An Act amending Title 66 (Public Utilities) of the Pennsylvania Consolidated Statutes, in restructuring of electric utility industry, further providing for definitions and for duties of electric distribution companies.

PRINTER'S NO. 1425
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No. 1272
Session of
2025
INTRODUCED BY STAMBAUGH, BERNSTINE, M. MACKENZIE, M. JONES,
ROWE, COOK, GREINER, GILLEN, HAMM, RADER, WATRO, ZIMMERMAN,
KAUFFMAN, GAYDOS, KUTZ AND RYNCAVAGE, APRIL 21, 2025
REFERRED TO COMMITTEE ON ENERGY, APRIL 21, 2025
AN ACT
Amending Title 66 (Public Utilities) of the Pennsylvania
Consolidated Statutes, in restructuring of electric utility
industry, further providing for definitions and for duties of
electric distribution companies.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Section 2803 of Title 66 of the Pennsylvania
Consolidated Statutes is amended by adding definitions to read:
§ 2803. 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:
* * *
"Long-term resource adequacy agreement." An agreement
between an electric distribution company and another person or
corporation in which the electric distribution company invests
in a new generation resource in exchange for a portion of the
net revenues derived from the new generation resource, with the
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portion of the net revenues being credited to customers through
a nonbypassable surcharge mechanism established in accordance
with section 2807(e)(5.1)(i)(G) (relating to duties of electric
distribution companies).
"New generation resource." An electric generation facility
that provides electric generation supply to the bulk electric
system and that is newly constructed in the electric
distribution company's transmission control zone or service
territory, including, but not limited to, one or more of the
following resources:
(1) Natural gas.
(2) Nuclear energy.
(3) Battery storage.
(4) Alternative energy sources, as the term is defined
by section 2 of the act of November 30, 2004 (P.L.1672,
No.213), known as the Alternative Energy Portfolio Standards
Act.
* * *
"Resource adequacy." When the projection for all available
sources of electric supply, as submitted under section 524(a)(2)
(relating to data to be supplied by electric utilities), exceeds
the projection of electrical energy use and electrical demand by
a reasonable reserve margin.
"Resource inadequacy." When the projection of available
sources of electric supply as calculated for resource adequacy,
including capacity and generation availability during times of
demand, falls below a reasonable reserve margin.
* * *
Section 2. Section 2807(e)(3.2), (3.3), (3.4) and (3.7) of
Title 66 are amended and the subsection is amended by adding a
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paragraph to read:
§ 2807. Duties of electric distribution companies.
* * *
(e) Obligation to serve.--A default service provider's
obligation to provide electric generation supply service
following the expiration of a generation rate cap specified
under section 2804(4) (relating to standards for restructuring
of electric industry) or a restructuring plan under section
2806(f) is revised as follows:
* * *
(3.2) The electric power procured pursuant to paragraph
(3.1) shall include [a prudent mix] one or more of the
following:
(i) Spot market purchases.
(ii) Short-term contracts.
(iii) Long-term purchase contracts, entered into as
a result of an auction, request for proposal or bilateral
contract that is free of undue influence, duress or
favoritism, of more than four and not more than [20] 30
years. The default service provider shall have sole
discretion to determine the source and fuel type. Long-
term purchase contracts under this subparagraph may [not
constitute more than 25% of the] be used to procure up to
the full amount of the default service provider's
projected default service load [unless the commission,
after a hearing, determines for good cause that a greater
portion of load is necessary to achieve least cost
procurement]. This subparagraph shall not apply to
contracts executed under paragraph (5).
[(3.3) The commission may determine that a contract is
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required to be extended for a longer term of up to 20 years,
if the extension is necessary to ensure adequate and reliable
service at least cost to customers over time.]
(3.4) [The prudent mix of contracts] A contract entered
into pursuant to [paragraphs (3.2) and (3.3)] paragraph (3.2)
shall be designed to ensure:
(i) Adequate and reliable service at a reasonable
cost to consumers.
[(ii) The least cost to customers over time.]
(iii) Compliance with the requirements of paragraph
(3.1).
* * *
(3.7) At the time the commission evaluates the plan and
prior to approval, in determining if the default electric
service provider's plan obtains generation supply at [the
least] a reasonable cost, the commission shall consider the
default service provider's obligation to provide adequate and
reliable service to customers and that the default service
provider has obtained [a prudent mix of contracts to obtain
least cost on a long-term, short-term and spot market basis
and] a contract to obtain reasonable cost generation supply.
The commission shall make specific findings which shall
include the following:
(i) The default service provider's plan includes
prudent steps necessary to negotiate favorable generation
supply contracts.
(ii) The default service provider's plan includes
prudent steps necessary to obtain [least] reasonable cost
generation supply [contracts on a long-term, short-term
and spot market basis].
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(iii) Neither the default service provider nor its
affiliated interest has withheld from the market any
generation supply in a manner that violates Federal law.
* * *
(5.1) (i) An electric distribution company shall be
permitted to petition the commission to demonstrate that
a resource inadequacy exists, to which the following
shall apply:
(A) There shall be a rebuttable presumption that
a resource inadequacy exists upon a showing that the
reserve margin forecast or similar replacement
reserve margin forecast falls below the target
reserve margin in any of the planning years of the
applicable independent system operator or regional
transmission organization in the 10-year forward
installed reserve margin forecast. If the commission,
upon the petition of an electric distribution
company, finds that a resource inadequacy exists, the
electric distribution company shall be permitted to
invest in new generation resources up to and
including:
(I) the electric distribution company's 100%
direct ownership of new generation resources;
(II) the electric distribution company
entering into long-term resource adequacy
agreements to invest in new generation resources
that does not involve 100% direct ownership by
the electric distribution company; or
(III) both subclauses (I) and (II).
(B) The commission shall render a decision on an
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electric distribution company's petition within nine
months of the date of filing. The petition shall be
deemed approved if no decision is made within the
nine-month period.
(C) The petition shall include the results of at
least one request for proposals for new generation
resources from the third-party generation developers.
The request for proposals shall, at a minimum,
evaluate new generation resource proposals based on
the following factors:
(I) Impact on addressing resource
inadequacy.
(II) Certainty of permitting and timely
construction for new generation resources.
(III) Ability to mitigate risk to customers,
including price volatility.
(D) The commission shall determine which
proposal, including the electric distribution
company's proposal, is reasonable and prudent and
issue an order approving either the electric
distribution company's proposal or a proposal
submitted in response to the electric distribution
company's request for proposals. An electric
distribution company shall be permitted to recover
the cost of preparing, filing and litigating the
proposal, including the cost of conducting a request
for proposals, in accordance with clause (G).
(E) Electric distribution companies are not
required to include the results of a request for
proposals under clause (C) if the electric
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distribution company demonstrates that the time or
cost involved in conducting the request for proposals
would inhibit timely action in addressing threats to
resource adequacy.
(F) If the commission approves a proposal that
does not involve the electric distribution company's
direct ownership of new generation resources, the
commission shall order the electric distribution
company to enter into a long-term resource adequacy
agreement for the approved new generation resource.
The electric distribution company shall recover its
costs from entering into the long-term resource
adequacy agreement under clause (G). In addition to
the cost recovery under clause (G), the commission
shall allow an additional financial incentive at a
reasonable rate set by the commission to incentivize
electric distribution companies to enter into long-
term resource adequacy agreements under this section
with such rate not less than the electric
distribution company's weighted cost of capital and
no more than the electric distribution company's
authorized return on equity. In the absence of a
stated return on equity established in a distribution
rate case, the commission shall use the return on
equity for capital recovered under the distribution
system improvement charge under section 1353
(relating to distribution system improvement charge)
in effect at the time of the commission's order.
(G) Costs for new generation resources and long-
term resource adequacy agreements, including all
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costs of preparing, filing and litigating the
petition, shall be recovered from customers in all
customer classes through a nonbypassable cost-
recovery tariff mechanism in accordance with section
1307 (relating to sliding scale of rates;
adjustments), to ensure full and timely recovery of
all prudent and reasonable costs of investment by the
electric distribution company in new generation
resources, as approved by the commission, including,
but not limited to, administrative costs, operation
and maintenance expenses and a just and reasonable
pretax return on the electric distribution company's
capital investments in the new generation resources.
An electric distribution company or the owner of the
new generation resources under a long-term resource
adequacy agreement shall credit to customers through
a reconciliation of the nonbypassable cost-recovery
tariff mechanism a portion of the net revenues
received from offering resources associated with the
new generation resources into wholesale markets.
(H) The pretax return for the electric
distribution company's capital investments in the new
generation resources shall be calculated using the
Federal and State income tax rates, the utility's
actual capital structure and actual cost rates for
long-term debt and preferred stock as of the last day
of the three-month period ending one month prior to
the effective date of the surcharge mechanism
established in accordance with clause (G) and any
subsequent updates. The cost of equity shall be the
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equity return rate approved in the utility's most
recent fully litigated base rate proceeding for which
a final order was entered not more than two years
prior to the effective date of the surcharge
mechanism. If more than two years have elapsed
between the entry of a final order and the effective
date of the surcharge mechanism, the equity return
rate used in the calculation shall be the equity
return rate calculated by the commission in the most
recent Quarterly Report on the Earnings of
Jurisdictional Utilities released by the commission.
(ii) This paragraph shall supersede any conflicting
provisions of this title or other laws of this
Commonwealth and shall specifically supersede all
provisions of Chapter 28 (relating to restructuring of
electric utility industry).
* * *
Section 3. This act shall take effect in 60 days.
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