PRINTER'S NO. 698
No. 630 Session of 1989
INTRODUCED BY DALEY, DeWEESE, COWELL, STAIRS, S. H. SMITH, WASS,
LAUGHLIN, TELEK, BLACK, TRICH, HALUSKA, KONDRICH, STISH,
ARGALL, COLAIZZO, BELARDI, BURD, KASUNIC, WOZNIAK, KAISER,
PETRARCA, McCALL, BILLOW, CESSAR, CARLSON, J. L. WRIGHT,
GEIST, CAWLEY, FARGO, PHILLIPS, DISTLER, LUCYK, JAROLIN,
TANGRETTI, HESS, LEVDANSKY AND McVERRY, MARCH 6, 1989
REFERRED TO COMMITTEE ON CONSUMER AFFAIRS, MARCH 6, 1989
AN ACT
1 Amending Title 66 (Public Utilities) of the Pennsylvania
2 Consolidated Statutes, further providing for the use of coal,
3 for inclusion of the cost of certain capital additions in the
4 rate base and for the inclusion of certain plants under
5 construction in the rate base.
6 The General Assembly of the Commonwealth of Pennsylvania
7 hereby enacts as follows:
8 Section 1. Sections 514, 521(f) and 1315 of Title 66 of the
9 Pennsylvania Consolidated Statutes are amended to read:
10 § 514. Use of coal.
11 [(a) Upgrading capability to use coal.--]The commission
12 shall promulgate regulations which require utilities to uprate
13 their electric power production by increasing the capability to
14 use coal in existing coal-fueled plants where economically
15 feasible and where the uprate is beneficial to ratepayers.
16 [(b) Incentive for uprating.--The commission shall
17 promulgate regulations which establish a special cost recovery
1 and shared benefits procedure for electric utilities and their
2 ratepayers as an incentive to implement upratings as provided in
3 subsection (a). Nothing in this section shall permit or require
4 the commission to establish rates or procedures which are
5 inconsistent with any other section in this title.
6 (c) Cost of upgrading.--Notwithstanding section 1315
7 (relating to limitation on consideration of certain costs for
8 electric utilities) and subject to regulations promulgated by
9 the commission, the commission may allow a portion of the
10 prudently incurred costs, determined on a per megawatt basis and
11 not to exceed 50% of the unit's undepreciated original cost per
12 megawatt, of uprating the capability of an existing coal-fueled
13 plant to use coal mined in Pennsylvania to be made a part of the
14 rate base or otherwise included in the rates charged by the
15 utility before such uprating is completed. This subsection shall
16 not apply unless, upon application of the affected public
17 utility, the commission determines that the uprating would be
18 more cost effective for the utility's ratepayers than other
19 alternatives for meeting the utility's load and capacity
20 requirements. Notwithstanding section 1309 (relating to rates
21 fixed on complaint; investigation of costs of production), the
22 commission, by regulation, shall provide for a utility to remove
23 the costs of an uprating from its rate base and to refund any
24 revenues collected as the result of this subsection, plus
25 interest, which shall be the average rate of interest specified
26 for residential mortgage lending by the Secretary of Banking in
27 accordance with the act of January 30, 1974 (P.L.13, No.6),
28 referred to as the Loan Interest and Protection Law, during the
29 period or periods for which the commission orders refunds, if
30 the commission, after notice and hearings, determines that the
19890H0630B0698 - 2 -
1 uprating has not been completed within a reasonable time.]
2 § 521. Retirement of electric generating units.
3 * * *
4 [(f) Construction costs.--Notwithstanding section 1315
5 (relating to limitation on consideration of certain costs for
6 electric utilities) and subject to regulations promulgated by
7 the commission, the commission may allow a portion of the
8 prudently incurred costs of capital additions, determined on a
9 per megawatt basis and not to exceed 50% of the unit's
10 undepreciated original cost per megawatt, to an electric
11 generating unit to be made a part of the rate base or otherwise
12 included in the rates charged by the utility before such capital
13 additions are completed if the commission, acting pursuant to
14 subsection (a) or (b), prohibits the utility from retiring the
15 unit or orders the utility to return the unit to normal
16 operation, provided that:
17 (1) the capital additions would allow the continued or
18 increased use of coal mined in Pennsylvania; and
19 (2) the capital additions would be more cost effective
20 for the utility's ratepayers than other alternatives for
21 meeting the utility's load and capacity requirements.
22 Notwithstanding section 1309 (relating to rates fixed on
23 complaint; investigation of costs of production), the
24 commission, by regulation, shall provide for a utility to remove
25 the costs of capital additions from its rate base and to refund
26 any revenues collected as the result of this subsection, plus
27 interest, which shall be the average rate of interest specified
28 for residential mortgage lending by the Secretary of Banking in
29 accordance with the act of January 30, 1974 (P.L.13, No.6),
30 referred to as the Loan Interest and Protection Law, during the
19890H0630B0698 - 3 -
1 period or periods for which the commission orders refunds, if
2 the commission, after notice and hearing, determines that the
3 capital addition has not been completed within a reasonable
4 time.]
5 * * *
6 § 1315. Limitation on consideration of certain costs for
7 electric utilities.
8 [Except for such nonrevenue producing, nonexpense reducing
9 investments as may be reasonably shown to be necessary to
10 improve environmental conditions at existing facilities or
11 improve safety at existing facilities or as may be required to
12 convert facilities to the utilization of coal, the] (a) General
13 rule.--The cost of construction or expansion of [a] any facility
14 undertaken by a public utility [producing, generating,
15 transmitting, distributing or furnishing electricity] shall not
16 be made a part of the rate base nor otherwise included in the
17 rates charged by the electric utility until such time as the
18 facility [is used and useful in service to the public. Except as
19 stated in this section, no electric utility property shall be
20 deemed used and useful until it] is presently providing actual
21 utility service to the customers.
22 (b) Exceptions.--
23 (1) The commission, in its discretion, may permit the
24 inclusion of a plant under construction in the rate base in
25 the case of a plant presently under construction which is
26 designed to be completed in one year or less and is
27 reasonably estimated to be capable of providing actual
28 utility service within six months after the end of the test
29 year. In the event that a utility makes a claim for the
30 inclusion of a short term plant under construction in the
19890H0630B0698 - 4 -
1 rate base, it shall furnish evidence of any and all
2 offsetting changes to its rate base, revenues or expenses
3 which may occur during the six month period after the end of
4 the test year or which may occur as a result of a short term
5 plant under construction going into service.
6 (2) The commission, in its discretion, may permit the
7 inclusion of a plant under construction in the rate base of
8 an electric utility providing it meets the following
9 criteria:
10 (i) With regard to the modification, refurbishment
11 or alteration of an existing electric generating or
12 transmission plant, such construction will materially
13 lengthen the service life of the plant, and will permit
14 materially increased use of coal or materially increased
15 efficiency in the use of coal, or will result in a
16 material reduction in plant emissions which harm the
17 environment.
18 (ii) With regard to construction of a new electric
19 generating or transmission plant, such new construction
20 employs technology which represents a material advance
21 over existing technology in the utilization of coal and
22 permits materially increased use of coal or materially
23 increased efficiency in the use of coal, and will result
24 in a material reduction in plant emissions which harm the
25 environment.
26 (c) Failure to complete construction within reasonable
27 period.--Notwithstanding the provisions of subsection (b), if
28 the commission, after notice and hearings, determines that the
29 plant under construction has not been completed within a
30 reasonable time, the commission shall order a utility to remove
19890H0630B0698 - 5 -
1 the costs of the plant under construction from its rate base and
2 to refund any revenues collected as the result of subsection
3 (b), plus interest. The rate of interest shall be the average
4 rate of interest specified for residential mortgage lending by
5 the Secretary of Banking in accordance with the act of January
6 30, 1974 (P.L.13, No.6), referred to as the Loan Interest and
7 Protection Law, during the period or periods for which the
8 commission orders refunds.
9 (d) Regulations.--The commission may promulgate regulations
10 in accordance with this section.
11 Section 2. This act shall take effect in 60 days.
A26L66WMB/19890H0630B0698 - 6 -