§ 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.

   The provisions of this §  69.1 issued under Public Utility Code,66 Pa.C.S. § §  501, 1301 and 1307.

 (a)  A utility should maintain an appropriate staff to adequately fulfill its responsibility to procure fuel at the lowest reasonable cost. The utility should be prepared to solicit and handle numerous competent bids and investigate these potential sources for ability to fulfill contracts.

 (b)  A utility should have a detailed organization chart of the personnel involved in fuel procurement, with a key official designated to act as liaison with the Commission. A utility should maintain written job descriptions for personnel, as well as formal policies and procedures pertaining to the fuel procurement process.

 (c)  Utility personnel in a position to influence fuel procurement decisions should be prohibited from having either direct or indirect ties or affiliations with fuel suppliers. A utility should conduct investigations to insure that personnel have no affiliation.

   The provisions of this §  69.1a issued under Public Utility Code,66 Pa.C.S. § §  501, 1301 and 1307.

   The provisions of this §  69.1a adopted October 18, 1985, effective October 19, 1985, 15 Pa.B. 3730.

 (a)  A utility should submit to the Commission its long-term generation plans and a statement of how the plans affect fuel purchasing policy and planning. A plan should be submitted each time there are revisions. A utility should adopt fuel purchasing strategies that provide lowest reasonable cost with maximum flexibility. It should strive to stimulate competition by purchasing from numerous suppliers.

 (b)  [Reserved].

   The provisions of this §  69.2 issued under Public Utility Code,66 Pa.C.S. § §  501, 1301 and 1307.

   The provisions of this §  69.2 amended October 18, 1985, effective October 19, 1985, 15 Pa.B. 3730. Immediately preceding text appears at serial pages (33013) to (33014).

 (a)  General. The Commission recommends that a utility adopt the following general purchasing guidelines:

   (1)  A balance of long-term, short-term and spot purchases should be utilized. This balance should provide a reasonably stable supply while allowing the utility the option of taking advantage of changing market conditions. At coal receiving sites, such as generating stations, central storage or loading facilities supplied by truck, coal handling equipment and procedures should be designed to accommodate numerous suppliers.

   (2)  Vendors should be selected on the basis of overall price and quality specifications of fuel that include, but are not limited to, Btu, moisture, ash and sulphur content. Service reliability is also a consideration. However, a utility is encouraged to give new suppliers every opportunity to compete, particularly in short-term/small-quantity fuel purchases. Documented service reliability becomes more important as contracts increase in duration and quantity. A utility should use its own staff in seeking and procuring adequate fuel supplies and should minimize the use of brokers, except where the use of brokers is consistent with the basic fuel procurement policy of obtaining fuel at the lowest reasonable price.

   (3)  Fuel agreements should include bonus/penalty provisions or be priced according to Btu, moisture, ash and sulphur content to insure that quality provisions are met. A utility should clearly state in fuel agreements the quality specifications of the fuel. Rejection limits for sulphur, ash and moisture content should be incorporated into contract or bid proposals.

   (4)  Fuel shipments should be adequately sampled when received at the generating plant. Contracts should include sampling procedures providing for an additional sealed and dated sample for independent verification if necessary.

   (5)  [Reserved].

   (6)  [Reserved].

   (7)  A utility should maintain documentation of reasons for rejection of bids on file in accordance with FERC’s Record Retention Table. During audits, Commission staff will inspect this documentation as deemed necessary.

   (8)  A utility should actively seek and maintain a significant number of vendors from which to solicit bids. This vendor list should be frequently updated with advertisements in newspapers and coal and oil publications.

 (b)  Short-term agreements and spot purchasing.

   (1)  [Reserved].

   (2)  Sealed bids should be considered on large orders covering more than 6 months’ supply.

   (3)  Verbal agreements, including telephone conversations relating to fuel price, quantity and quality, should be formalized by letter or a log confirming details. In securing vendors for inclusion on the vendor list referred to in subsection (a)(8), a utility should omit unnecessary provisions and requirements which restrict or discourage small suppliers from submitting bids. Requirements include engineering, geological and financial studies and reports which are not necessary for small, short-term or spot purchases.

   (4)  [Reserved].

   (5)  [Reserved].

 (c)  Long-term contracts.

   (1)  [Reserved].

   (2)  Cost escalation clauses included in long-term contracts should be based on measurable supplier costs, such as labor, material, transportation and equipment costs, and the like. Escalation clauses may also be based on regularly published relevant indices, such as those published by the United States Department of Interior, Bureau of Mines, the United States Department of Labor, and the like.

   (3)  Right to audit clauses should be included in contracts that provide for cost escalation. The right to audit clause gives the utility the authority to audit specific records of its suppliers. It is recommended that the utility enforce the right to audit provisions either through the use of qualified internal audit staff or outside independent auditors on a regular basis. Contracts should contain resumption clauses to provide for continuation (at the utility’s discretion) of contracts that are temporarily curtailed due to strikes or similar occurrences.

   (4)  It is recommended that all contracts, escalation clauses, or terms of purchase of fuel agreements be reviewed by the legal office of the utility. Contracts should include specific reference to special arrangements, such as loan agreements, which may affect the operation of the utility or the price of fuel.

   (5)  [Reserved].

   (6)  Minimum tonnage requirements should not be set at unreasonably high quantity levels which would prohibit competitive proposals from reliable and competent small suppliers. Investigations should be conducted to insure that potential vendors have adequate owned or contracted supplies to fulfill all contract provisions.

   (7)  A utility should seek contracts with greater ranges in minimum/maximum tonnage requirements to be exercised at the utility’s discretion. Contract tonnage would increase or decrease based on market conditions. The contracts would also provide a means of control over suppliers with excessive price or inferior quality.

   (8)  Escalation clauses based on market prices are discouraged. Market escalators, if used, should have a reasonable geographic limitation, yet should be sufficiently broadly based so that no supplier or group of suppliers could materially influence the market price. De-escalation should also be incorporated in the contracts based on the same market data. Data used to calculate the increment or decrement in coal prices should be based on comparable fuels and should not be influenced by short-term aberrations in coal prices. When incorporating market price escalators/de-escalators, the utility should delineate in the contract the comparable market data to be used and the time frames for adjustments. The Commission will review the reasonableness of market priced data on a case-by-case basis.

 (d)  Dedicated fuel supplies. Dedicated fuel supplies are those in which a utility, through ownership, contract tonnage requirements, location, or guarantee of debt, has substantial influence and interest in the contracted fuel supply. The following guidelines are recommended for dedicated fuel supplies and are in addition to the general and long-term contract guidelines in subsections (a) and (c):

   (1)  In order to insure efficient management over dedicated fuel supply, a utility should not provide, assume or guarantee an excessive amount of the project financing. The owner, operator or developer of the mine, or fuel supplier, should maintain substantial equity in the project or guarantee a substantial portion of the project financing.

   (2)  The use of cost-plus contracts is strongly discouraged.

   (3)  Contracts for dedicated fuel supplies should contain additional provisions so that if fuel prices exceed an average range of prices for fuel with similar characteristics for an extended period of time, the fuel price charged by the dedicated supplier would be adjusted to fall within the price range of the similar fuel. Under certain circumstances, similarities in methods of producing the fuel, contract provisions and geographic areas may also be considered. As with market-adjusted long-term contracts, the utility should establish and monitor the comparable market data that is to be utilized.

 (e)  Wholly-owned fuel sources. The following guidelines are in addition to the general, long-term contract, and dedicated fuel supply guidelines in subsections (a), (c) and (d):

   (1)  A utility should regularly compare the costs of fuel from its wholly-owned sources to that available in the competitive market place for fuel with similar characteristics. The Commission may take appropriate action when wholly-owned fuel costs differ significantly from comparable market prices for an extended period. A utility may be called upon to explain why its coal prices should not be reduced to the comparable market price. Decisions on a long-term deviation from market prices will be made by the Commission on a case-by-case basis.

   (2)  A utility should retain independent auditors to verify the charges affecting wholly-owned fuel costs. The Commission may review the audit of the fuel subsidiary or division and conduct reexaminations considered necessary.

   The provisions of this §  69.4 issued under Public Utility Code,66 Pa.C.S. § §  501, 1301 and 1307.

   The provisions of this §  69.4 amended October 18, 1985, effective October 19, 1985, 15 Pa.B. 3730. Immediately preceding text appears at serial pages (33014) to (33016).

 (a)  Since transportation costs often are a significant part of the cost of fuel, and are ultimately passed on to the consumer, the goal of the utility should be to provide reliable, timely transportation at a reasonable cost to the plant facility.

 (b)  A utility should maintain proper documentation and submit the information to the Commission upon request to insure that:

   (1)  Effective methods are used to schedule and control individual shipments of fuel.

   (2)  Transportation means available to insure the necessary service levels of reliability.

   (3)  Responsibility for negotiation of transportation costs is placed upon the appropriate persons who actively participate in the fuel procurement policies.

   (4)  Sufficient lead times are planned to permit delivery of fuels on a timely basis.

   (5)  Transportation costs are held to a minimum, considering reliability and quality of service.

   The provisions of this §  69.5 issued under Public Utility Code,66 Pa.C.S. § §  501, 1301 and 1307.

   The provisions of this §  69.5 amended October 18, 1985, effective October 19, 1985, 15 Pa.B. 3730. Immediately preceding text appears at serial page (33017).

   The provisions of this §  69.7 reserved October 18, 1985, effective October 19, 1985, 15 Pa.B. 3730. Immediately preceding text appears at serial pages (33017) to (33018).

SAFETY AND RELIABILITY GUIDELINES

 (a)  NGSs should deliver natural gas supplies under the terms of service specified in NGDC tariffs. Failure to deliver natural gas supplies in accordance with the tariffs may subject NGSs to penalties under procedures specified in the tariffs or revocation of licenses, or both. (See section 2203(12) of the act (relating to standards for restructuring of natural gas utility industry).) The NGSs may serve customers with different quality of service requirements, as permitted under the act and applicable NGDC tariffs.

 (b)  NGSs should utilize firm capacity sufficient to meet the requirements of their firm service customers except to the extent otherwise provided in each NGDC’s reliability plan. Service to any essential human needs retail gas customer lacking installed and operable alternative fuel capability and any residential retail gas customer should be firm service.

 (c)  NGSs should warrant to the NGDC that they have sufficient firm capacity to meet the requirements of the essential human needs retail gas customers, as defined in §  69.11 (relating to definitions), and should describe the characteristics of any firm capacity to the NGDC. The NGDC should take commercially reasonable steps to attempt to verify that the firm capacity contract rights exist. The failure or inability of an NGDC to verify the existence of the contract rights using commercially reasonable steps does not relieve an NGS from any liability for failing to deliver gas, or subject the NGDC to any liability resulting from the NGS’s failure to deliver.

 (d)  Natural gas service to interruptible gas service customers should be interrupted, pursuant to the terms and conditions of the NGDC’s tariff, if the safety and reliability of firm service would be impeded by the interruptible customer’s continued use of natural gas.

 (a)  The SOLR is the NGDC or an NGS, which has been designated by the Commission under section 2207 of the act (relating to obligations to serve) to provide SOLR service. Each of the following services will be provided by an SOLR:

   (1)  Natural gas supply services to those customers who have not chosen an alternative NGS or who choose to be serviced by their SOLR.

   (2)  Natural gas supply services to those customers who are refused supply service from an NGS.

   (3)  Natural gas supply services to those customers whose NGS has failed to deliver its requirements.

 (b)  A customer should not have more than one SOLR designated for any of the services in subsection (a).

 (c)  An SOLR under subsection (a)(3) should provide sufficient supplies as to quantity, quality, pressure and location to meet the operational reliability requirements of the NGDC’s system including a failure of one or more NGSs to do one of the following:

   (1)  Supply natural gas to their retail gas customers in conformance with their contractual obligations to the customers.

   (2)  Satisfy applicable reliability standards and obligations.

 An NGDC should, in addition to performing any other roles such as selling natural gas, function as the system operator in ensuring that its distribution system is designed, constructed, managed and operated to safely and reliably receive and deliver natural gas throughout its facilities to customers connected to them. An NGDC, in performing its responsibilities as a system operator, may retain or acquire gas supply assets as required to perform its system operator functions in a manner which permits it to operate its system in a safe and reliable manner. The identity of the gas supply assets utilized by the NGDC to perform its system operator function should be reviewed by the Commission annually in the NGDC’s Section 1307(f) proceeding as part of the NGDC’s reliability plan.

 (a)  NGSs using firm gas supply contracts with Pennsylvania producers or storage or transportation capacity contracts acquired through assignment or release by NGDCs or acquired as the result of the nonrenewal of a storage or transportation capacity contract previously held by the NGDC should offer the SOLR, or the successor NGS, a right of first refusal to utilize the contracts at the NGS’s contract cost as long as needed to serve retail gas customers being relinquished by the NGS.

 (b)  NGSs using storage or transportation capacity contracts acquired in a manner other than through assignment, release or nonrenewal by the NGDC should provide the SOLR a right of first refusal to use the capacity at contract cost if the NGS failed to give the SOLR and the NGDC sufficient notice or if there is insufficient alternative capacity available to serve the market being relinquished by the NGS.

   (1)  The SOLR may retain the right to use the capacity at cost until the SOLR, through reasonable and diligent efforts, is able to acquire replacement capacity sufficient to serve the customers being relinquished by the NGS.

   (2)  The NGDC or the SOLR should acquire the replacement capacity in a manner consistent with the Commission’s least cost fuel procurement policy.

 Nonperformance penalties should be established at levels sufficiently high to deter NGSs from failing to comply with their delivery obligations.

   (1)  The penalties should be independent of and in addition to the costs incurred by the NGDC, or, in the alternative, the supplier of last resort, for replacement gas supplies, including pipeline penalties.

   (2)  NGDCs may take into consideration the operational costs and other liabilities NGDCs may be exposed to by virtue of an NGS’s failure to deliver in establishing penalties.

   (3)  Failure of an NGS to honor delivery obligations may lead to disqualification from NGDC programs, suspension or revocation of the NGSs license.

   (4)  The disqualification, suspension or revocation should not relieve the NGS of its obligations to pay all penalties and costs incurred by the NGDC as a result of the NGS’s failure to deliver.

 (a)  A critical period exists when the NGDC declares an Operational Flow Order (OFO). A critical period implies the need for heightened awareness and attention by all parties.

   (1)  OFOs are issued to alleviate stress, or potential stress, to the NGDC system that threatens safety or reliability, or both.

   (2)  OFOs are an action of last resort, are never issued lightly, and are only issued for safety or reliability reasons.

   (3)  OFOs are distinct from, and do not preclude, other types of flow orders which an NGDC may issue to satisfy other obligations of the NGDC or the SOLR under the code or this title, such as the obligation to fulfill the least cost fuel procurement requirements of section 1318 of the act (relating to determination of just and reasonable gas cost rates).

 (b)  The NGDC should describe in detail, in its tariff, the actions it will take in advance of, and during a critical period. At a minimum, those actions should include the following:

   (1)  Exercises wherein critical period communications between, and the required responses of, the parties can be tested.

   (2)  A protocol for issuing and communicating system alerts that announce actual or pending events that, if unchecked, may result in a critical period, and call for voluntary actions or responses from NGSs and customers.

   (3)  A protocol for issuing and communicating OFOs. The protocol should address how and when the OFOs will be announced, and provide for disseminating periodic status reports during the period an OFO is in effect. OFOs should state the actions required and the reasons for the actions, be as localized as possible and be applied in a nondiscriminatory manner.

 Communications protocols are tools by which NGDCs, NGSs and other parties, define and describe the type, form and frequency of communications necessary to successfully fulfill customer requirements in an operating environment of increased retail choice. Effective and consistent communications are critical to reduce errors, and provide all entities with the information necessary to properly fulfill their respective responsibilities, both in normal and emergency circumstances. A communications protocol should include at minimum, in addition to the specific requirements in §  69.17(b)(2) and (3) (relating to critical period procedures) the following:

   (1)  A detailing of contact data for both NGDC and NGS personnel responsible for the various aspects of customer contact, gas deliveries and distribution, including mechanisms for ensuring that the data is kept current for all parties.

   (2)  The specification that regular meetings will be held, with joint agenda development responsibilities, including the potential scheduling of operational conference calls.

   (3)  Communications, to the extent not otherwise set forth in the NGDC’s tariff, associated with the NGDC’s procedures for customer enrollment, billing arrangements, daily or monthly delivery quantity determination, nominations (monthly, daily, intra-day, and weekend), balancing options, reconciliation or true-ups, cash-outs and electronic data exchange requirements.

 (d)  Procedures utilized by NGDCs to inform NGSs of changes to NGS delivered supplies or customer demand, or both, required to assure system reliability, both daily and seasonal, and to avoid pipeline penalties.

 (a)  Each NGDC should create an operational and capacity council for parties referred to in section 2204(f) of the act (relating to implementation) to discuss and attempt to resolve operational and capacity issues related to customer choice, including the reliability effects of those operational and capacity issues related to customer choice and the ongoing implementation of this section and § §  69.11—69.18 (relating to safety and reliability guidelines). The intent of these councils is to explore the possibility of building consensus among council participants relating to operational, capacity and operational and capacity-related safety and reliability issues in a fair and nondiscriminatory manner.

 (b)  Each NGDC’s operational and capacity council should, at a minimum, establish, in consultation with council participants, the following:

   (1)  A regular meeting schedule.

   (2)  An agenda for each meeting.

 (c)  The final determination of operational and reliability issues resides with the NGDC, subject to Commission review.

 (d)  The fact that statements were made, or positions were taken and were not considered or accepted, in operational and capacity council meetings should not be considered, or entered into evidence, in any formal proceeding before the Commission relating to any matter addressed in the council meetings.

   The provisions of these § §  69.21—69.27 adopted October 9, 1976, effective October 10, 1976, 6 Pa.B. 2513; reserved December 14, 2001, effective December 15, 2001, 31 Pa.B. 6800. Immediately preceding text appears at serial pages (271646) to (271650), (201989) to (201990) and (263695) to (263696).

   Hospital

   When based on consideration of the technical and economic feasibility of conversion to alternate fuels, it is reasonable to classify a hospital, two of whose three boilers have a dual-fire capability and which has an 8000 gallon on-site fuel-oil storage capacity, as a 99% Priority 6 customer. Montefiore Hospital Association v. Pennsylvania Public Utility Commission, 421 A.2d 481 (Pa. Cmwlth. 1980).

   High Rise Apartment

   A high rise apartment building may be classified as Priority 6, since the operator of the building is the customer of the gas company and, in turn, furnishes natural gas to its tenants, and since the building could not be classified as Priority 1 and also could not be classified as industrial. Housing Authority v. Pennsylvania Public Utility Commission, 406 A.2d 591 (Pa. Cmwlth. 1979).

   Overrun Revenue

   The Commission did not err or abuse its discretion in including overrun revenue in a purchased gas cost proceeding under section 1307(f), 66 Pa.C.S. §  1307. Because the utility’s core customers, rather than the utility’s shareholders, bore the risk of service interruption, then the utility’s core customers, rather than its shareholders, should receive the benefit of the overrun revenues. UGI Utilities v. Pennsylvania Utility Commission, 673 A.2d 43 (Pa. Cmwlth. 1996).

   Validity of Regulation

   The penalty provisions of 52 Pa. Code §  69.25 for unauthorized overruns of allocated volumes are rationally related to enforcement of the Commission’s natural gas curtailment scheme and are not arbitrary. Montefiore Hospital Association v. Pennsylvania Public Utility Commission, 421 A.2d 481 (Pa. Cmwlth. 1980).

COMMISSION POLICY STATEMENT ON ELECTRIC UTILITY
FINANCING OF ENERGY SUPPLY ALTERNATIVES

§ 69.31. Importance of energy supply alternatives.

 The Commission believes that energy supply alternatives such as conservation, load management, and alternate energy supply products are viable supply options which must be considered by the jurisdictional electric utilities as alternatives to capacity expansion and to reduce operating costs.

   The provisions of this §  69.31 issued under the Public Utility Code, 66 Pa.C.S. §  308(c).

 Reasonable and prudently incurred costs associated with the development, management, and operation of a cost effective alternative to energy supply shall be afforded rate treatment at least on a par with any other supply option.

   The provisions of this §  69.32 issued under the Public Utility Code, 66 Pa.C.S. §  308(c).

 Subject to Commission approval, electric utilities may request recovery of costs of energy supply alternatives by methods such as treating them as normal operating expenses, amortizing them over several years, capitalizing them for inclusion in rate base, or any combination thereof. Based upon Commission policy and recent Commission actions, the utilities shall determine how they will design their rate filings to recover these costs.

   The provisions of this §  69.33 issued under the Public Utility Code, 66 Pa.C.S. §  308(c).

 Energy supply alternatives may include but are not limited to conservation programs, load reducing or load shifting programs, and alternate energy supply projects.

   The provisions of this §  69.34 issued under the Public Utility Code, 66 Pa.C.S. §  308(c).

 A common evaluation methodology, developed by the Commission with the cooperation and assistance of the utilities, will be utilized to determine whether an energy supply alternative may be considered cost effective.

   The provisions of this §  69.35 issued under the Public Utility Code, 66 Pa.C.S. §  308(c).

 The Pennsylvania Public Utility Commission intends to examine specific factors in rate proceedings of electric and gas utilities regarding the action or failure to act to encourage development of cost effective energy supply alternatives. Specifically, the Commission will review utilities’ efforts to meet the criteria inthis section when determining just and reasonable rates in future rate proceedings and may consider those efforts in other proceedings instituted by the Commission.

   (1)  Information. At least twice annually utilities should provide customers with information on specific means of utilizing their energy services more effectively and efficiently. Topic areas should include insulation, lighting efficiencies, appliance efficiencies, conservation practices, load management techniques or other relevant information that informs the customer of the efficient use of energy.

   (2)  Energy surveys. Class A utilities should offer onsite energy surveys to the residential, commercial and industrial classes on an ongoing basis. Surveys should be conducted by trained personnel and the results of the survey, upon written request of the customer, be delivered in writing with a clear explanation of the resulting components.

   (3)  Cogeneration and small power production. Electric utilities for which a need for capacity is projected should establish effective programs to explore and encourage the development of additional cogeneration and small power production facilities within their respective service territories.

   (4)  Least cost planning. Gas and electric utilities should actively pursue a least-cost strategy by acquiring and developing the resources necessary to effectively meet their customers’ future energy needs, consistent with established availability and reliability criteria. Utilities should make a reasonable effort to promote the utilization of practical and economical energy conservation and demand management through cost effective programs.

   (5)  Evaluation. Class A utilities should demonstrate progressive work regarding development of a reliable customer data base, including, but not limited to:

     (i)   End-use applications for each class of customer in terms of energy and demand.

     (ii)   Customer behavior with regard to the decision-making process.

     (iii)   The impact of program decisions or strategies and how they effect the overall planning process.

   (6)  Natural gas co-firing. Electric utilities should explore the potential for increasing capacity and output at coal-fired generating stations through gas cofiring.

   The provisions of this §  69.44 adopted March 4, 1977, effective March 5, 1977, 7 Pa.B. 577; reserved June 29, 1984, effective June 30, 1984, 14 Pa.B. 2250. Immediately preceding text appears at serial pages (33028) and (66641).

INCLUSION OF STATE TAXES AND GROSS RECEIPTS TAXES IN BASE RATES

§ 69.51. Definitions.

 The following words and phrases, when used in § §  69.51—69.56, have the following meanings, unless the context clearly indicates otherwise:

   Gross receipts tax rider—The separate rider which certain gas utilities impose on customer bills at a rate of 2.04% to collect the 20 mills gross receipts tax which was in effect prior to January 1, 1970. On that date the gross receipts tax was increased by 25 mills, which additional amount was included in the State tax adjustment surcharge.

   State tax adjustment surcharge—The surcharge implemented under the State Tax Adjustment Procedure Order of the Commission dated March 10, 1970, as amended, which permits utilities under its jurisdiction to recover portions of the Capital Stock Tax, Corporate Net Income Tax and Gross Receipts Tax and the Public Utility Realty Tax through a surcharge on rates charged to customers.

   The provisions of this §  69.51 issued under Public Utility Code,66 Pa.C.S. § §  501, 1301, 1302, 1504 and 1509.

   The provisions of this §  69.51 adopted January 8, 1988, effective January 9, 1988, 18 Pa.B. 185.

   Unless necessitated by a change in the Pennsylvania Capital Stock Tax, Corporate Net Income Tax, Gross Receipts Tax or Public Utility Realty Tax which would increase or decrease rates in a manner governed by the Commission’s State Tax Adjustment Procedure, 44 Pa. P.U.C. 545 (1970), a utility which has a State tax adjustment surcharge or gross receipts tax rider shall maintain its surcharge and rider rates at 0%.

   The provisions of this §  69.52 issued under Public Utility Code,66 Pa.C.S. § §  501, 1301, 1302, 1504 and 1509.

   The provisions of this §  69.52 adopted January 8, 1988, effective January 9, 1988, 18 Pa.B. 185.

   (Editor’s Note: The following Exhibit is codified under 1 Pa. Code §  3.1(a)(9) (relating to contents of Code) as a document which the Legislative Reference Bureau finds to be general and permanent in nature.)

Exhibit A
STATE TAX ADJUSTMENT PROCEDURE

   BY THE COMMISSION, March 10, 1970:

 By enactments at the end of 1969 and during February of 1970, the Legislature has retroactively increased the rates of three types of taxes paid by public utilities, and has imposed a new tax upon real estate of public utilities, as follows:

 It should be noted here that the increase of 25 mills in the gross receipts tax, which will produce the greatest tax revenues, was enacted as a temporary tax effective for the period January 1, 1970 to September 1, 1971. Prescribed assessment procedures for the realty tax may cause the relative effective rate for each utility to fluctuate in subsequent years. It is also possible that predicted tax reform may modify or eliminate these recent tax increases.

 Public utilities under our jurisdiction are subject to regulation, which permits them to recover, in the form of rates, their legitimate costs, plus a fair return which compensates investors for the use of the funds they have provided for the construction of utility facilities.

 The new and increased taxes constitute a legitimate cost, and, unless compensated for, will reduce the return of public utilities at a time when many of them, particularly the electric and telephone groups, are engaged in unprecedented construction programs in order to assure adequate facilities for service to customers. These large construction programs must be financed by attracting funds from investors; and such attraction will be difficult in many instances, and impossible in others, if the returns of the public utilities are permitted to decline appreciably as a result of these increases in taxes. Unless relief is granted, there could be serious deterioration of service to the public.

 The public utilities are deluging us with requests to preserve their present returns by filing individually for rate increases which are retroactive because the new taxes are retroactive and any delay for rate relief would make the impairment of return inescapable. We have 620 electric, gas, water and telephone utilities, as well as many utilities of other types, under our jurisdiction and to attempt to give necessary and prompt relief on an individual basis would be an impossibility.

 A more sensible and practicable approach is to temporarily allow those public utilities which are affected by the increased taxes to recover, prospectively but not retroactively, such costs by a surcharge on service furnished after the charge is approved; to study various long-term procedures; to compute the surcharge so as to prevent overcompensation for the increased costs; to provide for subsequent modification of the surcharge to reflect any elimination or modification of these tax increases; and to later review each public utility’s situation to enable us to require refunds or other remedies to customers in any appropriate case; THEREFORE,

 IT IS ORDERED:

 A. Every public utility which has been subjected to new or increased taxes enacted by the General Assembly of 1969-1970, and proposing to impose a surcharge to recover such taxes, shall compute the surcharge in the following manner and submit the computation to this Commission:

   1. The one-mill increase in the capital stock and franchise tax rate shall be applied to the most recently settled valuation placed on the utility for that tax.

   2. For the 4 1/2% increase in the corporate net income tax rate, add together (a) the Pennsylvania corporate net income tax liability for the most recently completed calendar year and (b) the net income, as defined in Section 2 of the Corporate Net Income Tax Act, upon which that liability was computed; and multiply the resulting total by (c) the factor 4.186%. (Note: This factor is the increase of 3.738% in the effective tax rate, divided by .983 which is the complement of the effective tax rate; and this factor shall be changed if the effective tax rate changes.)

   3. The new 30-mill Public Utility Realty Tax shall be applied to the utility’s ‘‘State taxable value’’ (as defined in section 2(d) of the tax act) at the end of the most recently completed calendar year.

   4. For any utility subject to the gross receipts tax (act of 1889), the 25-mill increase in the gross receipts tax rate shall be applied to the gross receipts tax base for the most recently completed calendar year.

   5. Items 1, 2, 3, and 4 where applicable, shall be totaled.

   6. For any public utility subject to the gross receipts tax, the total of item 5 shall be divided by a factor which is the complement of the gross receipts tax rate (such factor being .955 as of the date of this order).

   7. The total of item 5 for any utility not subject to the gross receipts tax, and the quotient of item 6 for any utility subject to such tax, shall be divided by the utility’s gross intrastate operating revenues derived from service under rates subject to the jurisdiction of this Commission for the most recently completed calendar year, exclusive of the revenues produced by the surcharge permitted by Section A. The quotient of such division shall be expressed as a percentage.

   8. If the utility shall have increased or decreased its rates under this Commission’s jurisdiction during or after the most recently completed calendar year, it shall include in its computation the appropriate adjustments to items 2, 4, 5, 6, and 7, as if such increased or decreased rates had been in effect for all of such year.

   9. The surcharge imposed shall not exceed the percentage determined by item 7, subject to the adjustments prescribed by item 8.

   10. Any public utility which, prior to the effective date of its initial surcharge permitted by this order, shall have placed new rates in effect, or has filed a proposed rate increase, which include any compensation for the tax increases referred to in section A, shall adjust those rates or filings to eliminate such compensation, and instead incorporate those increases in the surcharge permitted by this order as prescribed by section A.

 B. Every tariff or supplement imposing such surcharge shall provide that the utility will recompute the surcharge, using the elements prescribed by section A:

   1. Whenever any of the tax rates referred to in section A is changed, in which case the recomputation shall take into account the changed tax rate.

   2. Whenever the utility makes effective increased or decreased rates under this Commission’s jurisdiction, in which case the recomputation shall take into account the adjustments prescribed by section A-8.

   3. And on March 31, 1971, and each year thereafter.

 C. Every tariff or supplement imposing such surcharge shall also provide that every recomputation prescribed by section B shall be submitted to this Commission within ten days after the occurrence of the event or date which occasions such recomputation; and that if the recomputed surcharge is less than the one then in effect the utility will, and if the recomputed surcharge is more than the one then in effect the utility may, accompany such recomputation with a tariff or supplement to reflect such recomputed surcharge.

 D. Every tariff or supplement filed pursuant to this order shall carry an effective date which shall be ten days after its filing with this Commission, and be applicable for service rendered on or after the effective date.

 E. Nothing in this order shall be deemed to preclude this Commission from investigating the financial affairs of any utility and, in appropriate cases, ordering refunds or other proper remedies for its customers. This order is intentionally couched in permissive rather than mandatory language, to preclude the possibility that any surcharge imposed hereunder is a Commission-made rate.

   A fixed service utility which has a State tax adjustment surcharge shall roll revenues collected through the surcharge into base rates to set the surcharge rate at 0%.

   The provisions of this §  69.53 issued under Public Utility Code,66 Pa.C.S. §  501, 1301, 1302, 1504 and 1509.

   The provisions of this §  69.53 adopted January 8, 1988, effective January 9, 1988, 18 Pa.B. 185.

   A fixed service utility which has a gross receipts tax rider shall roll revenues collected through the rider into base rates to set the rider rate at 0%.

   The provisions of this §  69.54 issued under Public Utility Code,66 Pa.C.S. § §  501, 1301, 1302, 1504 and 1509.

   The provisions of this §  69.54 adopted January 8, 1988, effective January 9, 1988, 18 Pa.B. 185.

 Compliance with §  69.53 (relating to zeroing of State tax adjustment surcharge) or §  69.54 (relating to zeroing of gross receipts tax rider) shall be accomplished in one of the following manners:

   (1)  Rate case method. If a utility has on file a State tax adjustment surcharge or gross receipts tax rider at a rate other than zero, the State tax adjustment surcharge and gross receipts tax rider shall be zeroed and the tax expense recovered by the surcharge and rider shall be rolled into base rates in the next general rate increase filed by the utility. If the utility files a cost of service study with its proposed rate increase, the tax expense previously recovered through the surcharge and rider shall be allocated to the various classes of service in a manner consistent with the cost of service study. If a cost of service study is not provided with the rate filing, the surcharge and rider revenues shall be rolled into base rates by applying the same percentage rate to each class of service so that there will be no effective change in total revenues recovered from each service classification as a result of the roll-in.

   (2)  Nonrate case method. The State tax adjustment surcharge and gross receipts tax rider shall be zeroed, and the tax expenses recovered through application of the surcharge and rider shall be rolled into base rates by filing a tariff or tariff supplement and supporting data on 60-days’ statutory notice to the Commission. The transfer of revenues to base rates shall be accomplished so that there will be no effective change in total revenues recovered from each service classification as a result of the roll-in. The supporting data shall include calculations showing the development of the new tariff rates as well as the revenues which they will produce on an annual basis. Customers shall be advised of the roll-in of the surcharge and rider revenues by bill insert to be mailed during the normal monthly or quarterly billing cycle.

   The provisions of this §  69.55 issued under Public Utility Code,66 Pa.C.S. § §  501, 1301, 1302, 1504 and 1509.

   The provisions of this §  69.55 adopted January 8, 1988, effective January 9, 1988, 18 Pa.B. 185.

 Tariff filings effectuating the zeroing of the State tax adjustment surcharge and gross receipts tax rider shall be submitted to the Commission by January 9, 1990, or thereafter, within 24 months of a change in the State tax adjustment surcharge or gross receipts tax rider which causes either to be set at a rate other than zero.

   The provisions of this §  69.56 issued under Public Utility Code,66 Pa.C.S. § §  501, 1301, 1302, 1504 and 1509.

   The provisions of this §  69.56 adopted January 8, 1988, effective January 9, 1988, 18 Pa.B. 185.

   The provisions of this §  69.85 adopted May 18, 1984, effective May 19, 1984, 14 Pa.B. 1713; reserved March 17, 2000, effective March 6, 1999, 30 Pa.B. 1548. Immediately preceding text appears at serial page (255447).

TARIFF PROVISIONS THAT LIMIT THE LIABILITY OF UTILITIES FOR INJURY OR DAMAGE AS A RESULT OF NEGLIGENCE OR INTENTIONAL TORTS—STATEMENT OF POLICY

§ 69.87. Tariff provisions that limit the liability of utilities for injury or damage as a result of negligence or intentional torts—statement of policy.

 The Commission, after review of applicable State law, and on consideration of the various policy considerations relative to the inclusion in tariffs of provisions which limit the liability of utilities for injury or damages as a result of negligence or intentional torts, finds that State law permits utilities to limit their liability for interruption or cessation of service. If a utility seeks to place the language in its tariff, a tariff filing should be made under section 1308 of the code (relating to voluntary changes in rates), and should include a company-specific dollar amount for the proposed limitation and work papers to substantiate the dollar amount. A copy of the tariff filing should be served on the Office of Consumer Advocate and on the Office of Small Business Advocate.

   The provisions of this §  69.87 adopted April 23, 1999, effective April 24, 1999, 29 Pa.B. 2147.

DISPOSITION OF COMPLAINTS IN RATE CASES

§ 69.91. Policy.

 (a)  In rate cases where either an ‘‘option order’’ or a settlement petition is approved by the Commission, there may arise a problem of the prompt resolution of any outstanding complainant where the complaint does not acquiesce to the approved option or settlement and, instead, elects to pursue the outstanding complaint. Oftentimes resolution of the outstanding complaint does not occur within the statutory suspension period, but rather extends well beyond the period required to decide a rate case.

 (b)  The Commission believes that lengthy and avoidable delays in the disposition of consumer complaints in rate cases which are optioned or settled undermine public trust in our rate setting process. Further, delay makes the administration of any refund found appropriate, should the complainant ultimately prevail on the merits, more difficult.

 (c)  Therefore, to the extent practicable, it is the policy of the Commission to:

   (1)  Require in any option order or order approving a settlement petition, that the Office of Administrative Law Judge proceed with hearings on any outstanding complaint, where desired by the complainant, on a schedule that would provide the Commission with a recommended decision in sufficient time for a final Commission order within the statutory suspension period which would have applied had the case not been optioned or settled; and

   (2)  Issue a final Commission order on any outstanding complaint, where desired by the complainant, within the statutory suspension which would have applied had the case not been optioned or settled.

   The provisions of this §  69.91 issued under the Public Utility Code, 66 Pa.C.S. § §  501, 703 and 1308.

   The provisions of this §  69.91 adopted April 8, 1983, effective April 9, 1983, 13 Pa.B. 1258.

BUILDING ENERGY CONSERVATION STANDARDS FOR RECEIPT
OF UTILITY SERVICE

§ 69.101. Definitions.

 The following words and terms, when used in § §  69.101—69.107, have the following meanings, unless the context clearly indicates otherwise:

   Act—The Building Energy Conservation Act (35 P. S. § §  7201.101—7201.602).

   Addition—An addition to an existing building. See §  69.102 (relating to scope).

   Building energy conservation standards—The standards promulgated by the Department at 12 Pa. Code Chapter 147 (relating to building energy conservation standards).

   Compliance certification copy—The part of the notice of intent to construct returned by the Department or municipality after receipt and processing of the notice of intent to construct, which bears the ID number assigned to the notice of intent to construct by the Department or municipality.

   Department—The Department of Community Affairs of the Commonwealth.

   Municipality—A city, borough, incorporated town, township or home rule municipality which has elected to administer the act under section 501 of the act (35 P. S. §  7201.501).

   Notice of intent to construct—The notice required to be filed with the Department, or a municipality, under section 306 of the act (35 P. S. §  7201.306).

   Person—Individuals, partnerships, associations, sole proprietorships, companies, corporations and their lessees, assignees, trustees, receivers, executors, administrators or other successors in interest.

   Public utility—Persons or corporations in this Commonwealth owning or operating equipment or facilities for producing, generating, transmitting, distributing or furnishing electricity to or for the public for compensation for any purpose. The term does not include the following:

     (i) A generator or producer of electricity not engaged in distributing the electricity directly to the public for compensation.

     (ii) A person not otherwise a public utility who furnishes service only to himself.

     (iii) A bona fide cooperative association which furnishes services only to its stockholders or members on a nonprofit basis.

   Renovation—The rehabilitation of an existing building which requires more than 25% of the gross floor area or volume of the entire building to be rebuilt. Cosmetic work, such as painting, wall covering, wall paneling, floor covering and suspended ceiling work is not required to be included. Sections 69.101—69.107 apply to the portion of the building being renovated and not to the entire building.

   Residential building—A building as defined in section 103 of act (35 P. S. §  7201.103), and renovations thereto, the actual construction of which commenced after March 19, 1986, and which is arranged for the use of one or two family dwelling units, and rowhouses, townhouses and garden apartment construction not exceeding three stories in height used for residential purposes, whenever each unit has its own individual and self-supporting heating, ventilating or air conditioning system.

   The provisions of this §  69.101 issued under Public Utility Code,66 Pa.C.S. § §  308, 501, 1501 and 1704; amended under Public Utility Code,66 Pa.C.S. § §  308, 331, 501, 1501 and 1704.

   The provisions of this §  69.101 adopted April 20, 1984, effective July 20, 1984, 14 Pa.B. 1393; amended January 23, 1987, effective January 24, 1987, 17 Pa.B. 389. Immediately preceding text appears at serial pages (90049) to (90051).

 (a)  Sections 69.101—69.107 apply to all applications for electric service to or for residential buildings received by a public utility after March 19, 1986.

 (b)  Sections 69.101—69.107 apply to the portion of the building which is being added and not to the entire building.

   The provisions of this §  69.102 issued under Public Utility Code,66 Pa.C.S. § §  308, 501, 1501 and 1704; amended under Public Utility Code,66 Pa.C.S. § §  308, 331, 501, 1501 and 1704.

   The provisions of this §  69.102 adopted April 20, 1984, effective July 20, 1984, 14 Pa.B. 1393; amended January 23, 1987, effective January 24, 1987, 17 Pa.B. 389. Immediately preceding text appears at serial page (90051).

 Except as provided in §  69.107 (relating to exemptions), a public utility, prior to furnishing electric service to or for a residential building, shall require that the compliance certification copy be submitted to it by the person requesting service to or for the residential building. A public utility shall require that the compliance certification copy be submitted not later than the date on which electric service to or for a residential building is provided by the utility.

   The provisions of this §  69.103 issued under Public Utility Code,66 Pa.C.S. § §  308, 501, 1501 and 1704; amended under Public Utility Code,66 Pa.C.S. § §  308, 331, 501, 1501 and 1704.

   The provisions of this §  69.103 adopted April 20, 1984, effective July 20, 1984, 14 Pa.B. 1393; amended January 23, 1987, effective January 24, 1987, 17 Pa.B. 389. Immediately preceding text appears at serial page (90051).

 (a)  The receipt by a public utility of the compliance certification copy constitutes conclusive evidence to the utility that the residential building, for which electric service has been requested, has been or will be constructed in compliance with the building energy conservation standards. Public utilities shall rely absolutely on the compliance certification copy in furnishing electric service to or for a residential building, and no public utility, which is in receipt of the compliance certification copy may conduct an audit, examination or inspection of the residential building for the purpose of determining compliance with the building energy conservation standards.

 (b)  The furnishing, rendering or supplying of electric service to or for a residential building by a public utility, in reliance upon the compliance certification copy may not constitute a certification or determination by the utility that the residential building has been constructed in compliance with the building energy conservation standards.

   The provisions of this §  69.104 issued under Public Utility Code,66 Pa.C.S. § §  308, 501, 1501 and 1704; amended under Public Utility Code,66 Pa.C.S. § §  308, 331, 501, 1501 and 1704.

   The provisions of this §  69.104 adopted April 20, 1984, effective July 20, 1984, 14 Pa.B. 1393; amended January 23, 1987, effective January 24, 1987, 17 Pa.B. 389. Immediately preceding text appears at serial pages (90051) and (95685).

 Except as provided in §  69.107 (pertaining to exemptions), no public utility may furnish electric service to a residential building unless it has first received the compliance certification copy.

   The provisions of this §  69.105 issued under Public Utility Code,66 Pa.C.S. § §  308, 501, 1501 and 1704; amended under Public Utility Code,66 Pa.C.S. § §  308, 331, 501, 1501 and 1704.

   The provisions of this §  69.105 adopted April 20, 1984, effective July 20, 1984, 14 Pa.B. 1393; amended January 23, 1987, effective January 24, 1987, 17 Pa.B. 389. Immediately preceding text appears at serial page (95685).

 A public utility shall be required to retain the compliance certification copy which is submitted to it for at least 2 years. If a public utility uses data processing equipment to record and maintain information derived from the compliance certification copy, the utility may not be required to retain the compliance certification copy.

   The provisions of this §  69.106 issued under Public Utility Code,66 Pa.C.S. § §  308, 501, 1501 and 1704; amended under Public Utility Code,66 Pa.C.S. § §  308, 331, 501, 1501 and 1704.

   The provisions of this §  69.106 adopted April 20, 1984, effective July 20, 1984, 14 Pa.B. 1393; amended January 23, 1987, effective January 24, 1987, 17 Pa.B. 389. Immediately preceding text appears at serial page (95685).

 (a)  A public utility is exempt from § §  69.103—69.106 (relating to utilities to require receipt of compliance certification copy of notice of intent to construct; reliance upon compliance certification copy; effect of reliance; service to certain residential buildings prohibited; and record retention), for an application for electric service to or for a residential building which is located in a municipality which has elected under sections 501 and 502 of the act (35 P. S. § §  7201.501 and 7201.502) to administer the act and which requires that a notice of intent to construct be filed with the municipality prior to or at the time that a building permit is applied for.

 (b)  A public utility is exempt from § §  69.103—69.106, if in the utility’s judgment, strict compliance may jeopardize the public health or safety or impose an undue hardship. In this event, the utility shall notify the Department or the municipality, in writing, of the exemption.

   The provisions of this §  69.107 issued under Public Utility Code,66 Pa.C.S. § §  308, 501, 1501 and 1704; amended under Public Utility Code,66 Pa.C.S. § §  308, 331, 501, 1501 and 1704.

   The provisions of this §  69.107 adopted April 20, 1984, effective July 20, 1984, 14 Pa.B. 1393; amended January 23, 1987, effective January 24, 1987, 17 Pa.B. 389. Immediately preceding text appears at serial pages (95685) to (95686).

   The provisions of these § §  69.153—69.168 adopted July 31, 1987, effective August 1, 1987, 17 Pa.B. 3220; reserved January 15, 1993, effective January 16, 1993, 23 Pa.B. 265. Immediately preceding text appears at serial pages (126877) to (126878).

POLICY STATEMENT INTERPRETING TERMS
INCLUDED IN 66 PA.C.S. §  1326

§ 69.169. Definitions—statement of policy.

 The following words and terms, used in 66 Pa.C.S. §  1326 (relating to standby charge prohibited), have the following meanings:

   Residential structure—A building which contains only individually metered dwelling units intended for human habitation.

   Standby charge—The charge for the availability of water supply during fire emergencies. Costs for the upsizing of company-owned service lines and meters, for the installation of additional lines and for backflow prevention devices are not standby charges for purposes of residential sprinkler systems, and these costs shall be borne by the applicant for service on a one-time basis.

   The provisions of this §  69.169 adopted June 30, 1989, effective July 1, 1989, 19 Pa.B. 2787.

LINE EXTENSIONS

§ 69.171. [Reserved].

   The provisions of this §  69.171 adopted September 18, 1992, effective September 19, 1992, 22 Pa.B. 4699; reserved February 14, 1997, effective February 15, 1997, 27 Pa.B. 799. Immediately preceding text appears at serial page (222438).

   Retroactive Application

   The provisions of this §  69.181 adopted August 4, 1989, effective August 5, 1989, 19 Pa.B. 3304; reserved March 29, 1996, effective March 30, 1996, 26 Pa.B. 1377. Immediately preceding text appears at serial pages (202014) to (202016).

   Cost Assignment

   A utility may not recover the carrying costs associated with the amortization of an operating expense. Not only would this allow a utility to capitalize an item in its rate base and at the same time recover an item as expense from taxpayers, but it would also undermine the Public Utility Commission’s policy, as codified by this regulation, to balance the interest of shareholders and ratepayers, and to fairly spread the cost of TOP expenses which arose out of gas distribution company’s failure to purchase gas at its full contract requirements level. National Fuel Gas Distribution Corp. v. Pennsylvania Public Utility Commission, 677 A.2d 861 (Pa. Cmwlth. 1996).

   General Comments

   This regulation is a statement of policy and does not have the force of law. It is only an indication of how the Public Utility Commission intends to proceed. UGI Utilities, Inc. v. Pennsylvania Public Utility Commission, 677 A.2d 882 (Pa. Cmwlth. 1996).

   Refund Granted

   Administrative law judge’s decision to order the utility company to refund its customers 90% of its take-or-pay refund, including interest, was upheld. UGI Utilities, Inc. v. Pennsylvania Public Utility Commission, 677 A.2d 882 (Pa. Cmwlth. 1996).

   Refunds

   Natural gas company was required to refund 90% of its take-or-pay refund, including interest, despite company’s contention that the decision was contrary to the take-or-pay refund policy statement and to the Public Utility Commission’s prior application of that statement to the company. Peoples Natural Gas Co. v. Pennsylvania Public Utility Commission, 677 A.2d 890 (Pa. Cmwlth. 1996); appeal denied 688 A.2d 174 (Pa. 1997).

   The witness testified that there was no analysis or quantification by the gas company of the time value of the money lost to ratepayers, that is the lag between the times that ratepayers made payments to the gas company for TOP costs, and the time the ratepayers received a refund. Therefore, the gas company failed to carry its burden to prove its equitable argument that it, and not the ratepayers, was entitled to a refund. National Fuel Gas Distribution Corp. v. Pennsylvania Public Utility Commission, 677 A.2d 861 (Pa. Cmwlth. 1996).

POLICY STATEMENT ADDRESSING AFFILIATED
INTEREST ISSUES OF NATURAL GAS
MARKETERS

§ 69.191. General.

 (a)  Given the unbundling of monopoly distribution services in the natural gas industry and the development of customer access to commodity gas and transportation services, the Commission has developed policies for local distribution companies (LDCs), marketers and customers with regard to the affiliated and nonaffiliated interests of LDCs. Unless otherwise stated, the phrase ‘‘marketer’’ or ‘‘marketers or brokers’’ includes all LDC affiliates, subsidiaries, parents, divisions, and the like providing gas supply to a respective LDC’s customer. This section and §  69.192 (relating to affiliated interest—statement of policy) are intended to clarify additional aspects of the Commission’s authority in this area. The Commission has a strong policy against direct or indirect discrimination by LDCs in favor of their marketing affiliates or marketing divisions and against independent gas marketers. The discrimination impermissibly hinders the unbundling of services and the entry of new competitors into the marketplace. This discrimination also violates section 1502 of the code (relating to discrimination in service).

 (b)  Many Pennsylvania LDCs have affiliated marketing divisions. Some Pennsylvania LDCs may have divisions or marketing sections that are not separately organized as affiliates as defined in 66 Pa.C.S. (relating to Public Utility Code). This section and §  69.192 provide guidance to an LDC’s affiliate, regardless of the format used to operate an LDC’s affiliate, in order to be effective, to prevent discriminatory behavior, and insure compliance with section 1502 of the code (relating to discrimination in service). This section and §  69.192 will apply without regard to the structural relationship of the LDC’s marketer to the LDC.

 (c)  This section and §  69.192 cover both the LDC’s affiliates and gas marketing divisions or marketing sections, even those without any distinct organizational structure, that do not have affiliate status. This section and §  69.192 will not require any generic structural separation of an LDC’s affiliate, notwithstanding actions taken to the contrary in other states, because the Commission does not believe this is necessary as long as the LDC fairly allocates costs to an LDC’s affiliate and refrains from giving the LDC’s affiliate any unfair advantage vis-a-vis a marketer or broker not affiliated with an LDC. The Commission may impose such a structural requirement if and when warranted by the facts and circumstances.

 (d)  The Commission’s authority with respect to affiliates and marketing divisions derives from different portions of the code. Chapter 21 of the code (relating to relations with affiliated interests) directly governs affiliated interests. Section 1318(b) of the code (relating to just and reasonable natural gas rates), addresses gas purchased from affiliates. Other provisions govern natural gas costs such as sections 1307, 1308, 1317, and 1318. The code requires adherence to tariffs under section 1303 (relating to adherence to tariffs) and thus prohibits a lack of uniformity or discrimination in the application of tariff provisions. Likewise under section 1304 (relating to discrimination in rates) it prohibits rate discrimination. Other provisions reenforce these policies: section 1501 (relating to character of service and facilities) requires utilities to furnish ‘‘adequate, efficient, safe and reasonable service,’’ while section 1502 prohibits ‘‘any unreasonable preference or disadvantage’’ and forbids ‘‘any unreasonable prejudice or disadvantage.’’ These provisions require equal treatment of similarly situated parties, in this case customers of an LDC’s transportation tariff services, regardless of whether that customer chooses to use the gas supply services of an LDC or otherwise.

 (e)  Under sections 505 and 506 of the code (relating to duty to furnish information to the Commission; cooperation in valuing property; and inspection of facilities and records), the Commission has authority to require utilities to keep and furnish information in accordance with requirements set forth by the Commission. As part of this section and §  69.192 the Commission has set forth certain recordkeeping requirements to help ensure that parties are fairly treated. The Commission expects the LDC, in consultation with marketers or brokers to propose a process for reporting and managing marketer or broker complaints as part of any tariff proposed as a result of this section and §  69.192. The Commission may expect additional recordkeeping or conflict resolution processes if the parties are unable to resolve this or if warranted by subsequent facts and circumstances.

   The provisions of this §  69.191 adopted August 15, 1997, effective August 16, 1997, 27 Pa.B. 4102.

 The following policies should be applied by the local distribution companies (LDCs):

   (1)  The LDC should apply its tariffs in a nondiscriminatory manner to its affiliate, its own marketing division and any nonaffiliate.

   (2)  The LDC should likewise not apply a tariff provision in any manner that would give its affiliate or division an unreasonable preference over other marketers with regard to matters such as scheduling, balancing, transportation, storage, curtailment or nondelivery.

   (3)  If a tariff provision is mandatory, the LDC should not waive the provision for its affiliate or division absent prior approval of the Commission.

   (4)  If a tariff provision is not mandatory or provides for waivers, the LDC should grant the waivers without preference to affiliates and divisions or nonaffiliates.

   (5)  The LDC should maintain a chronological log of tariff provisions for which it has granted waivers. Entries should include the name of the party receiving the waiver, the date and time of the request, the specific tariff provision waived and the reason for the waiver. Any chronological log should be open for public inspection during normal business hours.

   (6)  The LDC should process requests for transportation promptly and in a nondiscriminatory fashion with respect to other requests received in the same or a similar period. The LDC should maintain a chronological log showing the processing of requests for transportation services. Any chronological log should be open for public inspection during normal business hours.

   (7)  Transportation discounts provided to the LDC’s or its marketing affiliate’s favored customers should be offered to other similarly situated customers and should not be tied to any unrelated service, incentive or offer on behalf of either the parent or affiliate. A chronological log should be maintained showing the date, party, time and rationale for the action. Any chronological log should be open for public inspection during normal business hours.

   (8)  The LDC should not disclose any customer proprietary information to its marketing affiliate or division, and to the extent that it does disclose customer information, it should do so to other similarly situated marketers in a similar fashion so as not to selectively disclose, delay disclosure, or give itself or its affiliate any undue advantage related to the disclosure. A chronological log should be maintained showing the date, time and rationale for the disclosure. Any chronological log should be open for public inspection during normal business hours.

   (9)  An LDC should justly and reasonably allocate to its marketing affiliate or division the costs or expenses for general administration or support services.

   (10)  An LDC selling surplus gas supplies and/or upstream capacity on a short-term basis (as defined by the Federal Energy Regulatory Commission’s definition) to its affiliate should make supplies available to similarly situated marketers on a nondiscriminatory basis. An LDC should not make any gas supplies and/or upstream capacity available through private disclosure to an LDC’s affiliate unless the availability is made simultaneously with public dissemination in a manner that fairly apprises interested parties of the availability of the gas supplies and/or upstream capacity. An LDC should maintain a chronological log of these public disseminations. Any chronological log should be open for public inspection during normal business hours.

   (11)  The LDC should not condition or tie agreements to release interstate pipeline capacity to any service in which the LDC or affiliate is involved.

   (12)  The LDC should not directly or by implication unfairly represent to any customer, supplier or third party that an advantage may accrue to any party through use of the LDC’s affiliate or subsidiary.

   (13)  The LDC should establish and file with the Commission a complaint procedure for dealing with any alleged violations of any of the standards listed in paragraphs (1)—(12), this paragraph or paragraphs (14) and (15), excepting for paragraph (9), which should be exclusively under the purview of the Commission. These procedures should be developed in consultation with interested parties during consideration of any tariff guided by this section and §  69.191 (relating to general). The Commission may expect establishment of a complaint procedure or other recordkeeping requirements if warranted by subsequent facts or circumstances.

   (14)  The LDC should keep a chronological log of any complaints, excepting paragraph (9), regarding discriminatory treatment of brokers. This chronological log should include the date and nature of the complaint and the LDC’s resolution of it. Any chronological log should be open for public inspection during normal business hours.

   (15)  Parties alleging violations of these standards may pursue their allegations through the Commission’s established complaint procedures. A complainant bears the burden of proof consistent with 66 Pa.C.S. (relating to Public Utility Code) in regard to the allegations.

   The provisions of this §  69.192 adopted August 15, 1997, effective August 16, 1997, 27 Pa.B. 4102.

   This section cited in 52 Pa. Code §  69.191 (relating to general).

UNIFORM STANDARDS FOR BROKERS AND MARKETERS

§ 69.195. Fitness of natural gas marketer or broker (including an LDC’s affiliate).

 (a)  Fitness of brokers and marketers.

   (1)  Unless otherwise stated, the phrase marketers or brokers, or both, includes all local distribution company (LDC) affiliates, subsidiaries, parents, divisions, and the like providing gas supply to the respective LDC’s customers.

   (2)  To retain reliable service when the gas industry unbundles, the Commission seeks to insure that brokers and marketers operating in this Commonwealth possess the financial or technical, or both,