2010 Pennsylvania Code
Title 66 - PUBLIC UTILITIES
Chapter 13 - Rates and Rate Making
1307 - Sliding scale of rates; adjustments.

     § 1307.  Sliding scale of rates; adjustments.
        (a)  General rule.--Any public utility, except common
     carriers and those natural gas distributors with gross
     intrastate annual operating revenues in excess of $40,000,000
     with respect to the gas costs of such natural gas distributors,
     may establish a sliding scale of rates or such other method for
     the automatic adjustment of the rates of the public utility as
     shall provide a just and reasonable return on the rate base of
     such public utility, to be determined upon such equitable or
     reasonable basis as shall provide such fair return. A tariff
     showing the scale of rates under such arrangement shall first be
     filed with the commission, and such tariff, and each rate set
     out therein, approved by it. The commission may revoke its
     approval at any time and fix other rates for any such public
     utility if, after notice and hearing, the commission finds the
     existing rates unjust or unreasonable.
        (b)  Mandatory system for automatic adjustment.--The
     commission, by regulation or order, upon reasonable notice and
     after hearing, may prescribe for any class of public utilities,
     except common carriers and those natural gas distributors with
     gross intrastate annual operating revenues in excess of
     $40,000,000, a mandatory system for the automatic adjustment of
     their rates, by means of a sliding scale of rates or other
     method, on the same basis as provided in subsection (a), to
     become effective when and in the manner prescribed in such
     regulation or order. Every such public utility shall, within
     such time as shall be prescribed by the commission, file tariffs
     showing the rates established in accordance with such regulation
     or order.
        (c)  Fuel cost adjustment.--In any method automatically
     adjusting rates to reflect changes in fossil fuel cost under
     this section, the fuel cost used in computing the adjustment
     shall be limited, in the case of an electric utility, to the
     cost of such fuel delivered to the utility at the generating
     site at which it is to be consumed, and the cost of disposing of
     solid waste from scrubbers or other devices designed so that the
     consumption of Pennsylvania-mined coal at the generating site
     would comply with the sulfur oxide emission standards prescribed
     by the Commonwealth. The cost of fuel handling after such
     delivery, or of waste disposal, other than as prescribed in this
     section, shall be excluded from such computation. In any method
     automatically adjusting rates to reflect changes in fuel cost
     other than fossil fuel cost under this section, the fuel cost
     used in computing the adjustment shall be limited, in the case
     of an electric utility, to the cost of such fuel delivered to
     the utility at the generating site at which it is to be consumed
     after deducting therefrom the present salvage or reuse value of
     such fuel, as shall be established by commission rule or order.
        (d)  Fuel cost adjustment audits.--The commission shall
     conduct or cause to be conducted, at such times as it may order,
     but at least annually, an audit of each public utility which, by
     any method described in this section, automatically adjusts its
     rates to reflect changes in its fuel costs, which audit shall
     enable the commission to determine the propriety and correctness
     of amounts billed and collected under this section. Whoever
     performs the audit shall be a person knowledgable in the subject
     matter encompassed within the operation of the automatic
     adjustment clause. The auditors report shall be in a form and
     manner directed by the commission.
        (e)  Automatic adjustment reports and proceedings.--
            (1)  Within 30 days following the end of such 12-month
        period as the commission shall designate, each public utility
        using an automatic adjustment clause shall file with the
        commission a statement which shall specify for such period:
                (i)  the total revenues received pursuant to the
            automatic adjustment clause;
                (ii)  the total amount of that expense or class of
            expenses incurred which is the basis of the automatic
            adjustment clause; and
                (iii)  the difference between the amounts specified
            by subparagraphs (i) and (ii).
        Such report shall be a matter of public record and copies
        thereof shall be made available to any person upon request to
        the commission.
            (2)  Within 60 days following the submission of such
        report by a public utility, the commission shall hold a
        public hearing on the substance of the report and any matters
        pertaining to the use by such public utility of such
        automatic adjustment clause in the preceding period and may
        include the present and subsequent periods.
            (3)  Absent good reason being shown to the contrary, the
        commission shall, within 60 days following such hearing, by
        order direct each such public utility to, over an appropriate
        12-month period, refund to its patrons an amount equal to
        that by which its revenues received pursuant to such
        automatic adjustment clause exceeded the amount of such
        expense or class of expenses, or recover from its patrons an
        amount equal to that by which such expense or class of
        expenses exceeded the revenues received pursuant to such
        automatic adjustment clause.
            (4)  For the purpose of this subsection, where a 12-month
        report period and 12-month refund or recovery period shall
        have been previously established or designated, nothing in
        this section shall impair the continued use of such
        previously established or designated periods nor shall
        anything in this section prevent the commission from amending
        at any time any method used by any utility in automatically
        adjusting its rates, so as to provide the commission more
        adequate supervision of the administration by a utility of
        such method and to decrease the likelihood of collection by a
        utility, in subsequent periods, of amounts greater or less
        than that to which it is entitled, or, in the event that such
        deficiency or surplus in collected amounts is found, more
        prompt readjustment thereof.
        (f)  Recovery of natural gas costs.--
            (1)  Natural gas distribution companies, as defined in
        section 2202 (relating to definitions), with gross intrastate
        annual operating revenues in excess of $40,000,000 may file
        tariffs reflecting actual and projected increases or
        decreases in their natural gas costs, and the tariffs shall
        have an effective date six months from the date of filing.
        The commission shall promulgate regulations establishing the
        time and manner of such filing, but, except for adjustments
        pursuant to a tariff mechanism authorized in this title, no
        such natural gas distribution company shall voluntarily file
        more than one such tariff in a 12-month period: Provided,
        That:
                (i)  Nothing contained herein shall prohibit any
            party from advising the commission that there has been or
            there is anticipated to be a significant difference
            between the natural gas costs to the natural gas
            distribution company and the costs reflected in the then
            effective tariff or the commission from acting upon such
            advice.
                (ii)  A natural gas distribution company may also
            file a tariff to establish a mechanism by which such
            natural gas distribution company may further adjust its
            rates for natural gas sales on a regular, but no more
            frequent than monthly, basis to reflect actual or
            projected changes in natural gas costs reflected in rates
            established pursuant to paragraph (2), subject to annual
            reconciliation under paragraph (5). In the event that the
            natural gas distribution company adjusts rates more
            frequently than quarterly, it shall also offer retail gas
            customers a fixed-rate option which recovers natural gas
            costs over a 12-month period, subject to annual
            reconciliation under paragraph (5). The commission shall,
            within 60 days of the effective date of this
            subparagraph, promulgate rules or regulations governing
            such adjustments and fixed-rate option, but the
            commission shall not prohibit such adjustments or fixed-
            rate option.
            (2)  The commission shall conduct an investigation and
        hold a hearing or hearings, with notice, to review the
        tariffs and consider the plans filed pursuant to section 1317
        (relating to regulation of natural gas costs). Where there
        has been an indication of consumer interest, the hearing
        shall be held in the service territory of the natural gas
        distribution company. Prior to the effective date of the
        filing, the commission shall issue an order establishing the
        rate to be charged to reflect such changes in natural gas
        costs. The commission shall annually review and approve plans
        for purposes of reliability and supply. Such rates, however,
        are subject to the same types of audits, reports and
        proceedings required by subsection (d).
            (3)  Within 60 days following the end of such 12-month
        period as the commission shall designate, each natural gas
        distribution company subject to this subsection shall file
        with the commission a statement which specifies for such
        period:
                (i)  The total revenues received pursuant to this
            section.
                (ii)  The total natural gas costs incurred.
                (iii)  The difference between the amounts specified
            by subparagraphs (i) and (ii).
                (iv)  How actual natural gas costs incurred differ
            from the natural gas costs allowed under paragraph (2)
            and why such differences occurred.
                (v)  How these natural gas costs are consistent with
            a least cost procurement policy as required by section
            1318 (relating to determination of just and reasonable
            gas cost rates).
        Such report shall be a matter of public record and copies
        thereof shall be made available by the natural gas
        distribution company to any person upon request. Copies of
        the reports shall be filed with the Office of Consumer
        Advocate and the Office of Small Business Advocate at the
        same time as they are filed with the commission.
            (4)  The commission shall hold a public hearing on the
        substance of such statement submitted by a natural gas
        distribution company as required in paragraph (3) and on any
        related matters.
            (5)  The commission, after hearing, shall determine the
        portion of the company's natural gas distribution actual
        natural gas costs in the previous 12-month period which meet
        the standards set out in section 1318. The commission shall,
        by order, direct each natural gas distribution company
        subject to this subsection to refund to its customers gas
        revenues collected pursuant to paragraph (2) which exceed the
        amount of actual natural gas costs incurred consistent with
        the standards in section 1318 and to recover from its
        customers any amount by which the actual natural gas costs,
        which have been incurred consistent with the standards in
        section 1318, exceed the revenues collected pursuant to
        paragraph (2). Absent good reason to the contrary, the
        commission shall issue its order within six months following
        the filing of the statement described in paragraph (3).
        Refunds to customers shall be made with interest, at the
        legal rate of interest plus two percent, during the period or
        periods for which the commission orders refunds, and
        recoveries from customers shall include interest at the legal
        rate of interest: Provided, That nothing contained herein
        shall limit the applicability of any defenses, principles or
        doctrines which would prohibit the commission's inquiry into
        any matters that were decided finally in the commission's
        order issued under paragraph (2).
            (6)  The commission shall require that customers
        transferring from sales to transportation service be subject
        to the over-or-under collection adjustment provided for in
        paragraph (5) and shall require further that customers
        transferring from transportation service to sales service not
        be subject to the over-or-under collection adjustment for an
        appropriate period following either such transfer.
        (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.
        (g.1)  Surcharge recoverability and offset.--Notwithstanding
     any other provision of this title or prior order of the
     commission, a surcharge imposed on and paid by a public utility
     under section 1111-A of the act of March 4, 1971 (P.L.6, No.2),
     known as the Tax Reform Code of 1971, is recoverable under this
     section by such means as approved by the commission. Retail
     rates as adjusted in accordance with this subsection shall also
     reflect any reduction in Public Utility Realty Tax Act
     liabilities secured by the utility and adjustments in State
     taxes reflected in any applicable State tax adjustment surcharge
     as defined by commission regulations.
        (h)  Definition.--As used in this section, the terms "natural
     gas costs" and "gas costs" include the direct costs paid by a
     natural gas distribution company for the purchase and the
     delivery of natural gas to its system in order to supply its
     customers. Such costs may include costs paid under agreements to
     purchase natural gas from sellers; costs paid for transporting
     natural gas to its system; costs paid for natural gas storage
     service from others, including the costs of injecting and
     withdrawing natural gas from storage; all charges, fees, taxes
     and rates paid in connection with such purchases, pipeline
     gathering, storage and transportation; and costs paid for
     employing futures, options and other risk management tools.
     "Natural gas" and "gas" include natural gas, liquified natural
     gas, synthetic natural gas and any natural gas substitutes.
     (May 31, 1984, P.L.370, No.74, eff. 60 days; Sept. 27, 1984,
     P.L.721, No.153, eff. 60 days; Dec. 21, 1984, P.L.1265, No.240,
     eff. imd.; Dec. 18, 1996, P.L.1061, No.156, eff. 60 days; June
     22, 1999, P.L.122, No.21, eff. July 1, 1999; Dec. 9, 2002,
     P.L.1556, No.203, eff. 60 days)

        2002 Amendment.  Act 203 added subsec. (g.1).
        1999 Amendment.  Act 21 amended subsecs. (f) and (h).
        1996 Amendment.  Act 156 relettered subsec. (g) to subsec.
     (h) and added a new subsec. (g).
        1984 Amendments.  Act 74 amended subsecs. (a) and (b) and
     added subsecs. (f) and (g), Act 153 amended subsec. (a) and Act
     240 amended subsecs. (a) and (f). The amendments by Acts 153 and
     240 to subsec. (a) are identical and therefore have been merged.
     See section 5 of Act 74 in the appendix to this title for
     special provisions relating to submission of cost estimate for
     units not completed. See section 7 of Act 240 in the appendix to
     this title for special provisions relating to filing of tariffs.
        Cross References.  Section 1307 is referred to in sections
     528, 1309, 1317, 1318, 2211, 2212, 2806.1, 2807, 2808 of this
     title.