PROPOSED RULEMAKING
PENNSYLVANIA PUBLIC UTILITY COMMISSION
[52 PA. CODE CH. 54]
[28 Pa.B. 490] [L-970127]
Adjustment of Electric Distribution Company Rates for Changes in State Tax Liability The Pennsylvania Public Utility Commission (Commission) on November 6, 1997, adopted a proposed rulemaking to address the requirement of 66 Pa.C.S. § 2804(16) (relating to standards for restructuring of electric industry) that the Commission by regulation allow an electric distribution company (EDC) to recover changes in its State tax liability by establishing the time, manner, form and information content of the filings required for seeking recovery of changes in its State tax liability under 66 Pa.C.S. §§ 2801--2812 (relating to Electricity Generation Customer Choice and Competition Act) (act). The contact persons are Bob Wilson, Manager, Finance/Tariffs, Bureau of Fixed Utilities Services (717) 783-6162 and Kevin J. Moody, Assistant Counsel, Law Bureau (717) 787-2126.
Executive Summary
On December 3, 1996, Governor Tom Ridge signed into law the act which is codified as Chapter 28 (relating to restructuring of electric utility industry). The act establishes standards and procedures to create direct access by retail customers to the competitive market for electricity generation while maintaining safe and reliable electric service and tax revenue neutrality to this Commonwealth. The act includes two new taxes: a use tax on electricity to compliment the tax on gross receipts from retail sales of electricity, and a revenue-neutral reconciliation (RNR) allowing the Commonwealth to recoup State tax losses that may result from the restructuring of the electric industry and the transition thereto.
The proposed regulations address the requirement of section 2804(16) of the act that the Commission by regulation allow an EDC to recover changes in its State tax liability by establishing the time, manner, form and information content of the filings required by an EDC seeking recovery of changes in its State tax liability under the code.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on January 16, 1998, the Commission submitted a copy of these proposed regulations to the Independent Regulatory Review Commission (IRRC) and to the Chairpersons of the House Committee on Consumer Affairs and the Senate Committee on Consumer Protection and Professional Licensure. In addition to submitting the proposed regulations, the Commission has provided IRRC and the Committees with a copy of a detailed Regulatory Analysis Form prepared by the agency in compliance with Executive Order 1996-1. A copy of this material is available to the public upon request.
If the Legislative Committees have objections to any portion of the proposed regulations, they will notify the Commission within 20 days of the close of the public comment period. If IRRC has objections to any portion of the proposed regulations, it will notify the Commission within 10 days of the close of the Legislative comment period. The notification shall specify the regulatory review criteria which have not been met by that portion. The Regulatory Review Act specifies detailed procedures for review, prior to final publication of the regulations, by the Commission, the General Assembly and the Governor of objections raised.
Public meeting held
November 6, 1997Commissioners Present: John M. Quain, Chairperson; Robert K. Bloom, Vice Chairperson; John Hanger; David W. Rolka; Nora Mead Brownell
Order By the Commission:
On December 3, 1996, Governor Tom Ridge signed into law 66 Pa.C.S. §§ 2801--2812 (relating to Electricity Generation Customer Choice and Competition Act) (act). The act establishes standards and procedures to create direct access by retail customers to the competitive market for electricity generation while maintaining tax revenue neutrality to the Commonwealth.
Recognizing that restructuring the electric industry would affect the State taxes associated with the production, delivery and sale of electricity in this Commonwealth, the General Assembly enacted a use tax on electricity in addition to the tax on gross receipts from retail sales of electric energy. 66 Pa.C.S. §§ 2806(g)(3)(iii) and 2809(c)(2). The Legislature also established a RNR to ''recoup losses that may result from the restructuring of the electric industry and the transition thereto.'' 66 Pa.C.S. § 2810(a). The intent of the RNR is to maintain the proportional tax obligations among customer classes and individual EDCs.
Section 2804(16) of the act requires the Commission to issue regulations that allow an EDC to recover changes in its State tax liability to the extent that the resulting rate does not exceed the rate cap established, except as provided in the act. 66 Pa.C.S. § 2804(16)(i). The act also permits an EDC to seek recovery of State tax liability changes under the act when the recovery would produce rates above the rate cap.
Regulations to implement these provisions of the act were developed by the Electric Competition Tax Working Group, which includes Commission staff, the Office of Consumer Advocate, the Office of Small Business Advocate, the Department of Revenue, the Pennsylvania Electric Association and its member EDCs and electricity suppliers. The proposed regulations establish the time, manner, form and information content of the filings required by an EDC seeking recovery of changes in its State tax liability under the act.
Specifically, § 54.93 (relating to manner of filing) requires proposed rate changes under Chapter 54 (relating to adjustment of electric generation customer choice) to comply with the existing Commission regulations in § 53.51(c) and (d) (relating to perfection of tariffs or tariff supplements and service of proposed rate changes).
Section 54.94 (relating to recovery of changes in State tax liability) sets forth the information that must be provided when an EDC seeks recovery of changes in its State tax liability when the resulting rates do not exceed the rate cap.
Section 54.95 (relating to recovery of RNR tax liability producing rates above the rate cap) provides information and procedures that apply when an EDC seeks recovery of changes in its RNR tax liability when the resulting rates would exceed the rate cap.
Section 54.96 (relating to recovery of sections 2806(g) and 2809(c) tax liability producing rates above the rate cap) provides information and procedures that apply when an EDC seeks recovery of changes in its tax liability under sections 2806(g) and 2809(c) of the act when the resulting rates would exceed the rate cap.
Section 54.97 (relating to State tax adjustment surcharge) provides information and procedures that apply when an EDC seeks to modify its State Tax Adjustment Surcharge (STAS) to recover new or increased taxes under the act.
Finally, § 54.98 (relating to customer notice requirements) requires proposed rate increases under Chapter 54 to comply with existing Commission regulations in §§ 53.41--53.45 (relating to posting of tariffs and notices).
Accordingly, under sections 501, 1301 and 2804(16) of the Public Utility Code, 66 Pa.C.S. §§ 501, 1301 and 2804(16), and the Commonwealth Documents Law (45 P. S. § 1201 et seq.) and the regulations promulgated thereunder in 1 Pa. Code §§ 7.1--7.4, we propose to adopt §§ 54.91--54.98 to read as set forth in Annex A. Therefore,
It is Ordered that:
1. A rulemaking docket be opened to implement the act to permit an EDC to recover changes in its State tax liability under the act as set forth in Annex A of this order.
2. The Secretary of the Commission submit this order and Annex A to the Office of the Attorney General for preliminary review as to form and legality.
3. The Secretary of the Commission submit a copy of this order and Annex A to the Governor's Budget Office for review of fiscal impact.
4. The Secretary of the Commission submit this order and Annex A for informal review by the designated standing committees of both Houses of the General Assembly, and for informal review and comments by IRRC.
5. The Secretary of the Commission shall certify this order and Annex A and deposit them with the Legislative Reference Bureau for publication in the Pennsylvania Bulletin.
6. Within 30 days of publication of this order in the Pennsylvania Bulletin, an original and 15 copies of any comments concerning this order be submitted to the Commission. Alternate formats of this document are available to persons with disabilities and may be obtained by contacting Shirley M. Leming, Regulatory Coordinator, Law Bureau at (717) 772-4597 or through the AT&T Relay Center at (800) 654-5988.
JAMES J. MCNULTY,
SecretaryFiscal Note: 57-188. No fiscal impact; (8) recommends adoption.
Annex A
TITLE 52. PUBLIC UTILITIES
PART I. PUBLIC UTILITY COMMISSION
Subpart C. FIXED SERVICE UTILITIES
CHAPTER 54. ELECTRICITY GENERATION CUSTOMER CHOICE
Subchapter D. ADJUSTMENT OF ELECTRIC DISTRIBUTION COMPANY RATES FOR CHANGES IN STATE TAX LIABILITY Sec.
54.91. Purpose. 54.92. Definitions. 54.93. Manner of filing. 54.94. Recovery of changes in State tax liability. 54.95. Recovery of RNR tax liability producing rates above the rate cap. 54.96. Recovery of sections 2806(g) and 2809(c) tax liability producing rates above the rate cap. 54.97. State tax adjustment surcharge. 54.98. Customer notice requirements. § 54.91. Purpose.
This subchapter implements Chapter 28 of the code (relating to the Electricity Generation Customer Choice and Competition Act) governing adjustments to the rates of an EDC to reflect changes in its State tax liability. This subchapter establishes the time, manner, form and information content of the filings required by an EDC seeking recovery of changes in its State tax liability. This subchapter establishes specialized procedures to supplement existing procedures relating to public utility rate changes. Finally, this subchapter establishes the effective dates of relevant EDC rate adjustments and the applicable customer notification requirements for these adjustments.
§ 54.92. Definitions.
The following words and terms, when used in this subchapter, have the following meanings, unless the context indicates otherwise:
Code--The Public Utility Code, 66 Pa.C.S. §§ 101--3316.
CTC--competitive transition charge--The competitive transition charge as defined in section 2803 of the code (relating to definitions).
Customer--A retail electric customer as defined in section 2803 of the code.
Department--The Department of Revenue of the Commonwealth.
EDC--electric distribution company--An EDC as defined in section 2803 of the code.
Electric generation supplier or electricity supplier--An electric generation supplier or an electricity supplier as defined in section 2803 of the code.
ITC--intangible transition charge--The intangible transition charge as defined in section 2812(g) of the code (relating to approval of transition bonds).
Rate cap or price cap--The limits on the allowable charges of an EDC, and the exceptions and exclusions from these limits, as prescribed by section 2804(4) of the code (relating to standards for restructuring of electric industry).
RNR--revenue neutral reconciliation--See section 2810 of the code (relating to revenue-neutral reconciliation).
STAS--State tax adjustment surcharge--The State tax adjustment surcharge as defined in § 69.51 (relating to definitions).
Transition or stranded costs--The transition or stranded costs as defined in section 2803 of the code.
§ 54.93. Manner of filing.
Each proposed change in rates in this subchapter shall be perfected in accordance with § 53.51(c) (relating to general) and shall be served in accordance with § 53.51(d).
§ 54.94. Recovery of changes in State tax liability.
(a) The Commission will permit an EDC to recover from customers changes in its State tax liability arising from sections 2806(g), 2809(c) and 2810 of the code (relating to implementation, pilot programs and performance-based rates; requirements for electric generation suppliers; and revenue-neutral reconciliation) and §§ 69.51--69.56 (relating to inclusion of State taxes and gross receipts taxes in base rates) to the extent that the resulting rates do not exceed the rate or price cap.
(b) An EDC seeking recovery of changes in its State tax liability under this section shall provide the following information to the Commission:
(1) A description of the surcharge proposed by the EDC.
(2) A statement that the surcharge becomes effective for service rendered beginning 30 days after perfection as provided in § 53.51(c) (relating to general).
(3) If applicable, the calculations supporting the amount of its tax liability arising from the RNR.
(4) If applicable, the amount of payments under section 2806(g) and 2809(c) of the code for the immediately preceding 12-month period ending on June 30, plus interest accrued at 6% per year from the time of payment until the time the payments are reflected in customer rates, supported by a copy of the notification received from the Department assessing these taxes and related interest.
§ 54.95. Recovery of RNR tax liability producing rates above the rate cap.
An EDC proposing to increase its rates above the rate cap due to the RNR shall file a single issue rate proceeding under section 1308(a) of the code (relating to voluntary changes in rates). The Commission will determine whether the EDC's filing accurately represents the amount of its tax liability arising from the RNR and whether recovery of its RNR tax liability causes the resulting rates to exceed the rate cap. Within 30 days of receiving the Department's notice of the change in the applicable tax rate established by the RNR, an EDC proposing to increase its rates as described in this section shall provide the following information to the Commission:
(1) A statement that the reason for the proposed rate increase is to permit the EDC to recover that portion of its RNR tax liability that produces rates above the rate cap.
(2) A proof of revenue calculation by rate class demonstrating the impact of the proposed rate increase upon each class of customers.
(3) A description of the surcharge for recovering the increased tax liability.
(4) A notice that the surcharge becomes effective 60 days from the date the EDC files the proposed rate increase.
§ 54.96. Recovery of sections 2806(g) and 2809(c) tax liability producing rates above the rate cap.
(a) The Commission will permit an EDC to recover, through its State Tax Adjustment Surcharge (STAS) or other appropriate mechanism, changes in its State tax liability and related interest under sections 2806(g) and 2809(c) of the code (relating to implementation, pilot programs and performance-based rates; and requirements for electric generation suppliers) when that recovery produces rates above the rate cap, upon certification by affidavit that the following exist:
(1) The EDC has not recovered the taxes due under its tariff indemnification provisions.
(2) The Department has not collected the taxes due under the other means in sections 2806(g)(3)(iii) and 2809(c)(2) of the code.
(b) In addition to the affidavit required under subsection (a), the EDC shall file with the Commission:
(1) A statement of the amount of payments under sections 2806(g) or 2809(c) of the code for the immediately preceding 12-month period ending on June 30, plus interest accrued at 6% per year from the time of payment until the time the payments are reflected in customer rates, supported by a copy of the notification received from the Department assessing these taxes and related interest.
(2) A proof of revenue calculation by rate class demonstrating the impact of the proposed rate increase upon each class of customers.
(3) A description of the surcharge for recovering the increased tax liability.
(4) A statement that the surcharge becomes effective for service rendered beginning 30 days after perfection as provided in § 53.51(c) (relating to general).
§ 54.97. State tax adjustment surcharge.
(a) Every EDC subjected to new or increased State taxes under sections 2806(g), 2809(c) and 2810 of the code (relating to implementation, pilot programs and performance-based rates; requirements for electric generation suppliers; and revenue-neutral reconciliation) and §§ 69.51--69.56 (relating to inclusion of State taxes and gross receipts taxes in base rates) that proposes to modify its STAS to recover these taxes shall include the following information in its surcharge calculation:
(1) The amounts paid under sections 2806(g) and 2809(c) of the code for the immediately preceding 12-month period ending on June 30, plus interest accrued at 6% per year from the time of payment until the time the payments are reflected in customer rates; the EDC shall also provide an affidavit that it has not recovered these taxes under the other means in sections 2806(g)(3)(iii) and 2809(c)(2) of the code.
(2) Adjustments to the gross receipts tax rate under to the RNR.
(3) When applicable, items 1 and 2 shall be added to any other amounts recoverable under the STAS.
(4) The total of item 3 divided by a factor which is the complement of the gross receipts tax rate, adjusted by the RNR to the extent that recovery is approved by the Commission under section 2804(16) of the code (relating to standards for restructuring of electric industry).
(5) The quotient of item 4 divided by gross intrastate operating revenues derived from service under rates subject to the jurisdiction of the Commission for the most completed calendar year, exclusive of the revenues produced by the surcharge permitted by subsection (a). This quotient shall be expressed as a percentage.
(6) If the EDC increased or decreased its rates under the Commission's jurisdiction during or after the most recently completed calendar year, it shall include in its computation the appropriate adjustments to items 1, 2, 3, 4 and 5, as if the increased or decreased rates had been in effect for all of that calendar year.
(b) For rate changes that require the STAS to be filed under this section, every EDC shall provide the following information to the Commission:
(1) For a change in an EDC's RNR tax liability contained in a notice from the Department, the information described in § 54.94(b)(3) (relating to recovery of changes in State tax liability).
(2) For amounts paid by an EDC under sections 2806(g) and 2809(c) of the code, the information described in § 54.94(b)(4).
(c) Every tariff or tariff supplement modifying an EDC's STAS under this section shall carry an effective date which is 10 days after its filing with the Commission and shall be applicable for service rendered on or after the effective date.
§ 54.98. Customer notice requirements.
(a) An EDC proposing to increase its rates under § 54.94 or § 54.96 (relating to recovery of changes in State tax liability; and recovery of sections 2806(g) and 2809(c) tax liability producing rates above the rate cap) shall provide customer notice as provided in § 53.45(g) (relating to notice of new tarriffs and tarriff changes).
(b) An EDC proposing to increase its rates under § 54.95 (relating to recovery of RNR tax liability producing rates above rate cap) shall provide customer notice and follow the tariff posting procedures in §§ 53.41--53.45 (relating to posting of tariffs and notices).
[Pa.B. Doc. No. 98-168. Filed for public inspection January 30, 1998, 9:00 a.m.]
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