Cooperatives -
CHAPTER 74 GENERATION CHOICE FOR CUSTOMERS OF ELECTRIC COOPERATIVES Sec. 7401. Short title of chapter. 7402. Application. 7403. Declaration of policy. 7404. Definitions. 7405. Customer choice in electric cooperative service territories. 7406. Competition by electric cooperatives. 7407. Transition surcharge and stranded cost recovery. 7408. Option to elect commission review. 7409. Universal service and energy conservation. 7410. Savings provision and repealer. Enactment. Chapter 74 was added December 3, 1996, P.L.802, No.138, effective January 1, 1997. Cross References. Chapter 74 is referred to in sections 2803, 2805, 2809 of Title 66 (Public Utilities). § 7401. Short title of chapter. This chapter shall be known and may be cited as the Electricity Generation Choice for Customers of Electric Cooperatives Act. § 7402. Application. The provisions of 66 Pa.C.S. Ch. 28 (relating to restructuring of electric utility industry) shall not apply to electric cooperative corporations or to the laws relating to electric cooperative corporations. § 7403. Declaration of policy. The General Assembly finds and declares as follows: (1) Because of advances in electric generation technology and Federal initiatives to encourage greater competition in the wholesale electric market, it is now in the public interest to permit retail customers to obtain direct access to a competitive generation market as long as safe and affordable service is available at levels of reliability that are currently enjoyed by the citizens and businesses of this Commonwealth. (2) Electric cooperative corporations which own and operate electric generation, transmission or distribution facilities in this Commonwealth, which are operated on a nonprofit basis and which are owned and are democratically controlled by the member-consumers which they serve are an essential part of the rural infrastructure and an important participant in the economic development and vitality of significant areas of this Commonwealth. (3) In providing for customer choice for the member- consumers of electric cooperative corporations, the financial integrity, operations and independence of electric cooperative corporations must be protected and preserved, while comparable standards are provided for electric suppliers for the provision of service to new loads, by providing for the continued exemption for electric cooperative corporations from the jurisdiction and control of the commission and by providing for a separate system of choice for persons in the service territories of electric cooperative corporations. (4) The complete right of electric cooperative corporations to compete with others in providing electric and other services must be provided for throughout this Commonwealth. § 7404. Definitions. The following words and phrases when used in this chapter shall have the meanings given to them in this section unless the context clearly indicates otherwise: "Commission." The Pennsylvania Public Utility Commission. "Departing member." A member-consumer served at retail by an electric cooperative corporation that has given notice of intent to receive generation service from another source or that is otherwise in the process of changing generation suppliers. These persons shall nonetheless remain members of the electric distribution cooperative corporation for purposes of distribution service. "Electric-consuming facilities." As defined in section 7352 (relating to definitions). "Retail electric service." As defined in section 7352 (relating to definitions). "Service territory." The service territory of electric cooperative corporations established in Chapter 73 (relating to electric cooperative corporations) as interpreted by existing case law. "Transition surcharge." The total stranded costs payable to an electric cooperative corporation as a condition precedent to a consumer-member of an electric cooperative corporation having the right to receive electric generation service from another source. § 7405. Customer choice in electric cooperative service territories. (a) General rule.-- (1) An electric cooperative corporation shall provide open and nondiscriminatory access and allow other electric generation suppliers that have been licensed or certified by the commission or jurisdictional public utilities to utilize the cooperative's facilities to make sales to end-use customers it serves. A person that, on or after the effective date of this chapter, receives retail electric service at an electric-consuming facility from an electric cooperative in this Commonwealth or owns or occupies an electric-consuming facility within the service territory of an electric cooperative corporation shall have the right to purchase and receive electric generation from another source at the conclusion of a four-year transition and phase-in period beginning on the effective date of this chapter and ending January 1, 2001. The following schedule for phased implementation of retail access shall be adhered to unless the commission should determine to extend the transition and phase-in period for its jurisdictional electric utilities under 66 Pa.C.S. § 2806 (relating to implementation, pilot programs and performance-based rates), in which case the transition and phase-in period for electric cooperative corporations shall be substantially similar to that established by the commission for direct access to the competitive electric generation market by customers of electric utilities: (i) As of January 1, 1999, a maximum of 33% of the peak load of each customer class shall have the opportunity for direct access. (ii) As of January 1, 2000, a maximum of 66% of the peak load of each customer class shall have the opportunity for direct access. (iii) As of January 1, 2001, all customers of electric cooperative corporations in this Commonwealth shall have the opportunity for direct access. (2) If the commission establishes a phase-in period which is not uniform among electric utilities, then the phase-in period for persons in the service territories of electric cooperative corporations may be as long as that of the longest phase-in period permitted by the commission. No electric cooperative corporation may utilize the transmission or distribution system of an electric utility regulated by the commission for the purpose of providing generation electric service until the electric cooperative begins its phase-in period. No electric utility regulated by the commission may utilize the transmission or distribution system of an electric cooperative corporation until the electric utility begins its phase-in period other than for pilot programs. (3) Electric cooperative corporations may develop retail pilot programs for their own service territories. (4) Customer bills issued by an electric cooperative corporation shall contain unbundled charges sufficient to enable the customer to determine the generation component of and basis for those charges. Electric generation shall be delivered to the departing member by the electric cooperative which has the exclusive right to provide retail electric service in such area under Chapter 73 (relating to electric cooperative corporations) at the nondiscriminatory prices, terms and conditions determined by the electric cooperative corporation. (5) It shall be the duty of an electric cooperative corporation which is a borrower from the Rural Utilities Service of the United States Department of Agriculture to maintain the integrity and safety of its distribution system in a manner to provide service to all customers connected to such system consistent with standards established by the Rural Utilities Service. It shall be the duty of an electric cooperative corporation which is not a borrower from the Rural Utilities Service to maintain the integrity and safety of its distribution system in a manner to provide service to all customers connected to such system consistent with standards of the National Electric Safety Code. (6) The right in this subsection to take generation service from another source and the duty of an electric cooperative corporation to deliver service shall be expressly subject to and contingent upon the full advance satisfaction by a departing member of all of the following conditions, unless waived by the electric cooperative corporation: (i) The departing member must give written notice of intent to receive generation service from another source to the electric cooperative corporation. (ii) With the written notice of intent required by subparagraph (i), the departing member must provide to the electric cooperative corporation written evidence reasonably satisfactory to the electric cooperative corporation that the departing member has acquired all necessary transmission services and related ancillary services as may be necessary to transmit the generation service from the alternative electric supplier to the distribution system of the electric cooperative corporation. (iii) The departing member must have made all payments for electric service or other services or products rendered to date by the electric cooperative corporation and must not otherwise be in violation or default of any membership requirement, rule or regulation of the electric cooperative corporation. (iv) The departing member or the provider of the competing generation source must make full payment of a transition surcharge or transition surcharges to each electric cooperative corporation which provides distribution, transmission or generation service, directly or indirectly, to the departing member or associated electric consuming facility. During the conduct of a pilot program, the electric cooperative corporation may choose not to apply the transition surcharge to departing members. The duty to pay a transition surcharge by a departing member and the right of an electric cooperative corporation to collect a transition surcharge shall not apply to departing members who become new members of an electric cooperative corporation following the expiration of the phase-in provided for in this chapter. (b) Effectiveness of existing contracts.--Notwithstanding the rights set forth in subsection (a), where an agreement for electric service evidenced by a signed writing between an electric cooperative corporation and any person exists prior to the effective date of this chapter, the person shall be bound by its terms and conditions and shall not have the right to receive generation service from another source until the expiration of the term of the agreement or otherwise pursuant to the terms and conditions of the agreement. § 7406. Competition by electric cooperatives. (a) Service rights.--Electric cooperative corporations may provide generation electric service to any person and at any location within this Commonwealth. In the case where an electric cooperative corporation provides generation electric service at retail to a person located outside of its service territory and within the franchised territory of an electric utility subject to 66 Pa.C.S. (relating to public utilities), it must first have been certified by the commission pursuant to subsection (e) and, unless it is otherwise exempt under subsection (d), it shall comply with all relevant terms, conditions and obligations applicable to electric generation suppliers pursuant to 66 Pa.C.S. Electric cooperative corporations shall not be required to be licensed by the commission and shall be exempt as otherwise provided for in this chapter in any and all other respects from the jurisdiction and control of the commission. To the extent such services are not provided for resale to others, such persons must be members of the electric cooperative corporation. It shall not be necessary for an electric cooperative corporation to amend its bylaws to permit it to provide service to any person at any location within this Commonwealth. All other utilities and persons owning, operating or controlling electric transmission or distribution facilities within this Commonwealth shall be obligated to transmit and deliver generation service by electric cooperative corporations at the same prices and at the same terms and conditions as are approved by the commission or the Federal Energy Regulatory Commission for similar service to others. (b) New load termination conditions.--In the case where an electric cooperative corporation provides generation service under subsection (a) to a person not located within its exclusive retail electric service territory and, consistent with any then-existing contract rights of the electric cooperative corporation, such person subsequently desires to receive generation service from another source, the departing member shall have the right to do so, contingent upon the full advance satisfaction of the following conditions, unless waived by the electric cooperative corporation: (1) The departing member must give written notice of intent to receive generation service from another source to the electric cooperative corporation prior to the initiation of the new generation service. (2) The departing member must have made all payments for electric service or other services or products rendered to date by the electric cooperative corporation. (c) Relation to utilities gross receipts tax.-- (1) To the extent that an electric cooperative corporation provides generation electric service at retail to a person in this Commonwealth and located outside of its service territory as set forth in subsection (a), then for that limited purpose and in that limited area it shall be deemed to be the statutory equivalent of an "electric light company," a "waterpower company" and a "hydro-electric company" for purposes of section 1101 of the act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of 1971. (2) To the extent that an electric cooperative corporation provides generation electric service at retail to a person in this Commonwealth and located outside of its service territory as set forth in subsection (a) and to the extent that the tax on sales of electric energy under section 1101 of the Tax Reform Code of 1971 has not previously been imposed on such generation electric service or electric energy, then for that limited purpose and in that limited area such retail sales to end-use consumers under this chapter shall be deemed "sales of electric energy" for purposes of section 1101 of the Tax Reform Code of 1971. (d) Small cooperative exceptions.--Because of the relatively small number of consumers which electric cooperative corporations serve, their relatively small electric loads, the nonprofit nature of their operations and their other unique characteristics, the General Assembly finds that it may be unduly burdensome and costly for small electric cooperative corporations to comply with the relevant terms, conditions and obligations applicable to electric generation suppliers pursuant to 52 Pa. Code Ch. 56 (relating to standards and billing practices for residential utility service) and regulations promulgated under 66 Pa.C.S. Ch. 28 (relating to restructuring of electric utility industry) when serving persons located outside of their service territories. Notwithstanding the provisions of subsection (a) requiring an electric cooperative corporation when serving persons outside of its territory to comply with relevant terms, conditions and obligations of electric generation suppliers pursuant to 52 Pa. Code Ch. 56 and regulations promulgated under 66 Pa.C.S. Ch. 28, an electric cooperative corporation may petition the commission to grant exemption from compliance with any or all such relevant terms, conditions or obligations or otherwise may petition the commission to establish and grant streamlined or reduced terms, conditions or standards. The commission shall approve such exemption, streamlining or reduction upon reaching a finding that the proposal is in the public interest. Exemptions shall not be transferable to any entity without prior commission approval. To the extent that an electric cooperative corporation, on its own or in partnership or combination with any other entity which operates on a for-profit basis, by sales outside of its service territory, increases its total net electric load by more than 20% of its total net electric load as of the effective date of this chapter, this subsection shall not apply. Nothing in this chapter shall be construed as allowing any entity, either through formation of a cooperative or through any other method described in this chapter, to avoid responsibility for paying a competitive transition charge that it would otherwise be required to pay pursuant to 66 Pa.C.S. Ch. 28. (e) Commission certification.--Prior to an electric cooperative corporation having the right to provide generation electric service at retail to a person located outside of its service territory as defined by Subchapter C of Chapter 73 (relating to unincorporated area certified territory) and within the franchised territory of an electric utility subject to 66 Pa.C.S., it must first have obtained from the commission a certification of its financial responsibility and technical capability, including the assurance that adequate reserve margins of electric supply are maintained. An application for certification by an electric cooperative corporation must be made to the commission in writing, be verified by oath or affirmation and be in such form and contain such information as the commission may require. A certification shall be issued by the commission to any qualified applicant if it is found that the applicant is fit, willing and able to perform properly the service proposed in conformity with the provisions of this chapter. No certification issued under this subsection may be transferred without prior commission approval. Cross References. Section 7406 is referred to in section 2810 of Title 66 (Public Utilities). § 7407. Transition surcharge and stranded cost recovery. (a) Transition surcharge.--A transition surcharge is the total stranded costs payable to an electric cooperative corporation as a condition precedent to a consumer-member of an electric cooperative corporation having the right to receive electric generation service from another source. (b) Determination of stranded costs.--Total stranded costs shall be reasonably determined by an electric cooperative and may include: (1) The pro rata share in all investments in electric cooperative distribution, transmission and generation plant and facilities. (2) The pro rata share of foreseeable decommissioning costs of generation facilities. (3) The pro rata share of all effective electric cooperative contractual commitments to others, regulatory assets, deferred debits and credits, fixed operation and maintenance expenses, expenditures made for the benefit of the departing customer and administrative and other costs incurred or to be incurred by an electric cooperative as a result of a decision by a consumer-member to take electric generation service from another source. (c) Determination of pro rata share.--The pro rata share of electric cooperative stranded costs shall be determined on the basis of historical energy and capacity usage by this consumer- member compared to historical total energy and capacity usage of such electric cooperative or by direct assignment where applicable. § 7408. Option to elect commission review. (a) General rule.--The transition surcharge assessed by an electric cooperative corporation under this chapter generally shall not be subject to the jurisdiction or control of the commission. An electric cooperative corporation shall have the option of submitting its proposed transition surcharge for review by the commission in the manner set forth in subsection (b). (b) Submission to commission.--Either by an affirmative vote of two-thirds of all members of the corporation or by an affirmative vote of two-thirds of all directors at a meeting of the members or directors called for the purpose, an electric cooperative corporation may elect the option of submitting a transition surcharge which has been adopted by its board of directors to the commission for review and approval. Within 30 days of such action by an electric cooperative corporation, the secretary of the corporation shall certify such an action by the members or directors, as the case may be, and submit the transition surcharge to the secretary of the commission requesting review and approval. (c) Commission determination.--The commission, within 90 days after a submission under subsection (b), shall make a determination as to whether the transition surcharge of an electric cooperative corporation is just and reasonable and shall issue an order reflecting its determination. If no order is issued within 90 days, the transition surcharge shall be deemed to be approved as being just and reasonable, and all review proceedings shall be terminated. If no order is issued by the commission within the 90 days, no appeal may be taken relative to the effectiveness of the transition surcharge, and it shall have full force and effect. (d) Alternative.--An electric cooperative corporation may take action by a majority vote of its board of directors to alter the amount of its transition surcharge. If the transition surcharge has previously been submitted to the commission for review and approval under subsection (b) and if the change by the board of directors causes a reduction of the current transition surcharge of greater than 10%, that action by the board of directors shall have the effect of immediately terminating any pending approval proceeding by the commission and ending its jurisdiction and control over the subject transition surcharge. § 7409. Universal service and energy conservation. (a) General rule.--Electric cooperative corporations shall ensure that universal service and energy conservation policies, activities and services that they provide as of the effective date of this chapter to assist customers who are low-income to afford electric service are appropriately funded and available within their territories. Such activities shall be funded by nonbypassable, competitively neutral cost-recovery mechanisms that fully recover the costs of universal service and energy conservation services. (b) Definition.--As used in this section, the term "universal service and energy conservation" shall mean policies, protections and services that help low-income customers to maintain electric service, including customer assistance programs and policies and services that help low-income customers to reduce or manage energy consumption in a cost- effective manner, such as the low-income usage reduction programs and customer education. § 7410. Savings provision and repealer. (a) Savings.--Except as set forth in subsection (b), all provisions of Chapter 73 (relating to electric cooperative corporations) are saved from repeal and shall remain in full force and effect. (b) Repeal.-- (1) Those provisions of Subchapter C of Chapter 73 (relating to unincorporated area certified territory) are repealed insofar as they conflict with the right of a departing member to take generation service from an alternative generation supplier. (2) Those provisions of Subchapters A (relating to preliminary provisions) and B (relating to powers, duties and safeguards) of Chapter 73 are repealed insofar as they conflict with the right of an electric cooperative corporation to provide generation service to any person and at any location within this Commonwealth.