1Amending Title 66 (Public Utilities) of the Pennsylvania
2Consolidated Statutes, in powers and duties, further
3providing for assessment for regulatory expenses upon public
4utilities; in restructuring of electric utility industry,
5further providing for duties of electric distribution
6companies and providing for next generation default service;
7and making a related repeal.

8The General Assembly finds and declares as follows:

9(1)  The economic vitality of this Commonwealth and its
10citizens will be advanced by innovative and competitively
11priced electric generation products and services.

12(2)  The most economically efficient means of assuring
13the availability of adequate, safe and efficient electric
14generation at the most economically efficient prices is by
15fully implementing the existing policy of the Commonwealth to
16establish full and sustainable competitive retail electric
17generation markets.

18(3)  The present provision of default service by electric
19distribution companies has and will continue to prevent
20retail electric generation markets from becoming fully and

1sustainably competitive.

2(4)  The implementation of a default service structure
3that relies on the competitive market, with necessary back-up
4protections, will assure that all retail customers have
5access to electric service and help deliver the jobs,
6economic development and other benefits of competitive
7markets to this Commonwealth.

8The General Assembly of the Commonwealth of Pennsylvania
9hereby enacts as follows:

10Section 1.  Section 510(a) of Title 66 of the Pennsylvania
11Consolidated Statutes is amended and the section is amended by
12adding subsections to read:

13§ 510. Assessment for regulatory expenses upon public
14utilities.

15(a) [Determination of assessment] Assessment.--Before
16November 1 of each year, the commission shall estimate its total
17expenditures in the administration of this part for the fiscal
18year beginning July of the following year, which estimate shall
19not exceed three-tenths of 1% of the total gross intrastate
20operating revenues of the public utilities, electric generation 
21suppliers and natural gas suppliers under its jurisdiction for
22the preceding calendar year. Such estimate shall be submitted to 
23the Governor in accordance with section 610 of the act of April 
249, 1929 (P.L.177, No.175), known as "The Administrative Code of 
251929." At the same time the commission submits its estimate to 
26the Governor, the commission shall also submit that estimate to
27the General Assembly. The commission or its designated
28representatives shall be afforded an opportunity to appear
29before the Governor and the Senate and House Appropriations
30Committees regarding their estimates. The commission shall

1subtract from the final estimate:

2(1) The estimated fees to be collected pursuant to
3section 317 (relating to fees for services rendered by
4commission) during such fiscal year.

5(2) The estimated balance of the appropriation,
6specified in section 511 (relating to disposition,
7appropriation and disbursement of assessments and fees), to
8be carried over into such fiscal year from the preceding one.

9The remainder so determined, herein called the total assessment,
10shall be allocated to, and paid by, such public utilities in the
11manner prescribed. If the General Assembly fails to approve the
12commission's budget for the purposes of this part, by March 30,
13the commission shall assess public utilities on the basis of the
14last approved operating budget. At such time as the General
15Assembly approves the proposed budget the commission shall have
16the authority to make an adjustment in the assessments to
17reflect the approved budget. If, subsequent to the approval of
18the budget, the commission determines that a supplemental budget
19may be needed, the commission shall submit its request for that
20supplemental budget simultaneously to the Governor and the
21chairmen of the House and Senate Appropriations Committees.

22(a.1) Electric generation supplier assessment.--The
23commission may impose an annual assessment upon electric
24generation suppliers. The assessment shall be used to reimburse
25the commission for incremental expenditures associated with
26carrying out the provisions of Chapter 28 (relating to
27restructuring of electric utility industry), but the assessment
28may not exceed $5,000 per licensed entity per year.

29* * *

30(h) Definitions.--As used in this section, the following
 

1words and phrases shall have the meanings given to them in this 
2subsection unless the context clearly indicates otherwise:

3"Electric generation supplier." As defined in section 2803
4(relating to definitions).

5"Natural gas supplier." As defined in section 2202 (relating
6to definitions).

7Section 2.  Section 2807(e)(3.1) of Title 66 is repealed:

8§ 2807. Duties of electric distribution companies.

9* * *

10(e) Obligation to serve.--A default service provider's
11obligation to provide electric generation supply service
12following the expiration of a generation rate cap specified
13under section 2804(4) (relating to standards for restructuring
14of electric industry) or a restructuring plan under section
152806(f) is revised as follows:

16* * *

17[(3.1) Following the expiration of an electric
18distribution company's obligation to provide electric
19generation supply service to retail customers at capped
20rates, if a customer contracts for electric generation supply
21service and the chosen electric generation supplier does not
22provide the service or if a customer does not choose an
23alternative electric generation supplier, the default service
24provider shall provide electric generation supply service to
25that customer pursuant to a commission-approved competitive
26procurement plan. The electric power acquired shall be
27procured through competitive procurement processes and shall
28include one or more of the following:

29(i) Auctions.

30(ii) Requests for proposal.

1(iii) Bilateral agreements entered into at the sole
2discretion of the default service provider which shall be
3at prices which are:

4(A) no greater than the cost of obtaining
5generation under comparable terms in the wholesale
6market, as determined by the commission at the time
7of execution of the contract; or

8(B) consistent with a commission-approved
9competition procurement process. Any agreement
10between affiliated parties shall be subject to review
11and approval of the commission under Chapter 21
12(relating to relations with affiliated interests). In
13no case shall the cost of obtaining generation from
14any affiliated interest be greater than the cost of
15obtaining generation under comparable terms in the
16wholesale market at the time of execution of the
17contract.]

18* * *

19Section 3.  Title 66 is amended by adding a section to read:

20§ 2807.1.  Next generation default service.

21(a)  General rule.--On and after June 1, 2015, service under
22former section 2807(e)(3.1) (relating to duties of electric
23distribution companies) shall no longer be provided, and next
24generation default service shall be provided as set forth in
25subsection (b). On June 1, 2015, the commission shall conduct a
26competitive process for assigning existing default service
27customers to qualified electric generation suppliers as set
28forth in subsection (c). As set forth in subsection (c)(2),
29beginning January 1, 2015, new and moving customers shall be
30asked to select an electric generation supplier when initiating

1electric service. Subject to the authority set forth in
2subsection (f), on June 1, 2016, initiating or changing electric
3generation and distribution service shall be the responsibility
4of licensed electric generation suppliers.

5(b)  Next generation default service.--

6(1) Next generation default service shall be provided by
7one or more electric generation suppliers. The provider or
8providers shall be selected for each electric distribution
9company service territory by a process that shall be
10established and conducted by the commission, and that shall
11require an electric generation supplier to meet reasonable
12and necessary financial fitness and bonding criteria to serve
13in that role. If no electric generation supplier meets the
14commission's requirements to provide next generation default
15service, the commission shall make the provision of next
16generation default service a condition of maintaining a
17license to provide electric generation service. When next
18generation default service is provided as a condition of
19maintaining a license, the commission may not impose any
20additional fees on electric generation suppliers providing
21next generation default service, but it may require
22additional financial fitness or bonding requirements. The
23commission may not require an electric generation supplier to
24provide next generation default service at rates that do not
25fully compensate the electric generation supplier for all of
26the costs and risks associated with providing the service.

27(2)  Next generation default service shall be available
28to any customer:

29(i) Who has contracted for electric generation
30service with an electric generation supplier and whose

1electric generation supplier becomes unable to deliver
2service to the customer.

3(ii) Who otherwise does not choose an electric
4generation supplier.

5(3)  The commission shall establish a pricing formula for
6the next generation default service rates that reflect the
7projected market price for electric generation during the
8time that the customer receives the service, together with
9all direct and indirect costs and risks of providing next
10generation default service, including cost of capital. The
11rate shall be set prospectively and may not be subject to
12reconciliation, but the electric generation supplier
13providing next generation default service may offer a
14customer an alternative generation product so long as the
15rate offered is lower than the next generation default
16service rate produced by the commission-established pricing
17formula.

18(4)  A customer may receive next generation default
19service at the formulaic price for a period of not more than
2060 days or two billing cycles, whichever is shorter, after
21which the customer shall arrange to receive electric
22generation service from an electric generation supplier. A
23customer remaining on next generation default service at the
24end of the 60 days or two billing cycles shall be assigned to
25an electric generation supplier on a rotating basis to be
26determined by the commission and shall be transferred to that
27service as soon as reasonably possible.

28(5) At the time that a customer is placed on next
29generation default service the electric generation supplier
30providing the next generation default service shall provide

1notice to the customer:

2(i) That the customer may take next generation
3default service for a maximum period of 60 days or
4two billing cycles, whichever is shorter.

5(ii) The current price of the next generation
6default service that the customer will be charged.

7(iii) The options available to the customer to
8select an alternative electric generation supplier,
9including notice that the customer may switch at any
10time without penalty.

11(6)  A customer who does not choose an alternative
12electric generation supplier at the end of the customer's
13contract term shall remain a customer of the electric
14generation supplier on a month-to-month basis. The customer
15shall be permitted to shop for an alternative electric
16generation supplier without penalty or restriction, unless
17the customer affirmatively chooses another product offered by
18the customer's current electric generation supplier, or
19chooses an alternative supplier. An electric generation
20supplier shall provide such notices as the commission shall
21require, prior to the end of the customer's term of service,
22that explain the customer's options.

23(c)  Transition process.--The following transition process
24shall apply:

25(1)  The commission shall conduct a competitive
26assignment process of existing default service customers in
27sufficient time to allow customers to be transferred to
28winning electric generation suppliers beginning on the
29customer's first meter read date on or after June 1, 2015.

30(i)  The assignment of customers and the prices at

1which the participating electric generation supplier
2shall serve assigned customers by customer class shall be
3determined for each electric distribution company service
4territory through a competitive solicitation process that
5shall be administered by the commission. A response to
6the competitive solicitation shall include the following:

7(A)  An agreement by the electric generation
8supplier to remit a $100 customer acquisition fee for
9each customer that is assigned to and enrolls with
10the participating electric generation supplier. All
11due and payable customer acquisition fees shall be
12paid to the commission and shall be remitted by the
13commission into the General Fund of the State
14Treasury through the Department of Revenue.

15(B)  An agreement by the electric generation
16supplier to remit a $50 bonus to each customer that
17enrolls with the participating electric generation
18supplier pursuant to the assignment process.

19(C)  A proposed price, per kilowatt hour and per
20rate class, at which the electric generation supplier
21offers to serve customers that enroll with the
22electric generation supplier pursuant to the
23competitive assignment process and the number of
24tranches which the electric generation supplier
25proposes to serve.

26(D)  An agreement to provide service pursuant to
27a fixed price, 12-month contract with no early
28termination or cancellation fees.

29(E) In addition to the payments under this
30subsection, each electric generation supplier

1participating in the competitive assignment process
2shall remit $2 per customer assigned to fund the
3commission's consumer education program under
4subsection (e). Any amounts to be paid under this
5clause shall be offset by the amount of any
6application fees not refunded pursuant to clause (F).

7(F)  An application fee that shall be the lesser
8of the product of the number of customers in each
9tranche bid multiplied by one dollar, or $5,000 per
10tranche bid. Application fees shall be retained by
11the commission only for tranches actually assigned,
12and application fees collected from electric
13generation suppliers for tranches bid but not
14assigned to them shall be refunded at the conclusion
15of the competitive assignment process. The
16application fee shall be used:

17(I) To reimburse the commission for the
18costs of conducting the competitive assignment
19process.

20(II) By the commission to educate customers
21about the assignment process.

22(G)  An agreement that at the end of the initial
2312-month term, and for the subsequent 24 months, the
24electric generation supplier will publicly post the
25prices charged to customers who were assigned under
26this process, who continue to take service from the
27electric generation supplier, and who have not
28affirmatively chosen a different product from that
29electric generation supplier, in a manner to be
30required by the commission to ensure price

1transparency and to avoid customer confusion.

2(ii)  The commission shall select no fewer than four
3successful electric generation suppliers for each
4electric distribution utility on the basis of the lowest
5electric generation price bid in a single clearing price,
6single day process as determined by rate class. All
7customers in the same rate class and service territory
8receiving service under this process shall be served at
9the same price. No bidder may be awarded in excess of 25%
10of the number of tranches to be awarded for each rate
11class and service territory, except that the commission
12may waive this limitation if necessary to assure that all
13tranches are awarded. The commission may retain an
14independent third-party evaluator to assist in the
15conduct of the assignment process.

16(iii)  Subject to the commission's authority to
17revise the tranche size to reflect the customer base of
18the electric distribution company or to enhance the
19chances of success of the competitive assignment process,
20the response to the competitive solicitation shall
21reflect tranche sizes of 5% of the total default service
22received by residential customers and tranches of
23comparable load size for nonresidential customers,
24subject to minimum successful supplier requirements under
25subparagraph (ii).

26(iv)  The commission may establish additional
27financial fitness and bonding requirements as a condition
28of an electric generation supplier's participation in the
29competitive assignment process.

30(v)  The commission shall conduct the competitive

1assignment process set forth in this subsection so that
2customers can be physically transferred to the assigned
3electric generation suppliers in accordance with the time
4frame set forth in subsection (c)(1). Between January 1,
52015, and June 1, 2015, each electric distribution
6company shall provide at least three notices to its
7existing default customers, at least one of which shall
8be a separate notice sent by first class mail, informing
9default service customers of the scheduled competitive
10assignment process and their options both prior to and as
11a result of the process. Customers initiating service on
12or after June 1, 2015, and before June 1, 2016, shall be
13assigned to the electric generation suppliers serving
14assigned customers under this subsection, in the same
15proportion as the number of tranches served by each
16assigned electric generation supplier to the total number
17of tranches, per rate class, in each electric
18distribution company service territory.

19(vi)  Selected electric generation suppliers shall
20remit the amounts required under subparagraphs (i)(A) and
21(i)(E) to the commission after all customers are enrolled
22with an electric generation supplier under the assignment
23authorized in this section. All amounts required to be
24paid to customers under subparagraph (i)(B) shall be due
25after the customer has remained with that electric
26generation supplier for three complete billing cycles.
27The amount shall be remitted within 30 days after the
28amount becomes due.

29(2)  As set forth in subsection (a), the commission shall
30establish a procedure whereby, on or after January 1, 2015, and

1through May 31, 2015, applicants for electric service and
2existing default customers moving from within the service
3territory of an electric distribution company shall be directed
4by the electric distribution company to select an electric
5generation supplier to supply electric generation service. If
6the applicant or customer fails to select an electric generation
7supplier, or declines to do so after no fewer than three
8requests by the electric distribution company, the applicant or
9customer shall be assigned to the default service provided by
10the electric distribution company.

11(3)  The following shall apply during the transition
12period:

13(i)  The commission may consider structures that
14minimize adverse effects on wholesale generation
15suppliers or any entity that has entered into a bona fide
16contractual relationship with an electric distribution
17company that is adversely affected by this section.

18(ii)  An affected entity under subparagraph (i),
19including a wholesale generation supplier, an electric
20generation supplier or an electric distribution utility,
21may make a claim with the commission to recover costs,
22including foregone profits, resulting from the transition
23to next generation default service. The commission shall
24consider only those transition costs shown to have
25occurred, or that are likely to occur, that are
26established on the record after a hearing and that the
27wholesale generation supplier or other entity meet all of
28the following:

29(A)  Were proximately caused by the transition to
30next generation default service.

1(B)  Were not a risk that existed at the time
2that the entity entered into the contract.

3(C)  Could not reasonably be avoided by the
4entity.

5(iii)  An electric distribution company shall, after
6taking reasonable steps to reduce transition costs,
7reimburse the wholesale generation supplier or other
8counterparty for the costs or for amounts that the
9commission determines will not be recovered due to the
10transition under this subsection. Any reimbursements
11shall be recoverable by electric distribution companies
12under subsection (h).

13(iv)  For any wholesale power supply contract for
14which a claim is made under subparagraph (ii), a
15reimbursable transition cost shall be the difference
16between the amount that the wholesale supplier actually
17supplies under the contract and the amount that it would
18have supplied absent the transition under this
19subsection, multiplied by the price for power set forth
20in the wholesale power supply contract. The commission
21shall make a determination of the amount of load by
22customer class that the wholesale supplier would have
23supplied absent the transition under this subsection and
24shall assume that the customer class default service load
25level absent the transition would be no less than the
26average default load in the previous 12 months. Absent
27clear and convincing evidence demonstrating that the
28claimed loss was caused by fraud or illegal activity, the
29commission shall direct the electric distribution company
30to reimburse the wholesale supplier for any unrecovered

1transition cost. Any reimbursements shall be recoverable
2under subsection (h).

3(d)  Customer billing and other services.--The following
4shall apply:

5(1)  On and after June 1, 2016, electric generation
6suppliers shall be permitted to utilize full supplier-
7consolidated billing where the electric generation supplier
8bills the customer for generation service, delivery and other
9charges currently billed by an electric distribution
10company. When an electric generation supplier provides a
11supplier-consolidated bill, it shall purchase the utility's
12distribution charges for service rendered on or after June 1,
132016, on a nonrecourse basis and remit payment to the
14electric distribution utility without discount and on
15schedules approved by the commission. An electric generation
16supplier providing a supplier-consolidated bill shall also
17receive a credit from the electric distribution company, in
18an amount determined to be reasonable by the commission, for
19the electric distribution company's avoided cost of providing
20a bill for the delivery and other charges currently billed by
21the electric distribution company.

22(2)  Upon petition of an electric distribution company
23and, after June 1, 2018, by any party, the commission may
24order an electric distribution company to provide billing
25functions and activities through a structurally separate
26affiliate, if the order is found to be in the public interest
27and to further advance the benefits of competition. The
28commission shall ensure that the electric distribution
29company allocates all direct and indirect costs of providing
30billing services to its structurally separate billing

1subsidiary by utilizing reasonable cost allocation
2principles. The corresponding costs of providing billing
3services included in the electric distribution company's base
4rates shall be identified and removed. The structurally
5separate billing subsidiary shall provide billing services to
6electric distribution companies and to electric generation
7suppliers at the same rates, terms and conditions set forth
8in tariffs filed with and approved by the commission. The
9electric distribution company's structurally separate billing
10subsidiary may also provide unregulated billing services so
11long as the incremental costs and revenues of providing the
12services are removed and separated from the costs and
13revenues of providing regulated billing services for
14distribution and electric generation service.

15(3)  Unless the commission determines otherwise, an
16electric distribution company shall continue to be
17responsible for metering, scheduling, settlements, service
18termination and reinstatement, compliance with energy
19efficiency requirements and any other actions or activities
20necessary to provide safe and adequate electric distribution
21service.

22(4)  On and after June 1, 2016, unless an earlier date is
23selected by the commission, electric generation suppliers
24shall be responsible for providing net metering to customer
25generators pursuant to the act of November 30, 2004
26(P.L.1672, No.213), known as the Alternative Energy Portfolio
27Standards Act, and consistent with commission rules regarding
28payments made to customer generators to purchase excess
29energy under the net-metering rules.

30(5)  On and after June 1, 2015, electric generation

1suppliers shall be responsible for compliance with the
2Alternative Energy Portfolio Standards Act.

3(e)  Consumer education.--The commission shall also establish
4a multimedia consumer education campaign designed to educate
5consumers about the changes directed by the implementation of
6next generation default service and implement the consumer
7education campaign sufficiently in advance of the implementation
8of next generation default service. The consumer education
9planning process shall solicit the views of electric
10distribution companies, electric generation suppliers and
11representatives of residential and small commercial customers.

12(f)  Consumer protection and commission implementation.--The
13following shall apply:

14(1)  The commission may have the authority to issue
15regulations or policy statements necessary to implement this
16section and may establish consumer protections for the
17initiatives mandated by this section, including:

18(i)  Requiring periodic electric generation supplier
19license renewal.

20(ii)  Imposing fines and penalties upon electric
21generation suppliers for noncompliance with commission
22rules and regulations, after providing appropriate notice
23and opportunity for hearing.

24(iii) Promulgating a consumer bill of rights setting
25forth rules for customer disclosure statements, marketing
26and advertising.

27(iv) Creating and publishing, at least annually, an
28electric generation supplier report card that includes,
29but is not necessarily limited to, levels of sustained
30informal complaints and formal complaints against

1electric generation suppliers.

2(2)  On or after June 1, 2016, and to the extent
3applicable, Chapter 14 (relating to responsible utility
4customer protection) and any regulations or orders
5promulgated by the commission pursuant to Chapter 14 shall
6apply to electric generation suppliers to the same extent as
7electric distribution companies, except that electric
8distribution companies shall continue to be responsible for
9physically terminating or discontinuing service to a customer
10at the direction of the customer's electric generation
11supplier.

12(g)  Preservation of universal service.--After the
13implementation of next generation default service and the
14conduct of the competitive assignment process, the commission
15shall continue to provide for universal service support in
16accordance with its existing customer assistance program
17policies, as set forth in 52 Pa. Code § 69.261 (relating to
18general). Any universal service support shall be structured so
19as to insure that the program permits low-income customers to
20participate in the competitive process to the same degree as
21other customers. This subsection does not limit the authority of
22the commission to alter or amend its existing policies as
23necessary to assure that they are just, reasonable and in the
24public interest.

25(h)  Cost recovery.--Electric distribution companies shall
26file tariffs establishing methods for the automatic adjustment
27of its rates for the recovery on a nonbypassable basis of all
28costs incurred to implement the provisions of this section and
29ongoing associated administrative costs.

30Section 4.  All acts and parts of acts are repealed insofar

1as they are inconsistent with the amendment or addition of 66
2Pa.C.S. §§ 510, 2807(e)(3.1) and 2807.1.

3Section 5.  This act shall take effect as follows:

4(1) The repeal of 66 Pa.C.S. § 2807(e)(3.1) shall take
5effect June 1, 2015.

6(2) The remainder of this act shall take effect
7immediately.