(1) On or before September 30, 2007, the commission shall commence a rule-making proceeding, as described in subsection (2) of this section, to develop expenditure and natural gas savings targets, funding and cost-recovery mechanisms, and a financial bonus structure for demand-side management programs implemented by an investor-owned gas distribution utility, also referred to in this section as a "gas utility".
(2) As part of the rule-making proceeding required by subsection (1) of this section, the commission shall:
Adopt DSM program expenditure targets equal to at least one-half of one percent of anatural gas utility's revenues from its full service customers in the year prior to setting such targets;
Establish DSM program savings targets that are commensurate with program expenditures and expressed in terms of an amount of gas saved per unit of program expenditures;
(I) Adopt procedures for allowing gas utilities to recover their prudently incurredcosts of DSM programs without having to file a rate case. Such costs shall include, but are not limited to, facility investments; rebates; interest rate buy-downs; incremental labor costs, employee benefits, carrying costs, and employee-related administrative costs; and other administrative costs. All such costs shall be recovered through a cost adjustment mechanism that is set on an annual basis, or more frequently if deemed appropriate.
(II) Cost adjustment procedures shall give gas utilities the option of obtaining cost recovery either through expensing DSM program expenditures or adding them to base rates, with an amortization period to be determined by the commission. In addition, such procedures shall provide that cost recovery for programs directed at residential customers are to be collected from residential customers only and that cost recovery for programs directed at nonresidential customers are to be collected from nonresidential customers only.
Adopt a bonus structure to reward gas utilities for investments in cost-effective DSMprograms. For each year of operation, the bonus shall be capped at twenty-five percent of the expenditures or twenty percent of the net economic benefits of the DSM programs, whichever amount is lower. The amount of the bonus awarded each year shall be determined based on the extent to which the gas utility has achieved the targets established by the commission in accordance with paragraphs (a) and (b) of this subsection (2). The bonus shall not count against a gas utility's authorized rate of return or be considered in rate proceedings.
Consider the fact that implementing the new DSM programs may require a phase-inperiod before a gas utility is able to achieve the funding level determined by the commission pursuant to paragraph (a) of this subsection (2). A gas utility that implements a new DSM program in phases shall be eligible to receive a bonus under the bonus structure adopted pursuant to paragraph (d) of this subsection (2) during its phase-in period.
Not adopt any measure authorizing a financial penalty against a gas utility that failsto meet the targets in any particular year.
(3) Within twelve months after the completion of the rule-making required by subsection (1) of this section, each gas utility shall:
Develop and begin implementing a set of cost-effective DSM programs for its fullservice customers. Such programs shall be of the gas utility's choosing, taking into account the characteristics of the gas utility and its customers. One or more programs may be targeted to low-income customers and, if so, may be provided directly by the gas utility or indirectly through financial support of conservation programs for low-income households administered by the state.
In implementing DSM programs, use reasonable efforts to maximize energy savingsconsistent with the annual energy efficiency budget.
In implementing DSM programs, gas utilities may spend a disproportionate share oftotal expenditures on one or more classes of customers.
The commission shall authorize each gas utility to recover moneys spent for education programs, impact and process evaluations, and program planning related to natural gas DSM programs offered by the gas utility without having to show that such expenditures, on an independent basis, are cost-effective. The commission may limit the amount spent for these activities.
(a) Gas utilities shall submit annual reports to the commission, as determined by the commission by rule. The annual report shall describe the gas utility's DSM programs and shall document program expenditures, energy savings impacts and the techniques used to estimate these impacts, the estimated cost-effectiveness of program expenditures, and any other information the commission may require.
(b) The commission shall review each report submitted pursuant to paragraph (a) of this subsection (6) and shall determine the level of bonus, if any, that the gas utility is eligible to collect on the basis of the information included in the report. The commission's determination shall be made within three months after receiving the report. Any such bonus shall be authorized as a supplement to the cost adjustment mechanism or alternative mechanism approved by the commission and shall be applied over a twelve-month period after approval of the bonus.
Gas utilities may continue DSM programs that were in existence on or before May22, 2007, and shall not be required to obtain approval from the commission for such programs.
This section shall not be construed to extend the commission's authority to any nonregulated utility businesses or affiliates of a gas utility.
Source: L. 2007: Entire section added, p. 984, § 3, effective May 22.
Cross references: For the definition of DSM programs, see § 40-1-102.