grounding wires, crossarms and brackets, relays,

capacitors, converters and condensers.

(v)  Unreimbursed funds costs related to highway

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relocation projects where an electric distribution

company must relocate its facilities.

(vi)  Other related capitalized costs.

(2)  For natural gas distribution companies and city

natural gas distribution operations, eligible property shall

include:

(i)  Piping.

(ii)  Couplings.

(iii)  Gas services lines and insulated and

noninsulated fittings.

(iv)  Valves.

(v)  Excess flow valves.

(vi)  Risers.

(vii)  Meter bars.

(viii)  Meters.

(ix)  Unreimbursed funds costs related to highway

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relocation projects where a natural gas distribution

company or city natural gas distribution operation must

relocate its facilities.

(x)  Other related capitalized costs.

(3)  For water utilities, eligible property shall

include:

(i)  Utility service lines, meters and hydrants

installed as in-kind replacements for customers.

(ii)  Mains and valves installed as replacements for

existing facilities that have worn out, are in

deteriorated condition or are required to be upgraded to

meet under 52 Pa. Code Ch. 65 (relating to water

service).

(iii)  Main extensions installed to eliminate dead

ends and to implement solutions to regional water supply

problems that present a significant health and safety

concern for customers currently receiving service from

the water utility.

(iv)  Main cleaning and relining projects.

(v)  Unreimbursed funds costs related to highway

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relocation projects where a water utility must relocate

its facilities.

(vi)  Other related capitalized costs.

(4)  For wastewater utilities, eligible property shall

include:

(i)  Collection sewers, collecting mains and service

laterals, including sewer taps, curbstops and lateral

cleanouts installed as in-kind replacements for

customers.

(ii)  Collection mains and valves for gravity and

pressure systems and related facilities such as manholes,

grinder pumps, air and vacuum release chambers,

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cleanouts, main line flow meters, valve vaults and lift

stations installed as replacements or upgrades for

existing facilities that have worn out, are in

deteriorated condition or are required to be upgraded by

law, regulation or order.

(iii)  Collection main extensions installed to

implement solutions to wastewater problems that present a

significant health and safety concern for customers

currently receiving service from the wastewater utility.

(iv)  Collection main rehabilitation including inflow

and infiltration projects.

(v)  Unreimbursed funds costs related to highway

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relocation projects where a wastewater utility must

relocate its facilities.

(vi)  Other related capitalized costs.

"Utility."  A natural gas distribution company, electric

distribution company, water or wastewater utility or city

natural gas distribution operation.

§ 1352.  Long-term infrastructure improvement plan.

(a)  Submission.--In order to be eligible to recover costs

under section 1353 (relating to distribution system improvement

charge), a utility must submit a long-term infrastructure

improvement plan. The plan shall include the following:

(1)  Identification of the types and age of eligible

property owned or operated by the utility for which the

utility would seek recovery under this subchapter.

(2)  A An initial schedule for the planned repair and

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replacement of eligible property.

(3)  A general description of the location of the

eligible property.

(4)  A reasonable estimate of the quantity of eligible

property to be improved.

(5)  Projected annual expenditures to implement the plan

and measures taken to ensure that the plan is cost effective.

(6)  The manner in which the replacement of aging

infrastructure will be accelerated and how the repair and, 

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improvement or replacement will ensure and maintain adequate,

efficient, safe, reliable and reasonable service.

(7)  If the plan is not adequate and sufficient to ensure

and maintain adequate, efficient, safe, reliable and

reasonable service, the commission shall order a new or

revised plan.

(b)  Periodic review.--

(1)  The commission shall promulgate regulations for the

periodic review at least once every five years of long-term

infrastructure plans. The regulations may authorize a utility

to revise, update or resubmit a plan as appropriate.

(2)  The regulations shall ensure that a distribution

system improvement charge shall terminate if the commission

determines that the utility is not in compliance with the

approved plan.

§ 1353.  Distribution system improvement charge.

(a)  Authority.--Except as provided under this subchapter,

after January 1, 2013, a utility may petition the commission

for, or the commission, after notice and hearing, may approve

the establishment of a distribution system improvement charge to

provide for the timely recovery of the reasonable and prudent

costs incurred to repair, improve or replace eligible property

in order to ensure and maintain adequate, efficient, safe,

reliable and reasonable service.

(b)  Petition.--A petition for commission approval of a

distribution system improvement charge shall include the

following:

(1)  An initial tariff that complies with a model tariff

adopted by the commission. The proposed tariff shall include

the following:

(i)  A description of the eligible property.

(ii)  The effective date of the distribution system

improvement charge.

(iii)  Computation of the distribution system

improvement charge.

(iv)  The method by which the utility will provide

quarterly updates of the distribution improvement charge.

(v)  A description of consumer protections.

(2)  Testimony, affidavits, exhibits or other evidence

that demonstrates that a distribution improvement system

charge is in the public interest and will facilitate utility

compliance with the following:

(i)  The provision and maintenance of adequate,

efficient, safe, reliable and reasonable service

consistent with section 1501 (relating to character of

service and facilities).

(ii)  Commission regulations and orders relating to

the provision and maintenance of adequate, efficient,

safe, reliable and reasonable service.

(iii)  Any other requirement under Federal or State

law relating to the provision and maintenance of

adequate, efficient, safe, reliable and reasonable

service.

(3)  A long-term infrastructure improvement plan under

section 1352 (relating to long-term infrastructure

improvement plan).

(4)  Certification that a base rate case has been filed

within the last five years prior to the date of the filing of

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the petition under section 1308(d) (relating to voluntary

changes in rates).

(5)  If a base rate case has not been filed within five

years prior to the effective date of this section date of the

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filing of the petition, the utility must file a base rate

case in order to be eligible for a distribution system

improvement charge.

(6)  Any other information required by the commission.

§ 1354.  Customer notice.

Utilities shall provide notice to customers in bill inserts

or through other means as prescribed by the commission of the

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following:

(1)  Submission of the proposed distribution system

improvement charge and initial tariff.

(2)  Notice of the commission's disposition of the

submission under paragraph (1).

(3)  Any changes that occur as a result of quarterly

adjustments.

(4)  Any other information required by the commission.

§ 1355.  Review.

Following the filing of a petition in compliance with section

1353 (relating to distribution system improvement charge), the

commission shall, after notice and opportunity to be heard,

approve, modify or reject the distribution system improvement

charge and initial tariff. The commission shall hold evidentiary

and public input hearings as necessary to review the petition.

§ 1356.  Asset optimization plans.

A utility with an approved distribution system charge and

long-term infrastructure plan shall file annual asset

optimization plans. The plan shall include the following:

(1)  A description that specifies all eligible property

repaired, improved and replaced in the immediately preceding

12-month period pursuant to the utility's long-term

infrastructure improvement plan and prior year's asset

optimization plan.

(2)  A detailed description of all the facilities to be

improved in the upcoming 12-month period.

§ 1357.  Computation of charge.

(a)  Recovery.--The following shall apply:

(1)  The initial distribution system improvement charge

shall be calculated to recover the fixed cost of eligible

property that has:

(i)  Not previously been reflected in the utility's

rates or rate base.

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(ii)  Been placed in service during the three-month

period ending one month prior to the effective date of

the distribution improvement system charge.

(2)  After calculation of the initial charge under

paragraph (1), the distribution system improvement charge 

must be updated on a quarterly basis to reflect eligible

property placed in service during the three-month period

ending one month prior to the effective date of each

distribution system improvement charge update.

(3)  The fixed cost of eligible property shall consist of

depreciation and pretax return, except as provided for in

subsection (c) for city natural gas distribution operation.

(b)  Depreciation calculation.--Depreciation shall be

calculated by applying the original cost of the eligible

property to the annual accrual rates employed in the utility's

last most recent base rate case for the plant accounts in which

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each retirement unit of distribution system improvement charge 

eligible property is recorded. The following shall apply:

(1)  The pretax return shall be calculated using the

Federal and State income tax rates, the utility's actual

capital structure and actual cost rates for long-term debt

and preferred stock as of the last day of the three-month

period ending one month prior to the effective date of the

distribution system or collection system improvement charge

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and subsequent updates.

(2)  The cost of equity shall be the equity return rate

approved in the utility's last most recent fully litigated

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base rate proceeding for which a final order was entered not

more than two years prior to the effective date of the

distribution system or collection system improvement charge.

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(3)  If more than two years have elapsed between the

entry of a final order and the effective date of the

distribution system improvement charge, the equity return

rate used in the calculation shall be the equity return rate

calculated by the commission in the latest most recent 

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Quarterly Report on the Earnings of Jurisdictional Utilities

released by the commission.

(c)  Recovery of costs.--Utilities may file tariffs

establishing a sliding scale of rates or other method for the

automatic adjustment of the rates of the utility to provide for

recovery of the depreciation and pretax return fixed costs of

eligible property, as approved by the commission, that are

completed and placed in service between base rate proceedings.

For city natural gas distribution operations, recoverable costs

shall be amounts reasonably expended or incurred to purchase and

install recovery eligible property and associated financing

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costs, if any, including debt service, debt service coverage and

issuance costs.

(d)  Calculation.--

(1)  The distribution system improvement charge shall be

expressed as a percentage carried to two decimal places and

shall be applied in a manner consistent with section 1358

(relating to customer protections) to each customer under the

utility's applicable rates and charges. The charge shall not

be applied to amounts billed for public fire protection

service by water utilities and the State tax adjustment

surcharge.

(2)  The distribution system improvement charge shall be

calculated by dividing one-fourth of the annual fixed costs

associated with all eligible property under the distribution

system improvement charge by the projected revenue for the

quarterly period during which the distribution system will be

collected. The projected revenues shall not include revenues

from public fire protection service earned by water utilities

and the State tax adjustment surcharge.

(3)  Supporting data for each quarterly update shall be

filed with the commission and served upon the commission, the

Office of Consumer Advocate and the Office of Small Business

Advocate at least ten days prior to the effective date of the

update.

§ 1358.  Customer protections.

(a)  Limitation.--As follows:

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

distribution system improvement charge may not exceed 5% of

the amount billed to customers under the applicable rates of

the wastewater utility or distribution rates of the electric

distribution company, natural gas distribution company or

city natural gas distribution operation. The commission may

upon petition grant a waiver of the 5% limit under this

paragraph for a utility in order to ensure and maintain

adequate, efficient, safe, reliable and reasonable service.

(2)  A distribution system improvement charge granted to

a water utility under former section 1307(g) (relating to

sliding scale of rates; adjustments) or this subchapter may

not exceed 7.5% of the amount billed to customers. All

proceedings, orders and other actions of the commission

related to a distribution system improvement charge granted

to a water utility and all practices and procedures of a

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water utility operating under a distribution system

improvement charge prior to the effective date of this

paragraph shall remain in effect unless specifically amended

or revoked by the commission.

(b)  Charge reset.--

(1)  The distribution system improvement charge shall be

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reset at zero as of the effective date of new base rates that

provide for prospective recovery of the annual costs

previously recovered under the distribution system or 

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improvement charge.

(2)  After the reset date under paragraph (1), only the

fixed costs of new eligible property that have not previously

been reflected in the utility's rate base shall be reflected

in the quarterly updates of the distribution system

improvement charge.

(3)  The distribution system improvement charge shall be

reset at zero if, in any quarter, data filed with the

commission in the utility's most recent annual or quarterly

earnings report show that the utility will earn a rate of

return that would exceed the allowable rate of return used to

calculate its fixed costs under the distribution system

improvement charge.

(c)  Construction.--Except as otherwise expressly provided

under this subchapter, nothing under this subchapter shall be

construed as limiting the existing ratemaking authority of the

commission, including the 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,

shall prescribe the specific procedures to be followed to

approve a distribution system improvement charge. A distribution

system improvement charge approved by the commission shall

provide:

(1)  That the distribution system improvement charge

shall be applied equally to all customer classes as a

percentage of each customer's billed revenue, consistently

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with subsection (a).

(2)  A process to adjust the charge and to provide:

(i)  Credit to customer accounts for over collections

and collections for ineligible projects.

(ii)  Charges to customer accounts for under

collections.

(3)  A cap on the amount that may be collected from

customers under this subchapter.

(e)  Audit and reconciliation.--The following shall apply:

(1)  The distribution system improvement charge shall be

subject to the following:

(i)  Audit at intervals determined by the commission.

(ii)  Annual reconciliation based on a reconciliation

period consisting of the 12 months ending December 31 of

each year. The commission may also permit quarterly

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reconciliation.

(2)  The revenue received under the distribution system

improvement charge for the reconciliation period shall be

compared to the utility's eligible costs for that period. The

difference between revenue and costs shall be recouped or

refunded, as appropriate, in accordance with section 1307(e)

(relating to sliding scale of rates; adjustments), over a

one-year period or quarterly period commencing April 1 of

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each year.

(3)  If revenues received from the distribution system

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improvement charge exceed eligible costs, the over

collections shall be refunded with interest. Interest on the

over collections shall be calculated at the residential

mortgage lending rate specified by the Secretary of Banking

in accordance with the act of January 30, 1974 (P.L.13,

No.6), referred to as the Loan Interest and Protection Law,

and shall be refunded in the same manner as an over

collection.

(f)  Complaint.--The distribution system improvement charge

shall be subject to complaint under section 701 (relating to

complaints).

§ 1359.  Projects.

(a)  Standards.--The commission shall establish standards to

ensure that work on utility systems to repair, improve or

replace eligible property is performed by qualified employees of

either the utility or an independent contractor in a manner that

protects system reliability and the safety of the public.

(b)  Inspection.--Projects for which work to repair, improve

or replace eligible property is performed by independent

contractors shall be subject to reliability and safety standards

and to inspection by utility employees.

(c)  Cost.--Work on projects to repair, improve or replace

eligible property that is not performed by qualified employees

<--

or contractors or inspected by the utility's qualified personnel

shall not be eligible for recovery of a distribution system

improvement charge.

§ 1360.  Applicability.

(a)  Acceptance.--The commission may accept a long-term

infrastructure plan filed by a water utility prior to the

effective date of this subsection in order to comply with

section 1352 (relating to long-term infrastructure improvement

plan).

(b)  Submission.--The commission may require the submission

of a new long-term infrastructure plan by a water utility.

Section 7.  Section 3301(c) of Title 66 is amended to read:

§ 3301.  Civil penalties for violations.

* * *

(c)  Gas pipeline safety violations.--Any person or

corporation, defined as a public utility in this part, who

violates any provisions of this part governing the safety of

pipeline or conduit facilities in the transportation of natural

gas, flammable gas, or gas which is toxic or corrosive, or of

any regulation or order issued thereunder, shall be subject to a

civil penalty of not to exceed [$10,000] $200,000 for each

violation for each day that the violation persists, except that

the maximum civil penalty shall not exceed [$500,000] $2,000,000 

for any related series of violations, or subject to a penalty

provided under Federal pipeline safety laws, whichever is

greater.

* * *

Section 8.  This act shall take effect in 60 days.