Pennsylvania Act 1996-94 — PUBLIC UTILITY CODE (66 PA.C.S.) - OMNIBUS AMENDMENTS

Act text

PUBLIC UTILITY CODE (66 PA.C.S.) - OMNIBUS AMENDMENTS
                  Act of Jul. 2, 1996, P.L. 542, No. 94               Cl. 66
                             Session of 1996
                               No. 1996-94

     HB 2446

                                  AN ACT

     Amending Title 66 (Public Utilities) of the Pennsylvania
        Consolidated Statutes, affirming the opportunity for an
        electric public utility to restructure, buy down or buy out a
        nonutility generation contract from which such utility has an
        obligation to purchase electricity and affirming rate
        recovery of certain electric utility payments for such
        purposes.

        The General Assembly makes the following findings:

            (1)  Electric public utilities in Pennsylvania have
        entered into contracts with various nonutility project
        developers for the purchase of electric capacity or energy,
        or both, from nonutility projects, some of which are in
        operation and some of which have not yet been completed. Some
        of these contracts have been entered into voluntarily by such
        utilities. Others have been entered into pursuant to orders
        of the Pennsylvania Public Utility Commission. Such contracts
        were predicated, in each case, on avoiding the estimated
        costs the utility would have incurred but for the nonutility
        project. The utilities' payments under such contracts are and
        should continue to be recoverable from customers, as well as
        the utilities' payments pursuant to other arrangements which
        are negotiated, as provided for herein.
            (2)  Some nonutility generation projects have provided
        benefits to utilities, consumers and the economy.
            (3)  Some of the existing contracts for nonutility
        projects not yet completed may no longer be needed or
        justified based on present cost estimates. This is due to
        unanticipated and unforeseeable changes in economic factors
        as a result of which either the utility no longer needs the
        contract's electric capacity or energy or there are less
        expensive alternatives by which the utility could obtain such
        needed electric capacity or energy.
            (4)  From time to time it may be in the mutual interest
        of a nonutility project developer, or owner of an operating
        nonutility project, and a public utility to voluntarily
        negotiate reasonable arrangements to buy down, buy out and
        terminate or otherwise restructure existing contracts.
            (5)  Negotiated arrangements to buy down, buy out and
        terminate or otherwise restructure contracts with operating
        nonutility projects and contracts for unfinished projects may
        be in the public interest.
            (6)  The costs prudently incurred by utilities under a
        buy out, buy down or other restructuring arrangement should
        be recoverable from customers.

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

        Section 1.  Section 527 of Title 66 of the Pennsylvania
     Consolidated Statutes is amended to read:
      § 527.  Cogeneration rules and regulations.
        (a)  Availability.--The commission shall promulgate rules and
     regulations concerning the rates, terms, conditions and
     availability of cogeneration in this Commonwealth. The
     commission shall require that utility rates to the public
     reflect the costs and savings to the utility from
     cogeneration[.], including, but not limited to, the costs
     incurred by utilities under contracts with nonutility generating
     unit project developers for the purchase of electric capacity or
     energy, or both; the costs recoverable under subsection (b) to
     buy out and cancel unfinished nonutility generating unit
     projects by mutual agreement of the project developer and the
     public utility; and the costs prudently incurred by utilities
     under a voluntary buy out, buy down or other restructured
     arrangement which are just and reasonable and which reduce the
     cost to customers of nonutility generating unit projects.
        (b)  Recovery of cancellation costs of nonutility generating
     unit projects.--A nonutility generating unit project is a
     generating unit project that is not owned by a public utility.
     If the construction of a nonutility generating unit project for
     which a public utility has a contract, whether entered into
     voluntarily or pursuant to commission order, to purchase project
     energy or project capacity and energy is canceled by mutual
     agreement of the project developer and the public utility prior
     to the unit's completion and operation, the public utility may
     recover all costs to be paid to the project developer and all
     costs directly related thereto which are prudently incurred as a
     result of such cancellation. The burden of proof to show that
     any costs claimed were prudently incurred shall be on the public
     utility. In reviewing a claim for such costs:
            (1)  the commission shall not disallow any portion solely
        on the basis that it constitutes an amount greater than
        actual development expenditures and all costs related
        thereto; and
            (2)  the commission shall consider the amount of the
        claim compared to the utility's total estimated costs of
        obligations under the contract.
        Section 2.  Nothing in this act shall be construed as:
            (1)  requiring an electric utility or a nonutility
        generating unit project to enter into an arrangement to buy
        down, buy out and terminate or otherwise restructure a
        contract; or
            (2)  authorizing the Pennsylvania Public Utility
        Commission to require regulated utility to pursue such an
        arrangement with a nonutility generating unit project.
        Section 3.  This act shall take effect immediately.

     APPROVED--The 2nd day of July, A. D. 1996.

     THOMAS J. RIDGE