2010 Pennsylvania Code
Title 66 - PUBLIC UTILITIES
Chapter 28 - Restructuring of Electric Utility Industry
2804 - Standards for restructuring of electric industry.

     § 2804.  Standards for restructuring of electric industry.
        The following interdependent standards shall govern the
     commission's assessment and approval of each public utility's
     restructuring plan, oversight of the transition process and
     regulation of the restructured electric utility industry:
            (1)  The commission shall ensure continuation of safe and
        reliable electric service to all consumers in the
        Commonwealth, including:
                (i)  The maintenance of adequate reserve margins by
            electric suppliers in conformity with the standards
            required by the North American Electric Reliability
            Council (NERC) and the regional reliability council
            appropriate to each supplier, or any successors to those
            reliability entities, and in conformity with established
            industry standards and practices.
                (ii)  The installation and maintenance of
            transmission and distribution facilities in conformity
            with established industry standards and practices,
            including the standards set forth in the National
            Electric Safety Code.
            (2)  Consistent with the time line set forth in section
        2806 (relating to implementation, pilot programs and
        performance-based rates), the commission shall allow
        customers to choose among electric generation suppliers in a
        competitive generation market through direct access.
        Customers should be able to choose among alternatives such as
        firm and interruptible service, flexible pricing and
        alternate generation sources, including reasonable and fair
        opportunities to self-generate and interconnect. These
        alternatives may be provided by different electric generation
        suppliers.
            (3)  The commission shall require the unbundling of
        electric utility services, tariffs and customer bills to
        separate the charges for generation, transmission and
        distribution. The commission may require the unbundling of
        other services.
            (4)  The following caps on electric utility rates shall
        apply:
                (i)  For a period of 54 months from the effective
            date of this chapter or until an electric distribution
            utility is no longer recovering its transition or
            stranded costs through a competitive transition charge or
            intangible transition charge and all the customers of an
            electric distribution utility can choose an alternative
            provider of electric generation, whichever is shorter:
                    (A)  the total charges of an electric
                distribution utility for service to any customer who
                purchases generation from that utility shall not
                exceed the total charges that have been approved by
                the commission for such service as of the effective
                date of this chapter; and
                    (B)  for customers who purchase generation from a
                supplier other than the electric distribution
                utility, the charges of the utility for non-
                generation services that are regulated as of the
                effective date of this chapter, exclusive of the
                competitive transition charge and intangible
                transition charge, shall not exceed the non-
                generation charges that have been approved by the
                commission for such service as of the effective date
                of this chapter.
                (ii)  In addition to the rate cap set forth in
            subparagraph (i), for a period of nine years from the
            effective date of this chapter or until an electric
            distribution utility is no longer recovering its
            transition or stranded costs through a competitive
            transition charge or intangible transition charge and all
            customers of an electric distribution utility can choose
            an alternative provider of electric generation, whichever
            is shorter, the generation component of a utility's
            charges to customers who purchase generation from the
            utility, including the competitive transition charge and
            intangible transition charge, shall not exceed the
            generation component charged to the customers that has
            been approved by the commission for such service as of
            the effective date of this chapter.
                (iii)  An electric distribution utility may seek, and
            the commission may approve, an exception to the
            limitations set forth in subparagraphs (i) and (ii) only
            in any of the following circumstances:
                    (A)  The electric distribution utility meets the
                requirements for extraordinary rate relief under
                section 1308(e) (relating to voluntary changes in
                rates).
                    (B)  Either the electric distribution utility is
                required to begin payment under contracts with
                nonutility generation projects that have received
                commission orders, has been unable to mitigate such
                costs, such costs are not recoverable in a
                competitive generation market and such costs were not
                previously covered in the competitive transition
                charge or intangible transition charge, or the
                utility prudently incurs costs related to
                cancellation, buyout, buydown or renegotiation of
                nonutility generating project obligations of the
                utility consistent with section 527 (relating to
                cogeneration rules and regulations) and such costs
                were not previously covered in the competitive
                transition charge or intangible transition charge.
                Costs related to cancellation, buyout, buydown or
                renegotiation shall be recovered from ratepayers over
                a period not to exceed three years, unless the
                commission determines within its discretion to
                require a longer recovery period due to the magnitude
                of such costs, but shall be accounted for by the
                utility on a levelized basis over the total period in
                which the generation portion of the utility's rates
                are capped.
                    (C)  The electric distribution utility is subject
                to significant increases in the rates of Federal or
                State taxes or other significant changes in law or
                regulations that would not allow the utility to earn
                a fair rate of return.
                    (D)  The electric distribution utility is subject
                to significant increases in the unit rate of fuel for
                utility generation or the price of purchased power
                that are outside of the control of the utility and
                that would not allow the utility to earn a fair rate
                of return.
                    (E)  The electric distribution utility is
                directed by the commission or an independent system
                operator or its functional equivalent to make
                expenditures to repair or upgrade its transmission or
                distribution system.
                    (F)  The electric distribution utility seeks to
                increase its allowance for nuclear decommissioning
                costs to reflect new information not available at the
                time the utility's existing rates were determined,
                and such costs are not recoverable in the competitive
                generation market and are not covered in the
                competitive transition charge or intangible
                transition charge, and such costs would not allow the
                utility to earn a fair rate of return.
                    (G)  As permitted by paragraph (16).
                (iv)  Consistent with the requirements of due
            process, the commission may expedite proceedings that
            invoke the provisions of subparagraph (iii).
                (v)  If an electric distribution utility rolls its
            energy cost rate into base rates at a combined level that
            does not exceed its combined level of such rates which
            have been approved by the commission as of the effective
            date of this chapter, the utility shall not be required
            to reduce its capped rates below the capped level upon
            the complaint of any party if the commission determines
            that any excess earnings achieved under the cap are being
            utilized to mitigate transition or stranded costs for the
            benefit of ratepayers or to offset other known and
            measurable cost increases that would be recoverable under
            traditional ratemaking but are not included within the
            capped rates.
                (vi)  This paragraph shall not apply to new services
            offered for the first time after the effective date of
            this chapter.
            (5)  The commission may permit, but shall not require, an
        electric utility to divest itself of facilities or to
        reorganize its corporate structure.
            (6)  Consistent with the provision of section 2806, the
        commission shall require that a public utility that owns or
        operates jurisdictional transmission and distribution
        facilities shall provide transmission and distribution
        service to all retail electric customers in their service
        territory and to electric cooperative corporations and
        electric generation suppliers, affiliated or nonaffiliated,
        on rates, terms of access and conditions that are comparable
        to the utility's own use of its system.
            (7)  The commission shall require that restructuring of
        the electric utility industry be implemented in a manner that
        does not unreasonably discriminate against one customer class
        to the benefit of another.
            (8)  The commission shall establish for each electric
        utility an appropriate cost-recovery mechanism which is
        designed to fully recover the electric utility's universal
        service and energy conservation costs over the life of these
        programs.
            (9)  The commission shall ensure that universal service
        and energy conservation policies, activities and services are
        appropriately funded and available in each electric
        distribution territory. Policies, activities and services
        under this paragraph shall be funded in each electric
        distribution territory by nonbypassable, competitively
        neutral cost-recovery mechanisms that fully recover the costs
        of universal service and energy conservation services. The
        commission shall encourage the use of community-based
        organizations that have the necessary technical and
        administrative experience to be the direct providers of
        services or programs which reduce energy consumption or
        otherwise assist low-income customers to afford electric
        service. Programs under this paragraph shall be subject to
        the administrative oversight of the commission which will
        ensure that the programs are operated in a cost-effective
        manner.
            (10)  The commission shall establish rates for
        jurisdictional transmission and distribution services and
        shall continue to regulate distribution services for new and
        existing customers in accordance with this chapter and
        Chapter 13 (relating to rates and rate making).
            (11)  The time line for the transition to and phase-in of
        direct access to competitive electric generation shall be in
        accordance with section 2806.
            (12)  The commission has the authority to order utility
        participation in retail access pilot programs as set forth in
        section 2806 and as further implemented or modified by the
        commission, with direct access to begin on April 1, 1997. The
        commission shall conduct milestone reviews of the transition
        to retail electric generation competition to assure a
        technically workable and equitable transition period.
            (13)  Consistent with section 2808 (relating to
        competitive transition charge), the commission has the power
        and duty to approve a competitive transition charge for the
        recovery of transition or stranded costs it determines to be
        just and reasonable to recover from ratepayers.
            (14)  The transition to a competitive generation market
        shall be orderly, protect electric system reliability, be
        fair to ratepayers and provide the investors in Pennsylvania
        electric utilities with a fair opportunity to fully recover
        the amount of transition or stranded costs that the
        commission determines to be just and reasonable.
            (15)  At the time each utility files its restructuring
        plan with the commission, the utility shall submit an initial
        plan that sets forth how it shall meet its universal service
        and energy conservation obligations.
            (16)  The following shall apply:
                (i)  The commission shall issue regulations that
            permit the electric distribution company to recover any
            change in its State tax liability under sections 2806(h),
            2809(c) (relating to requirements for electric generation
            suppliers) and 2810 (relating to revenue-neutral
            reconciliation) or in its liability under 52 Pa. Code §§
            69.51 through 69.56 (relating to inclusion of State taxes
            and gross receipts taxes in base rates) to the extent
            that the resulting rate does not exceed the rate cap
            established in this section except as provided in this
            chapter.
                (ii)  With regard to any portion of the change in an
            electric distribution company's tax liability under
            section 2810 which would cause it to exceed the rate cap,
            the electric distribution company may file a single issue
            rate proceeding under section 1308(a) to recover that
            amount. The commission shall adjudicate, within 60 days,
            whether the resulting rates are just and reasonable.
                (iii)  With regard to any portion of the change in an
            electric distribution company's tax liability under
            sections 2806(h) and 2809(c) which would cause it to
            exceed the price cap, upon certification to the
            commission by affidavit that the electric distribution
            company has not collected the taxes due pursuant to the
            tariff indemnification provisions required by section
            2810(m) and that the electric distribution company and
            the Department of Revenue have not collected the taxes
            due pursuant to the other means set forth in sections
            2806(g)(3)(i) and (ii) and 2809(c) to recover the taxes
            due and any interest thereon, the electric distribution
            utility shall be permitted to recover that amount in the
            State Tax Adjustment Surcharge.

        Cross References.  Section 2804 is referred to in sections
     2803, 2806, 2807, 2812 of this title.