FUEL PROCUREMENT POLICIES AND PROCEDURES
§ 69.1. General.
(a) Since 66 Pa.C.S. § 1307 (relating to sliding scale of rates; adjustments), enables a utility to pass fuel costs directly to the ratepayers, a utility has the highest degree of responsibility to take aggressive action on behalf of its ratepayers to control fuel costs. A utility should use every means reasonably available to monitor and enforce vendor adherence to all aspects of fuel procurement agreements. In addition to contract adherence, the Commission may exercise its independent right to review whether each utility purchases the lowest cost fuel that meets the necessary standards and specifications, which may include a review to determine if the utility is continually, thoroughly and aggressively searching the fuel market for reasonably priced fuel. The Commission may make constructive suggestions with regard to an individual company’s fuel procurement policies and procedures from time to time.
(b) The purpose of § § 69.1—69.2, 69.4 and 69.5 (relating to fuel procurement policies and procedures) is to establish guidelines that the Commission recommends an electric utility follow in its fuel procurement activities. The Commission realizes that fuel procurement practices of utilities may differ depending on individual circumstances. However, the Commission believes that there are certain common procedures that will result in the lowest reasonable fuel costs. The Commission defines lowest reasonable cost to be fuel purchases that result in the lowest generating costs. This fuel should be consistent with contracted quality, regulatory requirements and prevailing wage rates, and may or may not be the lowest priced fuel.
(c) If a utility believes that an otherwise nonconforming fuel procurement policy will, in the long term, result in lower costs, the utility should submit the details of the policy for review by the Commission prior to implementation.
(d) If it appears, through Commission review, that nonconforming fuel procurement practices have resulted in excessive fuel costs, a utility may be required to demonstrate the reasonableness of the costs.
(e) If the Commission determines after notice and hearing that a utility’s nonconforming fuel procurement policy has resulted in unreasonable fuel costs, the utility shall be required to apply credits against the applicable energy cost rate or to make refunds to its customers.
(f) In order for the Commission to monitor fuel costs properly, a utility should record fuel prices FOB supplier with transportation costs reported separately. For contracts which state only delivered costs, the company should impute transportation costs and report those costs separately.
(g) Sections 69.1—69.2, 69.4 and 69.5 represent the standard by which the Commission intends to assess a utility’s fuel purchasing policies and procedures. Sections 69.1—69.2, 69.4 and 69.5 serve as notice to electric utilities of the Commission’s expectations with regard to fuel procurement policies and procedures. Utilities should apply § § 69.1—69.2, 69.4 and 69.5 prospectively in planning fuel purchases. Where provisions of existing contracts are in conflict with § § 69.1—69.2, 69.4 and 69.5, utilities need not seek to immediately amend the contracts, but should move towards the policies set forth in § § 69.1—69.2, 69.4 and 69.5 as contracts are modified, renegotiated or extended.
Authority The provisions of this § 69.1 issued under Public Utility Code,the Public Utility Code, 66 Pa.C.S. § § 501, 1301 and 1307.
Source The provisions of this § 69.1 amended October 18, 1985, effective October 19, 1985, 15 Pa.B. 3730. Immediately preceding text appears at serial page (33013).
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