WEST virginia legislature
2021 regular session
Committee Substitute
for
House Bill 2959
By Delegates Anderson, J. Kelly, G. Ward, Westfall, Zatezalo, Hott, Statler, Pethtel and Boggs
[Originating in the Committee on Energy and Manufacturing, March 16, 2021]
A BILL to amend and reenact §24-2-1l of the Code of West Virginia, 1931, as amended, relating to the powers and duties of the Public Service Commission concerning cost recovery for improvements modernizing coal-fired boilers and installing pollution control equipment on coal-fired power plants; amending legislative findings to include language concerning environmental pollution controls on power plants to comply with federal and state environmental regulatory requirements; adding provisions creating a program for the installation, operation, and maintenance of environmental pollution control equipment; providing that electric utilities may file with the commission an application for expedited recovery of costs for the installation, operation, and maintenance of environmental pollution control equipment; amending requirements for cost recovery regarding programs for modernizing coal-fired boilers; amending and providing for application requirements for both programs; altering provisions concerning the time required for a waiver of public hearings for both programs; amending conditions and terms for recovery of incremental capital costs; and amending provisions concerning rates.
Be it enacted by the Legislature of West Virginia:
ARTICLE 2. POWERS AND DUTIES OF PUBLIC SERVICE COMMISSION.
§24-2-1l. Modernization
and improvement of coal-fired boilers at electric power plants; required
environmental pollution controls for coal-fired power plants; findings;
expedited process; requirements; rulemaking.
(a) The Legislature hereby finds that:
(1) West Virginia is rich in energy resources, which provide many advantages to the state, its economy and its citizens;
(2) West Virginia’s abundant coal reserves have created, and will continue to create, many benefits to the state and its citizens;
(3) West Virginia is experiencing a significant downturn in the coal industry as a result of increasing environmental regulation and increased competition from natural gas and oil;
(4) Stabilization of the coal industry to maintain its accompanying benefits to the state and its citizens requires West Virginia to be proactive and focus on the modernization and improvement of coal-fired boilers used by electric utilities in this state to allow the more efficient use of coal in the generation of electricity with reduced environmental impact;
(5) Electric utilities in the state have made considerable investments in equipment at coal-fired plants to comply with numerous environmental regulations;
(6) Electric utilities in West Virginia continue to modify and install environmental pollution controls on power plants to comply with federal and state environmental regulatory requirements to ensure that those facilities can continue to operate and serve the citizens of the state with reliable and affordable capacity and energy while protecting the environment, including air, water and land;
(5) (7) A comprehensive program of modernizing,
upgrading and improving coal-fired boilers and a program of modifying and
installing pollution controls and other related equipment at existing West
Virginia power plants owned by electric utilities at reasonable cost to ratepayers,
will benefit the customers of the electric utilities, the public in West
Virginia, the environment and the economy of the state as a whole;
(6) (8) A coal-fired boiler modernization and
improvement program or an environmental pollution control program which
includes modification or installation of pollution control equipment,
associated infrastructure, and necessary ancillary equipment, will create
jobs, provide for continued and enhanced safety and reliability of aging
electrical generation infrastructure, and provide for more economical
generation of electricity from coal, all of which will benefit customers
located throughout the state; and
(7) (9) Efforts to modernize and improve
coal-fired boilers and to comply with environmental regulatory mandates at
coal-fired power plants owned by electric utilities and used to generate
electricity in this state involve the investment of capital and the incurrence
of associated incremental costs. Accordingly, in order for the electric utility
undertaking those coal-fired boiler modernization and improvement programs or
environmental pollution control programs to comply with air, water, land and
related requirements to attract the necessary capital, the electric utility
should be permitted to recover a the incremental rate of return on
incremental increases in net rate base, related income taxes, depreciation
and property taxes associated with the coal-fired boiler modernization and improvement
programs or environmental pollution control programs commencing with
the implementation of a coal fired-boiler modernization program approved by
the commission without waiting for a full base rate tariff filing, as more
fully described in subsection (f)(g) of this section; and
(10) Environmental pollution control equipment shall include, but not be limited to, carbon capture, reduction, and storage if state or federal reductions of carbon or CO2 emissions are required.
(b) Electric utilities may
file with the commission an application for a multiyear comprehensive program
for modernizing and improving coal-fired boilers at power plants located in
this state and owned, in whole or in part, by the electric utility. Subject to
commission review and approval, a program may be amended and updated by the
electric utility as circumstances warrant. The recovery of costs in support
of the program shall be allowed in the manner set forth in this section if the
proposed program and related rates are found to be just, reasonable, and based
on prudent investments that are used and useful to the utilities’ West Virginia
ratepayers
(c) Electric utilities may file with the commission an application for the expedited recovery of costs for the installation, operation, and maintenance of environmental pollution control equipment that will be installed to comply with federal or state environmental requirements. The filing may be a separate filing from a coal-fired boiler modernization and improvement program filing.
(c) (d) The application is in lieu of a proceeding
pursuant to section eleven of this article and shall contain the following:
(1) A description of the coal-fired boiler modernization and improvement program or environmental pollution control program, in such detail as the commission prescribes, which may include costs associated with or incidental to the reduction of emissions or compliance with environmental requirements, the projected cost, and timing of the installation of equipment and facilities that the applicant proposes to replace, construct, modernize and/or improve;
(2) The projected net increase in rate base, on an average annual basis, related to the replacement, construction or improvements;
(3) The projected starting and completion dates for the modernization and improvement program or environmental pollution control program;
(4) The projected cost of debt for the coal-fired boiler modernization and improvement program funding or environmental pollution control program funding and the projected capital structure for coal-fired boiler modernization and improvement program or environmental pollution control program funding;
(5) Testimony, exhibits or other evidence that demonstrates the need for the modernization and improvement of coal-fired boilers or environmental pollution control equipment and other related equipment in order to provide and maintain adequate, efficient, safe, reliable and reasonably priced electrical generation;
(6) A proposed cost recovery mechanism consistent with this section; and
(7) Other information the applicant considers relevant or the commission requires.
(d) (e) Upon filing of the application, the
applicant shall publish, in the form the commission directs, which form shall
include, but not be limited to, the anticipated rates and, if any, rate
increase under the proposal, by average percentage and dollar amount for
customers within a class of service, as a Class I legal advertisement in
compliance with the provisions of §59-3-1 et seq. of this code, the
publication area to be each county in which service is provided by the
electrical utility, a notice of the filing of the application and that the
commission shall may hold a hearing on the application within 180
days of the notice; unless no substantial opposition to the application
is received by the Public Service Commission within one week, 60 days
of the publication, of the proposed hearing date in which case the
hearing can be waived. and The Commission shall issue a final
order within 270 days of the application filing date unless the Commission
tolls the running of the 270 days due to failure of the electric utility to
timely provide information required by the commission.
(e) (f) Upon notice and hearing, if required by
the commission, the commission shall approve the coal-fired boiler
modernization and improvement program or environmental pollution control
program and allow expedited recovery of costs related to the expenditures
as provided in subsection (g) of this section if the commission finds
that the expenditures and the associated rate requirements are just,
reasonable, based on prudent investments, not contrary to the
West Virginia public interest, and will allow for the provision and maintenance
of adequate, efficient, safe, reliable and reasonably priced electricity
generated from coal.
(f) (g) Upon commission approval, electric
utilities will be authorized to implement the coal-fired boiler modernization
and improvement programs or environmental pollution control programs and
to recover related incremental capital costs and net operation and
maintenance costs of contributions to recovery of return and
depreciation and property tax expenses directly attributable to the coal-fired
boiler modernization and improvement program, provided by electric utility’s
customers, if any, as provided in the following subdivisions:
(1) An allowance for return
shall be calculated by applying a rate of return to the average planned net
incremental increase to in rate base attributable to the net
rate base effect of the coal-fired boiler modernization and improvement
program or environmental pollution control program for the coming year,
considering the projected amount and timing of expenditures under the
coal-fired boiler modernization and improvement program or environmental
pollution control program plus any expenditures in previous years of the
program. The rate of return shall be determined by utilizing the rate of return
on equity authorized by the commission in the electric utility’s most recent base
rate case proceeding or in the case of a settled rate case a rate of return
on equity set forth in or associated with such settlement or, if neither is set
forth or associated with such settlement, a rate of return on equity as
determined by the commission, and the projected cost of the electric utility’s
debt during the period of the coal-fired boiler modernization and improvement
program or environmental pollution control programs to determine the
weighted cost of capital based upon the electric utility’s capital structure used
in the most recent base rate case proceeding.
(2) Income taxes at the corporate statutory income rates applicable to the return allowed on the coal-fired boiler modernization and improvement program or environmental pollution control program shall be calculated for inclusion in rates.
(3) Incremental depreciation and property tax expenses directly attributable to the coal-fired boiler modernization and improvement program or environmental pollution control program shall be estimated for the upcoming year.
(4) Incremental net increases in operation and maintenance expenses attributable to the coal-fired boiler modernization and improvement program or environmental pollution control program estimated for the upcoming year after consideration of any operation and maintenance expense savings from modified use of existing boiler or environmental control equipment.
(4) (5) Following commission approval of its
coal-fired boiler modernization and improvement program or environmental
pollution control program, an electric utility shall place into effect
rates that include an increment, approved by the commission in accordance
with subsection (g) above, that recovers the allowance for return,
operation and maintenance expenses, related income taxes, depreciation and
property tax expenses associated with the electric utility’s estimated
coal-fired boiler modernization and improvement program investments for the
upcoming year, net of contributions to recovery of those incremental costs
provided by the electric utility’s customers, if any, (“incremental cost
recovery increment”). In each year subsequent to the order approving the
coal-fired boiler modernization and improvement program or environmental
pollution control program and an incremental cost recovery increment, the
electric utility shall file a petition with the commission setting forth a new
proposed incremental cost recovery increment based on investments and expenses
to be made in the subsequent year,. The filing shall also include a
true-up for plus any under-recovery or minus any over-recovery
of actual incremental costs attributable to the coal-fired boiler modernization
and improvement program or environmental pollution control program
investments, for the preceding year.
(g) (h) The electric utility may make any
accounting accruals necessary to establish a regulatory asset or liability
through which actual incremental costs incurred and costs recovered through the
rate mechanism are tracked.
(h) (i) Electric utilities may defer incremental
operation and maintenance expenditures attributable to regulatory and
compliance-related requirements introduced after the electric utility’s last
rate case proceeding and not included in the electric utility’s current base
rates. In a future base rate case, the commission shall allow recovery
of the deferred costs amortized over a reasonable period of time to be
determined by the commission if the commission finds that the costs were
reasonable and prudently incurred and were not reflected in rates in prior rate
cases.
NOTE: The purpose of this bill is regarding required environmental pollution controls for coal-fired power plants and to allow utilities to file with the commission an application for the expedited recovery of costs for the installation and operation and maintenance of environmental pollution control equipment.
Strike-throughs indicate language that would be stricken from a heading or the present law and underscoring indicates new language that would be added.