SB 6424 — Authorizing an alternative form of regulation of electrical and natural gas companies.

S-4508.2SUBSTITUTES-3557.3SENATE SENATE BILL 6424State of Washington65th Legislature2018 Regular SessionBy Senate Energy, Environment & Technology (originally sponsored by Senators Carlyle, Fain, Palumbo, and Saldaña)READSaldañaRead FIRSTfirst TIMEtime 02/02/18.AN01/17/18. ACT Relating to authorizing an alternative form of regulation of electrical and natural gas companies;

Referred to Committee on Energy, Environment & Technology.AN ACT Relating to authorizing an alternative form of regulation of electrical and natural gas companies;

The legislature finds that a similar update to the utilitiesutility and transportation commission's statutory grant of authority for telecommunications customers a decade ago serves as a reasonable model.

The legislature intends that the utilitiesutility and transportation commission will utilize alternative forms of regulation to further the state's public policy goals by ensuring that electrical and gas companies are incentivized to invest to meet state policy objectives.The legislature intends that an alternative form of regulation should:

and(b) To receive through rates revenues sufficient to recover the bondable conservation investment and the costs of equity and debt capital associated with it, including, without limitation, the payment of principal, premium, if any, and interest on conservation bonds.(4) "Finance subsidiary" means any corporation, company, association, joint stock association, or trust that is beneficially owned, directly or indirectly, by an electrical, gas, or water company, or in the case of a trust issuing conservation bonds consisting of beneficial interests, for which an electrical, gas, or water company or a subsidiary thereof is the grantor, or an unaffiliated entity formed for the purpose of financing or refinancing approved conservation investment, and that acquires conservation investment assets directly or indirectly from such company in a transaction approved by the commission.(5) "Greenhouse"Carbon gas" and "greenhouse gases" has the same meaning as defined in RCW 70.235.010.(6) "Greenhouse gas planning adder" means a calculation of the economic impacts associated with an incremental increase in greenhousecarbon gasdioxide emissions in a calendar year and must be an amount equal to the greater of:

(a) The minimum annual greenhousecarbon gas planning adder for such a calendar year;

or (b) the applicable carbon or greenhouse gas tax rate, if any, as expressed in dollars per metric ton of carbon dioxide or greenhouse gas for such a calendar year.(7)year.(6) "Intermediate-term"Minimum resourceannual options"carbon meansplanning aadder" newmeans, or renewed contract for electricitycalendar oryear natural2018, gasforty withdollars aper termmetric ton of morecarbon thandioxide, threewhich butamount lessmust thanbe fiveincreased yearseach forJanuary the1st provisionby ofone electricityand orone-quarter naturalpercent, gasrounded to retailthe end-usenearest customersdollar.Sec. 3.  RCW in80.28.010 thisand state.(8)2011 "Long-termc resource214 options"s means:(a)11 Eitherare aeach newamended ownershipto interestread inas anfollows:(1) electricAll charges made, demanded or received by any gas plantcompany, electrical company, wastewater company, or anwater upgradecompany for gas, electricity or water, or for any service rendered or to anbe existingrendered electricin plant;connection therewith, shall be just, fair, reasonable and sufficient.

or(b) A new or renewed contract for electricity or natural gas with a term of five or more years for the provision of electricity or natural gas to retail end-use customers in this state.(9) "Minimum annual greenhouse gas planning adder" means, for calendar year 2018, forty dollars per metric ton of greenhouse gas, which amount must be increased each January 1st by one and one-fourth percent, rounded to the nearest dollar.(10) "Qualified biomass energy" has the same meaning as defined in RCW 19.285.030.(11) "Upgrade" means any modification made for the primary purpose of increasing the electric generation capacity of an electric generation facility.

"Upgrade" does not include routine or necessary maintenance, installation of emission control equipment, installation, replacement, or modification of equipment that improves the heat rate of the facility, or installation, replacement, or modification of equipment for the primary purpose of maintaining reliable generation output capability that does not increase the heat input or fuel usage.Sec. 3.  RCW 80.28.010 and 2011 c 214 s 11 are each amended to read as follows:(1) All charges made, demanded or received by any gas company, electrical company, wastewater company, or water company for gas, electricity or water, or for any service rendered or to be rendered in connection therewith, shall be just, fair, reasonable and sufficient.

8624(C)(1) without limiting availability to certain months of the year, without regard to the length of time the customer has occupied the premises, and without regard to whether the customer is the tenant or owner of the premises occupied.(8) Every gas company, electrical company, wastewater company, and water company shall construct and maintain such facilities in connection with the manufacture and distribution of its product, or provision of its services, as will be efficient and safe to its employees and the public.(9) An agreement between the customer and the utility, whether oral or written, does not waive the protections afforded under this chapter.(10) In establishing rates or charges for water service, water companies as defined in RCW 80.04.010 may consider the achievement of water conservation goals and the discouragement of wasteful water use practices.(11)(a) Electrical companies, gas companies, and the commission shall use the greenhousecarbon gas planning adder when evaluating and selecting conservation policies, programs, and targets.(b)(i)targets.(b) Electrical companies shall use the greenhousecarbon gas planning adder inin: developing and evaluating integrated resource plans pursuant to chapter 19.280 RCW;

and(ii)(i) GasDeveloping companies shall use the greenhouse gas planning adder in developing integrated resource plans that describe a mix of natural gas, biogas, or synthetic gas and conservation designated to meet current and future needs at the lowest reasonable costs to the gas company and its customers.(c) Electrical companies and gas companies shall use the greenhouse gas planning adder in evaluating and selecting intermediate-term and long-term resource options.(d) The commission shall use the greenhouse gas planning adder in evaluating integrated resource plans andpursuant intermediate-termto andchapter long-term19.280 resourceRCW; options selected by electrical companies and gas companies under this subsection.(e) For the purposes of this subsection:

(i)and Gas(ii) evaluating and selecting long-term resource options.(c) For the purposes of this subsection, gas consisting largely of methane and other hydrocarbons derived from the decomposition of organic material in landfills, wastewater treatment facilities, and anaerobic digesters must be considered a nonemitting resource;resource.(d) For the purposes of this subsection, "long-term resource options" means:(i) Either a new ownership interest in electric plant or an upgrade to an existing electric plant;

andor(ii) (ii)A qualifiednew biomassor energyrenewed mustcontract befor consideredelectricity with a nonemittingterm resource.(f)of Afive multistateor electricmore companyyears withfor retail customers and generation located outside the stateprovision of Washingtonpower shallto useretail theend-use greenhousecustomers gasin planning adder pursuant to this subsectionstate.NEW beginning January 1, 2020.NEW SECTION.  Sec. 4.  A new section is added to chapter 80.28 RCW to read as follows:(1) The legislature declares that changes in technology and the structure of the energy industry may produce conditions under which traditional rate of return, rate-based regulation of electrical and gas companies may not in all cases provide the most efficient and effective means of achieving the legislature's intent and the public policy goals of this state as declared in chapters 19.280 and 19.285 RCW and this title.

The commission may determine the manner and extent of any alternative form of regulation as may be appropriate in the public interest, including, but not limited to, authorizing an alternative form of regulation for all or individual utility services.(b) The commission shall consider,consider to the extent applicable, the extent to which an alternative form of regulation is expected to:(i) Align utility regulatory incentives with the public interest;(ii) Maintain and enhance the ability of the electrical or gas company to furnish safe, adequate, and efficient service to its customers;(iii) Support prudent and efficient use of the electrical or natural gas system and utility operations;(iv) Maintain and enhance overall electrical or natural gas system reliability, security, and resilience;(v) Allow an electrical or gas company to support and participate in market transformation for enabling technologies without harming competition;(vi) Allow an electrical or gas company to be financially indifferent as to:

(A) The ownership of the property necessary to furnish utility service to its customers,customers; except where appropriate for facilities furnished to establish a person as a customer of the electrical or gas company;

or (B) the quantity of electricity or gas sold to its customers;(vii) ReasonablyProtect protect customers, includingespecially low-income customers, from associatedundue shortrisk;(viii) and long-term risks;(viii) Ensure an appropriate level of consumer protection;(ix)protection; Support the achievement of state emissions reduction goals;(x) Consider adverse environmental impacts;(xi) Provide the electrical or gas company with the opportunity to earn a reasonable rate of return on investment;

and(xii)and(ix) ProvideSupport forthe broadachievement customer engagement to promote participation by a diversity of customers,state particularlyemissions underservedreduction communitiesgoals.(3) or segments thereof, in the associated programs to help achieve the criteria identified in this subsection (2)(b).(3) An electrical or gas company may petition the commission to establish an alternative form of regulation.

The developmentplan of a plan, which must include customer and stakeholder input, and must also contain a proposal for appropriate performance metrics that include, but are not limited to, ensuring adequate customer service quality, including service quality standards, and appropriate enforcement or remedial provisions in the event the company fails to meet service quality standards or performance measures.

The commission may waive different regulatory requirements for different electrical or gas companies or services if the different treatment is in the public interest.(6) Upon petition by the electrical or gas company, or on motion by the commission when evaluating the achievement of metrics developed in subsection (3) of this section, and after notice and hearing, the commission may rescind or modify an alternative form of regulation in the manner requested by the electrical or gas company.(7) The commission or any person may file a complaint under RCW 80.04.110 alleging that an electrical or gas company under an alternative form of regulation has not complied with the terms and conditions set forth in the alternative form of regulation.