SB 9 — PUBLIC UTIL-PERFORMANCE-BASED

SB0009 EngrossedEnrolled LRB098 04269 HLH 34296 b AN ACT concerning regulation.

The Commission may confer in person, or by correspondence, by attending conventions, or in any other way, with Commissions and any and all agencies dealing with public SB0009 EngrossedEnrolled - 2 - LRB098 04269 HLH 34296 b utilities of other states and of the United States on any matters relating to public utilities.

The Commission may also recommend the enactment of SB0009 EngrossedEnrolled - 3 - LRB098 04269 HLH 34296 b such legislation with respect to any matter within its jurisdiction as it deems wise or necessary in the public interest.

"Combination SB0009 EngrossedEnrolled - 4 - LRB098 04269 HLH 34296 b utility" means a utility that, as of January 1, 2011, provided electric service to at least one million retail customers in Illinois and gas service to at least 500,000 retail customers in Illinois.

For purposes of this Section, "peak program year" means the consecutive 12-month period with the highest number of full-time equivalent SB0009 EngrossedEnrolled - 5 - LRB098 04269 HLH 34296 b jobs that occurs between the beginning of investment year 2 and the end of investment year 4.

(ii) training facility construction or upgrade projects totaling an estimated $10,000,000, provided that, at a minimum, one such facility shall be located in a municipality having a SB0009 EngrossedEnrolled - 6 - LRB098 04269 HLH 34296 b population of more than 2 million residents and one such facility shall be located in a municipality having a population of more than 150,000 residents but fewer than 170,000 residents;

to be eligible for improvement, the participating SB0009 EngrossedEnrolled - 7 - LRB098 04269 HLH 34296 b utility's ability to maintain proper tree clearances surrounding the overhead circuit must not have been impeded by third parties;

(A) over a 10-year period, invest an estimated $265,000,000 in electric system upgrades, modernization projects, and training facilities, SB0009 EngrossedEnrolled - 8 - LRB098 04269 HLH 34296 b including, but not limited to:

SB0009 EngrossedEnrolled - 9 - LRB098 04269 HLH 34296 b (iii) associated cyber secure data communication network;

Within 60 days after filing a tariff under subsection (c) of this Section, a participating utility shall submit to the Commission its plan, including scope, schedule, and staffing, for satisfying its infrastructure investment program SB0009 EngrossedEnrolled - 10 - LRB098 04269 HLH 34296 b commitments pursuant to this subsection (b).

Further, no later than 45 days following the last day of the first, second, and third quarters of each year of the plan, a participating utility shall submit to the Commission a verified quarterly report for the prior quarter that includes (i) the total number of full-time equivalent jobs created during the prior quarter, (ii) the total number of employees as of the last day of the SB0009 EngrossedEnrolled - 11 - LRB098 04269 HLH 34296 b prior quarter, (iii) the total number of full-time equivalent hours in each job classification or job title, (iv) the total number of incremental employees and contractors in support of the investments undertaken pursuant to this subsection (b) for the prior quarter, and (v) any other information that the Commission may require by rule.

SB0009 EngrossedEnrolled - 12 - LRB098 04269 HLH 34296 b With respect to the participating utility's investment amount commitments, if, after considering the utility's corrective action plan and compliance thereunder, the Commission enters an order finding, after notice and hearing, that a participating utility is not satisfying its investment amount commitments described in this subsection (b), then the utility shall no longer be eligible to annually update the performance-based formula rate tariff pursuant to subsection (d) of this Section.

In meeting the obligations of this subsection (b), to the extent feasible and consistent with State and federal law, the investments under the infrastructure investment program should provide employment opportunities for all segments of the SB0009 EngrossedEnrolled - 13 - LRB098 04269 HLH 34296 b population and workforce, including minority-owned and female-owned business enterprises, and shall not, consistent with State and federal law, discriminate based on race or socioeconomic status.

In no event, absent General Assembly approval, shall the SB0009 EngrossedEnrolled - 14 - LRB098 04269 HLH 34296 b capital investment costs incurred by a participating utility other than a combination utility in satisfying its infrastructure investment program commitments described in subsection (b) of this Section exceed $3,000,000,000 or, for a participating utility that is a combination utility, $720,000,000.

(b-10) All participating utilities shall make contributions for an energy low-income and support program in SB0009 EngrossedEnrolled - 15 - LRB098 04269 HLH 34296 b accordance with this subsection.

(2) a program that provides grants and other bill payment concessions to disabled veterans who demonstrate a hardship and members of the armed services or reserve forces of the United States or members of the Illinois National Guard who are on active duty pursuant to an SB0009 EngrossedEnrolled - 16 - LRB098 04269 HLH 34296 b executive order of the President of the United States, an act of the Congress of the United States, or an order of the Governor and who demonstrate a hardship;

If a utility elects to file tariffs with the Commission to implement all or a portion of the programs, those SB0009 EngrossedEnrolled - 17 - LRB098 04269 HLH 34296 b tariffs shall, regardless of the date actually filed, be deemed accepted and approved, and shall become effective on the effective date of this amendatory Act of the 97th General Assembly.

In the event the utility SB0009 EngrossedEnrolled - 18 - LRB098 04269 HLH 34296 b recovers a portion of its costs through automatic adjustment clause tariffs on the effective date of this amendatory Act of the 97th General Assembly, the utility may elect to continue to recover these costs through such tariffs, but then these costs shall not be recovered through the performance-based formula rate.

The performance-based formula rate shall be implemented through a tariff filed with the Commission consistent with the provisions of this subsection (c) that shall be applicable to SB0009 EngrossedEnrolled - 19 - LRB098 04269 HLH 34296 b all delivery services customers.

SB0009 EngrossedEnrolled - 20 - LRB098 04269 HLH 34296 b (A) the average for the applicable calendar year of the monthly average yields of 30-year U.S.

SB0009 EngrossedEnrolled - 21 - LRB098 04269 HLH 34296 b (B) recovery of pension and other post-employment benefits expense, provided that such costs are supported by an actuarial study;

recovery of expenses related to the annual Commission proceedings under SB0009 EngrossedEnrolled - 22 - LRB098 04269 HLH 34296 b subsection (d) of this Section to review the inputs to the performance-based formula rate shall be expensed and recovered through the performance-based formula rate;

SB0009 EngrossedEnrolled - 23 - LRB098 04269 HLH 34296 b (H) historical weather normalized billing determinants;

(5) Provide that if the participating utility's earned rate of return on common equity related to the provision of delivery services for the prior rate year (calculated using costs and capital structure approved by the Commission as provided in subparagraph (2) of this subsection (c), consistent with this Section, in accordance with Commission rules and orders, including, but not limited to, adjustments for goodwill, and after any Commission-ordered disallowances and taxes) is more than 50 basis points higher than the rate of return on common equity calculated pursuant to paragraph (3) of this subsection (c) (after adjusting for any penalties to the rate of return on common equity applied pursuant to the performance metrics provision of subsection (f) of this Section), then the participating utility shall apply a credit through the performance-based formula rate that reflects an amount equal to the value of that portion of the earned rate of return on common equity that is more than 50 basis points higher than the rate of return on common equity calculated pursuant to paragraph (3) of this subsection (c) (after adjusting for any penalties to the rate of return on common equity applied pursuant to the performance metrics provision of subsection (f) of this Section) for the prior SB0009 EngrossedEnrolled - 24 - LRB098 04269 HLH 34296 b rate year, adjusted for taxes.

(6) Provide for an annual reconciliation, as described in subsection (d) of this Section, with interest as SB0009 EngrossedEnrolled - 25 - LRB098 04269 HLH 34296 b described in subsection (d) of this Section, of the revenue requirement reflected in rates for each calendar year, beginning with the calendar year in which the utility files its performance-based formula rate tariff pursuant to subsection (c) of this Section, with what the revenue requirement would have been had the actual cost information for the applicable calendar year been available at the filing date.

The SB0009 EngrossedEnrolled - 26 - LRB098 04269 HLH 34296 b Commission shall enter an order approving, or approving as modified, the performance-based formula rate, including the initial rates, as just and reasonable within 270 days after the date on which the tariff was filed, or, if the tariff is filed within 14 days after the effective date of this amendatory Act of the 97th General Assembly, then by May 31, 2012.

Subsequent changes to the performance-based formula rate structure or protocols shall be made as set forth in Section 9-201 of this Act, but nothing in this subsection (c) is intended to limit the Commission's authority under Article IX and other provisions of this Act to initiate an investigation of a participating utility's performance-based formula rate SB0009 EngrossedEnrolled - 27 - LRB098 04269 HLH 34296 b tariff, provided that any such changes shall be consistent with paragraphs (1) through (6) of this subsection (c).

(d) Subsequent to the Commission's issuance of an order approving the utility's performance-based formula rate structure and protocols, and initial rates under subsection (c) of this Section, the utility shall file, on or before May 1 of SB0009 EngrossedEnrolled - 28 - LRB098 04269 HLH 34296 b each year, with the Chief Clerk of the Commission its updated cost inputs to the performance-based formula rate for the applicable rate year and the corresponding new charges.

Provided, however, that the first such reconciliation shall be for the calendar year in which the utility files SB0009 EngrossedEnrolled - 29 - LRB098 04269 HLH 34296 b its performance-based formula rate tariff pursuant to subsection (c) of this Section and shall reconcile (i) the revenue requirement or requirements established by the rate order or orders in effect from time to time during such calendar year (weighted, as applicable) with (ii) the revenue requirement determined using a year-end rate base for that calendar year calculated pursuant to the performance-based formula rate using (A) actual costs for that year as reflected in the applicable FERC Form 1, and (B) for the first such reconciliation only, the cost of equity, which shall be calculated as the sum of 590 basis points plus the average for the applicable calendar year of the monthly average yields of 30-year U.S.

Notwithstanding anything that may be to the contrary, the intent of the reconciliation is to ultimately reconcile SB0009 EngrossedEnrolled - 30 - LRB098 04269 HLH 34296 b the revenue requirement reflected in rates for each calendar year, beginning with the calendar year in which the utility files its performance-based formula rate tariff pursuant to subsection (c) of this Section, with what the revenue requirement determined using a year-end rate base for the applicable calendar year would have been had the actual cost information for the applicable calendar year been available at the filing date.

Notwithstanding any other provision of this Section or Act or any rule or other requirement adopted by the Commission, a participating utility that is a combination utility with more than one rate zone shall not be required to file a separate set of such data and documentation for each rate zone and may combine such data and documentation into a single set of SB0009 EngrossedEnrolled - 31 - LRB098 04269 HLH 34296 b schedules.

In a proceeding under this subsection (d), the Commission shall enter its order no later than the earlier of SB0009 EngrossedEnrolled - 32 - LRB098 04269 HLH 34296 b 240 days after the utility's filing of its annual update of cost inputs to the performance-based formula rate or December 31.

(e) Nothing in subsections (c) or (d) of this Section shall SB0009 EngrossedEnrolled - 33 - LRB098 04269 HLH 34296 b prohibit the Commission from investigating, or a participating utility from filing, revenue-neutral tariff changes related to rate design of a performance-based formula rate that has been placed into effect for the utility.

(f) Within 30 days after the filing of a tariff pursuant to subsection (c) of this Section, each participating utility shall develop and file with the Commission multi-year metrics designed to achieve, ratably (i.e., in equal segments) over a SB0009 EngrossedEnrolled - 34 - LRB098 04269 HLH 34296 b 10-year period, improvement over baseline performance values as follows:

(4) Seventy-five percent improvement in the total number of customers who exceed the service reliability SB0009 EngrossedEnrolled - 35 - LRB098 04269 HLH 34296 b targets as set forth in subparagraphs (A) through (C) of paragraph (4) of subsection (b) of 83 Ill.

design a performance metric SB0009 EngrossedEnrolled - 36 - LRB098 04269 HLH 34296 b regarding the creation of opportunities for minority-owned and female-owned business enterprises consistent with State and federal law using a base performance value of the percentage of the participating utility's capital expenditures that were paid to minority-owned and female-owned business enterprises in 2010.

The metrics shall include incremental performance goals SB0009 EngrossedEnrolled - 37 - LRB098 04269 HLH 34296 b for each year of the 10-year period, which shall be designed to demonstrate that the utility is on track to achieve the performance goal in each category at the end of the 10-year period.

If the utility is unable to meet the metrics and performance goals set forth in subparagraphs (5) through (8) of this subsection (f) for such reasons, and the Commission so finds after notice and hearing, then the utility shall be excused from compliance, but only to the limited extent achievement of the affected metrics and performance SB0009 EngrossedEnrolled - 38 - LRB098 04269 HLH 34296 b goals was hindered by the less than full implementation.

SB0009 EngrossedEnrolled - 39 - LRB098 04269 HLH 34296 b (2) With respect to each of the incremental annual performance goals established pursuant to paragraph (2) of subsection (f) of this Section, for each year that the participating utility does not achieve each such goal, the participating utility's return on equity shall be reduced as follows:

(5) With respect to each of the incremental annual SB0009 EngrossedEnrolled - 40 - LRB098 04269 HLH 34296 b performance goals established pursuant to subparagraph (5) of subsection (f) of this Section, for each year that the participating utility does not achieve at least 95% of each such goal, the participating utility's return on equity shall be reduced by 5 basis points for each such unachieved goal.