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BILL NO.
INTRODUCED BY
(Primary Sponsor)
A BILL FOR AN ACT ENTITLED: "AN ACT REVISING CERTAIN PUBLIC UTILITY RATEMAKING; REQUIRING THE PUBLIC SERVICE COMMISSION TO ESTABLISH PERFORMANCE CRITERIA AND A PERFORMANCE MECHANISM TO MEASURE A PUBLIC UTILITY'S PERFORMANCE FOR THE PURPOSE OF SETTING RATES; LIMITING RETURNS BASED ON PERFORMANCE; LIMITING RETURNS UNTIL PERFORMANCE MECHANISMS ARE ADOPTED BY THE COMMISSION; PROVIDING RULEMAKING AUTHORITY; AMENDING SECTIONS 69-2-101, 69-3-302, 69-3-306, 69-3-324, AND 69-3-330, MCA; AND PROVIDING AN IMMEDIATE EFFECTIVE DATE, A RETROACTIVE APPLICABILITY DATE, AND A TERMINATION DATE."
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
NEW SECTION. Section 1. Definitions. As used in [sections 1 through 4], the following definitions apply:
(1) (a) "General rate case" means a contested case review of all necessary components of the revenue requirement, allocated cost of service, and rate design of a public utility, followed by a commission order establishing rates and schedules.
(b) The term does not mean:
(i) a commission proceeding on an application from a public utility to reflect in its rates changes in the commodity cost of natural gas or electricity;
(ii) a proceeding on an application from a public utility for an automatic rate adjustment pursuant to 69-3-308; or
(iii) any other proceeding allowed by the commission on an application from a public utility to change rates and schedules based on a review of a single or a limited number of public utility cost components.
(2) "Public utility" means a public utility regulated by the commission that has restructured pursuant to Title 69, chapter 8, that provides electricity, natural gas, or both for sale to customers.
(3) "Range of reasonableness" means a range authorized by the commission for setting a public utility's rates. The rate must include the performance mechanism approved by the commission in accordance with [section 2] and may include but is not limited to:
(a) index-based adjustments that account for factors such as inflation;
(b) customer growth;
(c) industry productivity;
(d) predetermined percentage adjustments;
(e) adjustments for planned capital additions; or
(f) a combination of one or more of the adjustments included in subsections (3)(a) through (3)(e).
NEW SECTION. Section 2. Performance-based ratemaking for public utilities -- commission rulemaking. (1) (a) When evaluating and setting rates in a general rate case for a public utility, the public service commission shall:
(i) establish utility-specific performance criteria for various aspects of utility operations, including but not limited to system reliability, customer service, power plant performance, utility costs, employee and public safety, energy efficiency and conservation programs, implementation of net metering programs, efficient use of renewable energy resources, and any other areas identified by the commission;
(ii) establish a performance mechanism to adjust a public utility's maximum allowed rate of return on equity on an annual basis based on the utility's performance in relation to the criteria established in subsection (1)(a)(i); and
(iii) develop a rate plan for the public utility that has a maximum 3-year term and includes the performance criteria established in subsection (1)(a)(i) and a performance mechanism established pursuant to subsection (1)(a)(ii).
(b) Performance criteria developed as provided in subsection (1)(a)(i) must, to the greatest extent possible, be based on quantitative metrics that are objective, easily measurable, and verifiable.
(c) The performance mechanism established pursuant to subsection (1)(a)(ii) must allow the commission to determine whether overall utility performance has been excellent, good, adequate, or unsatisfactory for the period reviewed.
(2) The rate proceeding provided for in subsection (1) may include provisions for rate adjustments during the 3-year term and provisions to address potential earnings surpluses or deficits during the term.
(3) By July 1, 2020, the commission shall adopt rules to implement this section. Rules must include but are not limited to:
(a) a range of reasonableness to be used in accordance with [section 3];
(b) performance criteria;
(c) a performance mechanism; and
(d) any other incentives and penalties considered by the commission to be necessary for utility performance.
NEW SECTION. Section 3. Utility returns -- range of reasonableness. (1) A public utility whose performance is deemed excellent must, inclusive of any incentive rewards and penalties, be allowed to retain for that period a return on equity no greater than 100 basis points above the midpoint of the range of reasonableness approved by the commission.
(2) A utility whose performance is deemed good must, inclusive of any incentive rewards and penalties, be allowed to retain for that period a return on equity no greater than 50 basis points above the midpoint of the range of reasonableness approved by the commission.
(3) A utility whose performance is deemed adequate for the period must, inclusive of any incentive rewards and penalties, be allowed to retain for that period a return on equity no greater than the midpoint of the range of reasonableness approved by the commission.
(4) A utility whose performance is deemed unsatisfactory, inclusive of any incentive rewards and penalties, must be allowed to retain for that period a return on equity no greater than 80 percent of the top of the range of reasonableness approved by the commission.
NEW SECTION. Section 4. Utility returns -- limitations -- rulemaking. (1) Except as provided in subsection (2), a public utility's overall rate of return may not exceed the risk of a comparable borrower's rate plus 200 basis points, as determined by the commission.
(2) The limitation in subsection (1) does not apply to a public utility resource if the commission on or before [the effective date of this act] fixed the permanent rate of return for the specific resource.
(3) The commission may adopt rules necessary to implement this section, including a comparable borrower's rate.
(4) For the purposes of this section, "comparable borrowers" means a rural electric cooperative utility operating in Montana in accordance with Title 35, chapter 18, or a municipal or county utility operating in Montana in accordance with Title 7 that uses funds, materials, or services on credit.
Section 5. Section 69-2-101, MCA, is amended to read:
"69-2-101. Adoption of rules for rate cases. (1) The Except as provided in subsection (2), the commission shall adopt such rules of practice and procedure for the filing, investigation, and hearing of petitions or applications to increase or decrease rates and charges of railroads, motor carriers, and public utilities as the commission finds necessary or appropriate to enable it to reach a final decision in an orderly manner.
(2) Rules pertaining to a public utility as defined in [section 1] must meet the requirements of [sections 1 through 3.]"
Section 6. Section 69-3-302, MCA, is amended to read:
"69-3-302. Changes in schedules. (1) Except as provided in 69-3-308 and [sections 1 through 3], a change may not be made in any schedule, including schedules of joint rates, except as approved by the commission, upon the passage of 9 months, or by operation of 69-3-907(1). If the 9-month time period expires prior to commission approval of a schedule, a utility may waive the time period.
(2) Notwithstanding any provision of this title to the contrary, other than rate adjustments made pursuant to 69-3-308 or in accordance with [sections 1 through 3] or [section 4], the rates, tolls, or charges set forth in any schedule filed with the commission pursuant to 69-3-301 must become effective and be lawful rates, tolls, or charges for the utility service rendered 9 months after the date upon on which the schedule was filed under the rules of practice and procedure for filing as adopted by the commission or upon commission approval, whichever occurs first, unless the utility waives the 9-month time period. However, if the rates, tolls, or charges become effective because of the passage of 9 months, the revenue collected is subject to rebate, plus interest at an annual rate determined by the commission, to the extent that the rates, tolls, or charges ultimately approved by the commission in its final decision produce revenue that is less than that collected under the filed schedules. In Except as provided in [sections 1 through 3], in the case of an investor-owned utility, the interest rate set by the commission may not exceed the cost of equity capital as last determined by the commission.
(3) The commission may prescribe rules necessary to effectively administer this section."
Section 7. Section 69-3-306, MCA, is amended to read:
"69-3-306. Classification of service. (1) Except as provided in subsection (3) and in accordance with [sections 1 through 3], the commission may prescribe classifications of the service of all public utilities. Classifications may take into account the quantity used, the time when used, and any other reasonable consideration. A public utility is required to conform its schedule of rates, tolls, and charges to the classifications.
(2) The Except as provided in [sections 1 through 3], the commission shall prescribe a declining block rate structure or a structure appropriate to customer-generators for electric service, when cost-justified.
(3) Classifications of service for customer-generators must be determined in accordance with Title 69, chapter 8, part 6."
Section 8. Section 69-3-324, MCA, is amended to read:
"69-3-324. Initiation of action by commission itself. The Except as provided in [sections 1 through 3], the commission may at any time, upon its own motion, investigate any of the rates, tolls, charges, rules, practices, and services and after a full hearing as provided in this part may make by order such changes as may be that are just and reasonable, the same as if a formal complaint had been made."
Section 9. Section 69-3-330, MCA, is amended to read:
"69-3-330. Decision by commission. (1) If, upon such after a hearing and due investigation, the rates, tolls, charges, schedules, or joint rates are found to be unjust, unreasonable, or unjustly discriminatory or to be preferential or otherwise in violation of the provisions of this chapter or [sections 1 through 3], the commission may fix and order substituted therefor such rates, tolls, charges, or schedules as that the commission finds are just and reasonable and, if applicable, in accordance with [sections 1 through 3].
(2) If the commission determines that a rate, toll, or charge has been was collected in violation of 69-3-305(1)(b), the commission may order refunds or credits as specified in 69-3-305(3).
(3) If the commission finds that any regulation, measurement, practice, act, or service complained of is unjust, unreasonable, insufficient, preferential, unjustly discriminatory, or otherwise in violation of the provisions of this chapter or [sections 1 through 3], if applicable, or that the service is inadequate or any reasonable service cannot be obtained, the commission may determine substitute therefor other regulations, measurements, practices, services, or acts and make such issue an order relating thereto as is that the substitute is just and reasonable.
(4) In Except as provided in [sections 1 through 3], in any decision ordering a change in the rates which may be charged for electricity or natural gas, the commission shall list each expenditure submitted by the utility for allowance as an operating cost which is disallowed by the commission as an element of operating costs. The list of disallowed expenditures shall must appear in the written decision of the commission and shall must itemize each expenditure by amount, category, and purpose."
NEW SECTION. Section 10. Codification instruction. [Sections 1 through 4] are intended to be codified as an integral part of Title 69, chapter 3, and the provisions of Title 69, chapter 3, apply to [sections 1 through 4].
NEW SECTION. Section 11. Effective date. [This act] is effective on passage and approval.
NEW SECTION. Section 12. Retroactive applicability. [Section 4] applies retroactively, within the meaning of 1-2-109, to general rate cases filed by a public utility on or after September 1, 2018, if the commission does not issue a final order in the case on or before [the effective date of this act].
NEW SECTION. Section 13. Termination. (1) [Section 4] terminates on the date that the commission issues its first final order in a general rate case in accordance with [sections 1 through 3].
(2) The public service commission shall provide the code commissioner with a copy of a final order approving a public utility's general rate case in accordance with [sections 1 through 3].
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Latest Version of LC 534 (LC0534.01)
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