PRINTER'S NO. 3052
No. 2143 Session of 2008
INTRODUCED BY ROSS, ADOLPH, BELFANTI, BENNINGTON, CAPPELLI, FREEMAN, GINGRICH, HERSHEY, HORNAMAN, McILVAINE SMITH, MILNE, MUNDY, MUSTIO, NICKOL, O'NEILL, RUBLEY, SANTONI, SAYLOR, SIPTROTH, STEIL, SWANGER, VITALI AND WAGNER, JANUARY 3, 2008
REFERRED TO COMMITTEE ON CONSUMER AFFAIRS, JANUARY 3, 2008
AN ACT 1 Providing for the adoption of procedures to encourage energy 2 efficiency and demand-side resources by electric distribution 3 companies, for program administrator, for review of 4 recommendations by the Public Utility Commission, for 5 responsibilities of electric distribution companies and for 6 reporting. 7 The General Assembly of the Commonwealth of Pennsylvania 8 hereby enacts as follows: 9 Section 1. Short title. 10 This act shall be known and may be cited as the Electric 11 Energy Conservation Investment Act. 12 Section 2. Findings and purpose. 13 The General Assembly finds and declares that: 14 (1) Energy efficiency and demand-side resources are 15 cost-effective resources that are an essential component of 16 the balanced resource portfolio that electric distribution 17 companies must achieve to provide affordable and reliable 18 energy to consumers. 19 (2) Energy efficiency and demand-side resources in this
1 Commonwealth are resources that are currently underutilized. 2 (3) Investments in energy efficiency and demand-side 3 resources present opportunities to increase Pennsylvania's 4 energy security, protect consumers from price increases, 5 preserve the Commonwealth's natural resources and pursue an 6 improved environment. 7 (4) Investment in energy efficiency and demand-side 8 resources can bring significant economic benefits to 9 Pennsylvania. 10 (5) The purpose of this act is to develop a process to 11 encourage the adoption of cost-effective energy efficiency 12 and demand-side resource investments throughout Pennsylvania 13 as one means to help keep energy costs affordable to all 14 consumers. 15 Section 3. Definitions. 16 The following words and phrases when used in this act shall 17 have the meanings given to them in this section unless the 18 context clearly indicates otherwise: 19 "Commission." The Pennsylvania Public Utility Commission. 20 "Cost-effective." In relation to a program being evaluated, 21 satisfaction of the total resource cost test. 22 "Demand-side resources." Load management technologies, 23 management practices or other strategies employed by retail 24 customers that decrease peak electricity demand or shift demand 25 from on-peak to off-peak periods provided that: 26 (1) the measure is installed on or after the effective 27 date of this section at the service location of a retail 28 customer; 29 (2) the measure reduces the consumption of energy by the 30 retail customer; and 20080H2143B3052 - 2 -
1 (3) the costs of the acquisition or installation of the 2 measure are directly incurred in whole or in part by the 3 electric distribution company. 4 "Electric distribution company." The term shall have the 5 same meaning given to it in 66 Pa.C.S. Ch. 28 (relating to 6 restructuring of electric utility industry). 7 "Energy efficiency." Technologies, management practices or 8 other strategies or measures employed by retail customers that 9 reduce electricity consumption provided that: 10 (1) the measure is installed on or after the effective 11 date of this section at the service location of a retail 12 customer; 13 (2) the measure reduces the consumption of energy by the 14 retail customer; and 15 (3) the costs of the acquisition or installation of the 16 measure are directly incurred in whole or in part by the 17 electric distribution company. 18 "Peak demand." The highest electrical requirement occurring 19 during a specified period. For an electric distribution company, 20 the term means the sum of the metered consumption for all retail 21 customers over that period. 22 "Total resource cost test." A standard test that is met if, 23 over the effective life of the program, the avoided supply-side 24 monetary costs are greater than the monetary costs of the 25 demand-side programs borne by both the electric distribution 26 company and the participants. 27 Section 4. Adoption of procedures encouraging energy efficiency 28 and demand-side resources. 29 The commission shall develop a program to provide for the 30 implementation of cost-effective programs that reduce energy 20080H2143B3052 - 3 -
1 demand and consumption within the service territories of all 2 electric distribution companies throughout this Commonwealth. 3 The program shall include, but is not limited to: 4 (1) Selecting a program administrator to develop and 5 oversee the delivery of energy efficiency and demand-side 6 resources programs with the service territory of each 7 electric distribution company within this Commonwealth. 8 (2) Implementing the necessary administrative and 9 financial mechanisms that will enable the program 10 administrator to develop and oversee the provision of energy 11 efficiency and demand-side resources programs within the 12 service territory of each electric distribution company 13 within this Commonwealth, including the levying of 14 assessments in accordance with 66 Pa.C.S. §§ 510 (relating to 15 assessment for regulatory expenses upon public utilities), 16 1307 (relating to sliding scale of rates; adjustments) and 17 1308 (relating to voluntary changes in rates). 18 (3) Implementing the necessary administrative and 19 financial mechanisms that facilitate a system of third-party 20 entities to deliver all or portions of the energy efficiency 21 and demand-side resources programs within the service 22 territory of each electric distribution company within this 23 Commonwealth, including the levying of assessments in 24 accordance with 66 Pa.C.S. §§ 510, 1307 and 1308. 25 Section 5. Program administrator. 26 (a) Selection procedure.-- 27 (1) The commission shall prepare a request for proposals 28 for a program administrator to provide for the development 29 and delivery of the energy efficiency and demand-side 30 resources programs in the service territories of all electric 20080H2143B3052 - 4 -
1 distribution companies and shall make the request for 2 proposals available for public comment. 3 (2) The commission shall within 60 days of the 4 completion of the public comment period issue the final 5 request for proposals. 6 (3) The commission shall, based upon a competitive bid 7 process, select an independent entity to serve as the energy 8 efficiency and demand-side resources program administrator. 9 (4) The commission shall include as part of its 10 agreement with the program administrator a system of 11 performance parameters and a financial mechanism that 12 provides incentives for exceeding established performance 13 parameters and penalties for not meeting established 14 performance parameters. 15 (b) Program administrator.--The administrator shall have 16 powers and duties assigned by the commission. The powers and 17 duties shall include, but not be limited to: 18 (1) Soliciting through a competitive procurement process 19 within each electric distribution company service territory a 20 program of providing energy efficiency and demand-side 21 resources programs to residential, commercial and industrial 22 customers utilizing third-party entities. 23 (2) Ensuring that each proposal includes, but is not 24 limited to: 25 (i) A clear delineation of how the program will be 26 conducted. 27 (ii) The types of specific program measures to be 28 offered. 29 (iii) The cost and benefit of each program to be 30 offered. 20080H2143B3052 - 5 -
1 (iv) A process for monitoring and verifying results, 2 data collection and management procedures, program 3 evaluation processes and financial management strategies. 4 (3) (i) In its review of each proposal received: 5 (A) Taking into account the unique circumstances 6 of each electric distribution company's service 7 territory. 8 (B) Finding that each program is cost effective 9 and that the portfolio of programs is designed to 10 provide every affected customer class with the 11 opportunity to participate and benefit economically. 12 (C) Determining the cost-effectiveness of energy 13 efficiency and demand-side resources measures using 14 the total resource cost test. 15 (4) In the event no qualified proposals are received 16 that meet the required plan goals in an electric distribution 17 company service territory to conduct the program activities: 18 (i) Issuing a subsequent request for proposals with 19 plan goals that are reduced no more than necessary to 20 obtain qualified proposals to provide program activities. 21 The lowered plan goals for energy efficiency and demand- 22 side resources shall be only in effect for that year. 23 (ii) In subsequent years, utilizing the plan goals 24 unless no qualified proposals are received to conduct the 25 program activities that meet the plan goals, the program 26 administrator shall issue a subsequent request for 27 proposals in accordance with the procedures identified in 28 this paragraph. 29 (5) Executing agreements with the selected entity in 30 each electric distribution company service territory to 20080H2143B3052 - 6 -
1 conduct the energy efficiency and demand-side resources 2 program. As part of these agreements the program 3 administrator shall ensure that: 4 (i) the programs offered by the selected entity are 5 provided equitably across all customer classes; 6 (ii) a clearly defined process for financial 7 compensation which is tied to defined goals for 8 performance regarding program activities accomplished, 9 energy cost savings on a per-customer basis and utility- 10 wide basis and overall energy and peak demand reductions 11 is established; 12 (iii) a system of incentives and penalties for 13 performance of contractual activities above and below 14 predetermined levels is in place; and 15 (iv) there is a set contract term which may include 16 an initial three-year term with renewal terms of a varied 17 length. 18 (6) Submitting reports to the commission at such times 19 and in such manner as the commission directs. 20 Section 6. Commission review of recommendations. 21 (a) General rule.--The commission shall review the 22 recommendations made by the program administrator regarding 23 those entities best suited to provide the energy efficiency and 24 demand-side resources programs within the service territory of 25 each electric distribution company. The commission shall approve 26 or disapprove the recommendations made by the program 27 administrator. 28 (b) Subjects for review.--The commission review of the 29 recommendations of the program administrator shall be limited to 30 ensuring that: 20080H2143B3052 - 7 -
1 (1) There is no evidence of fraud or market abuse. 2 (2) Any costs entered into are borne by the appropriate 3 parties and that costs related to the provision of the 4 contracted services are borne by the appropriate customer 5 class. 6 (3) There will be, provided in a cost-effective manner, 7 a program that provides energy efficiency and demand-side 8 resources measures to all customer classes throughout the 9 service territory of each electric distribution company. 10 (c) Third-party agreement.--If the commission approves a 11 third-party entity to conduct the program, the commission shall 12 ensure the program administrator finalizes the agreement between 13 it and the third-party entity selected to provide the program of 14 energy efficiency and demand-side resources. 15 (d) Disapproval.--In the event the commission disapproves 16 the recommendation of the program administrator, the commission 17 shall provide a rationale for this decision and direct the 18 program administrator on a course of action. 19 (e) Plan goals.-- 20 (1) The program administrator shall ensure that each 21 proposal submitted by a third-party entity to deliver a 22 program of energy efficiency measures includes meeting the 23 goal of reaching an incremental annual energy savings based 24 on a percentage of all electricity sold in calendar year 2007 25 of 0.4% in 2010 and 2.0% in 2014 and each year thereafter. 26 The program administrator shall ensure that a third-party 27 entity meets the goals contained in this section through the 28 implementation of a program of energy efficiency measures 29 throughout the service territory of the electric distribution 30 company. 20080H2143B3052 - 8 -
1 (2) The program administrator shall ensure that each 2 proposal submitted by a third-party entity to deliver a 3 program of demand-side resources measures includes meeting 4 the goal of reducing peak demand from a target year being the 5 calendar year 2007 on a weather-normalized basis and adjusted 6 to eliminate the effect of emergency load control procedures 7 implemented by a regional transmission organization by an 8 amount equal to 2.0% in 2010, 5.0% in 2015 and 10.1% in 2020 9 and each year thereafter. The program administrator shall 10 ensure a third-party entity meets the goals contained in this 11 section through the implementation of a program of demand- 12 side resources measures throughout the service territory of 13 the electric distribution company. 14 (f) Measurements and verification.-- 15 (1) The commission shall establish standards by which 16 the program administrator submits to the commission an annual 17 report, which report includes that information relating to 18 the actions and results of the energy efficiency and demand- 19 side resources programs undertaken within each electric 20 distribution service territory by each third-party entity. 21 (2) The report shall include, but not be limited to: 22 (i) Documentation of program expenditures. 23 (ii) Measurement and verification of savings 24 resulting from programs. 25 (iii) Evaluation of the cost-effectiveness of 26 expenditures. 27 (iv) Any other information the commission may 28 require pursuant to its rulemaking authority. 29 (3) The program administrator, upon consultation with 30 the commission, shall direct a third-party entity to modify 20080H2143B3052 - 9 -
1 or terminate particular energy efficiency or demand-side 2 resources program if, after an adequate period for 3 implementation of the program, the commission determines the 4 program is not sufficiently meeting its goals and purposes. 5 (4) In the event an energy efficiency or demand-side 6 resources program is terminated, the program administrator 7 shall require the third-party entity to submit a revised 8 program describing the actions to be undertaken to either 9 offer a substitute program or increase the availability of 10 existing programs to make up for the effect of the terminated 11 program on its overall program goals. 12 Section 7. Responsibilities of electric distribution companies. 13 (a) General rule.--Each electric distribution company shall: 14 (1) Cooperate with the program administrator as needed 15 in its efforts to competitively procure the services of a 16 third-party entity to provide an energy efficiency and 17 demand-side resources program with the service territory of 18 the electric distribution company. 19 (2) Provide information necessary to effectively 20 facilitate the work of the selected third-party entity in 21 conducting the energy efficiency and demand-side resources 22 program. 23 (3) Provide assistance as may be requested by the 24 program administrator in reviewing proposals from third-party 25 entities seeking to provide energy efficiency and demand-side 26 resources programs within their service territory. 27 (4) Provide assistance as may be requested by the 28 program administrator to facilitate the successful execution 29 of the contract agreement with the third-party entities to 30 provide energy efficiency and demand-side resources programs 20080H2143B3052 - 10 -
1 within their service territory. 2 (b) Recovery of administrative costs.--An electric 3 distribution company may fully recover all administrative costs 4 that the commission determines are prudently incurred pursuant 5 to implementing a program to deliver cost-effective energy 6 efficiency and peak demand reduction activities through a third- 7 party entity. 8 Section 8. Reporting. 9 The commission shall submit an annual report to the General 10 Assembly describing the results of the programs implemented by 11 each of the electric distribution companies, including, but not 12 limited to: 13 (1) The costs, benefits and reductions in energy costs. 14 (2) Energy use by customer class within this 15 Commonwealth. 16 (3) Reductions in overall peak demand and projections 17 toward complying with the overall target reduction goals of 18 this act. 19 Section 9. Effective date. 20 This act shall take effect immediately. K30L66GRH/20080H2143B3052 - 11 -