HB 1272 — An Act amending Title 66 (Public Utilities) of the Pennsylvania Consolidated Statutes, in restructuring of electric utility industry, further providing for definitions and for duties of electric distribution companies.

PRINTER'S NO.   1425

                     THE GENERAL ASSEMBLY OF PENNSYLVANIA



                         HOUSE BILL
                         No. 1272
                                               Session of
                                                 2025

     INTRODUCED BY STAMBAUGH, BERNSTINE, M. MACKENZIE, M. JONES,
        ROWE, COOK, GREINER, GILLEN, HAMM, RADER, WATRO, ZIMMERMAN,
        KAUFFMAN, GAYDOS, KUTZ AND RYNCAVAGE, APRIL 21, 2025

     REFERRED TO COMMITTEE ON ENERGY, APRIL 21, 2025


                                    AN ACT
 1   Amending Title 66 (Public Utilities) of the Pennsylvania
 2      Consolidated Statutes, in restructuring of electric utility
 3      industry, further providing for definitions and for duties of
 4      electric distribution companies.
 5      The General Assembly of the Commonwealth of Pennsylvania
 6   hereby enacts as follows:
 7      Section 1.    Section 2803 of Title 66 of the Pennsylvania
 8   Consolidated Statutes is amended by adding definitions to read:
 9   § 2803.    Definitions.
10      The following words and phrases when used in this chapter
11   shall have the meanings given to them in this section unless the
12   context clearly indicates otherwise:
13      * * *
14      "Long-term resource adequacy agreement."    An agreement
15   between an electric distribution company and another person or
16   corporation in which the electric distribution company invests
17   in a new generation resource in exchange for a portion of the
18   net revenues derived from the new generation resource, with the
 1   portion of the net revenues being credited to customers through
 2   a nonbypassable surcharge mechanism established in accordance
 3   with section 2807(e)(5.1)(i)(G) (relating to duties of electric
 4   distribution companies).
 5      "New generation resource."        An electric generation facility
 6   that provides electric generation supply to the bulk electric
 7   system and that is newly constructed in the electric
 8   distribution company's transmission control zone or service
 9   territory, including, but not limited to, one or more of the
10   following resources:
11             (1)   Natural gas.
12             (2)   Nuclear energy.
13             (3)   Battery storage.
14             (4)   Alternative energy sources, as the term is defined
15      by section 2 of the act of November 30, 2004 (P.L.1672,
16      No.213), known as the Alternative Energy Portfolio Standards
17      Act.
18      * * *
19      "Resource adequacy."        When the projection for all available
20   sources of electric supply, as submitted under section 524(a)(2)
21   (relating to data to be supplied by electric utilities), exceeds
22   the projection of electrical energy use and electrical demand by
23   a reasonable reserve margin.
24      "Resource inadequacy."        When the projection of available
25   sources of electric supply as calculated for resource adequacy,
26   including capacity and generation availability during times of
27   demand, falls below a reasonable reserve margin.
28      * * *
29      Section 2.     Section 2807(e)(3.2), (3.3), (3.4) and (3.7) of
30   Title 66 are amended and the subsection is amended by adding a

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 1   paragraph to read:
 2   § 2807.    Duties of electric distribution companies.
 3      * * *
 4      (e)    Obligation to serve.--A default service provider's
 5   obligation to provide electric generation supply service
 6   following the expiration of a generation rate cap specified
 7   under section 2804(4) (relating to standards for restructuring
 8   of electric industry) or a restructuring plan under section
 9   2806(f) is revised as follows:
10             * * *
11             (3.2)    The electric power procured pursuant to paragraph
12      (3.1) shall include [a prudent mix] one or more of the
13      following:
14                 (i)    Spot market purchases.
15                 (ii)    Short-term contracts.
16                 (iii)    Long-term purchase contracts, entered into as
17             a result of an auction, request for proposal or bilateral
18             contract that is free of undue influence, duress or
19             favoritism, of more than four and not more than [20] 30
20             years. The default service provider shall have sole
21             discretion to determine the source and fuel type. Long-
22             term purchase contracts under this subparagraph may [not
23             constitute more than 25% of the] be used to procure up to
24             the full amount of the default service provider's
25             projected default service load [unless the commission,
26             after a hearing, determines for good cause that a greater
27             portion of load is necessary to achieve least cost
28             procurement]. This subparagraph shall not apply to
29             contracts executed under paragraph (5).
30             [(3.3)    The commission may determine that a contract is

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 1    required to be extended for a longer term of up to 20 years,
 2    if the extension is necessary to ensure adequate and reliable
 3    service at least cost to customers over time.]
 4        (3.4)     [The prudent mix of contracts] A contract entered
 5    into pursuant to [paragraphs (3.2) and (3.3)] paragraph (3.2)
 6    shall be designed to ensure:
 7             (i)    Adequate and reliable service at a reasonable
 8        cost to consumers.
 9             [(ii)    The least cost to customers over time.]
10             (iii)    Compliance with the requirements of paragraph
11        (3.1).
12        * * *
13        (3.7)     At the time the commission evaluates the plan and
14    prior to approval, in determining if the default electric
15    service provider's plan obtains generation supply at [the
16    least] a reasonable cost, the commission shall consider the
17    default service provider's obligation to provide adequate and
18    reliable service to customers and that the default service
19    provider has obtained [a prudent mix of contracts to obtain
20    least cost on a long-term, short-term and spot market basis
21    and] a contract to obtain reasonable cost generation supply.
22    The commission shall make specific findings which shall
23    include the following:
24             (i)    The default service provider's plan includes
25        prudent steps necessary to negotiate favorable generation
26        supply contracts.
27             (ii)    The default service provider's plan includes
28        prudent steps necessary to obtain [least] reasonable cost
29        generation supply [contracts on a long-term, short-term
30        and spot market basis].

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 1             (iii)      Neither the default service provider nor its
 2        affiliated interest has withheld from the market any
 3        generation supply in a manner that violates Federal law.
 4        * * *
 5        (5.1)     (i)    An electric distribution company shall be
 6        permitted to petition the commission to demonstrate that
 7        a resource inadequacy exists, to which the following
 8        shall apply:
 9                   (A)    There shall be a rebuttable presumption that
10             a resource inadequacy exists upon a showing that the
11             reserve margin forecast or similar replacement
12             reserve margin forecast falls below the target
13             reserve margin in any of the planning years of the
14             applicable independent system operator or regional
15             transmission organization in the 10-year forward
16             installed reserve margin forecast. If the commission,
17             upon the petition of an electric distribution
18             company, finds that a resource inadequacy exists, the
19             electric distribution company shall be permitted to
20             invest in new generation resources up to and
21             including:
22                         (I)    the electric distribution company's 100%
23                   direct ownership of new generation resources;
24                         (II)    the electric distribution company
25                   entering into long-term resource adequacy
26                   agreements to invest in new generation resources
27                   that does not involve 100% direct ownership by
28                   the electric distribution company; or
29                         (III)    both subclauses (I) and (II).
30                   (B)    The commission shall render a decision on an

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 1             electric distribution company's petition within nine
 2             months of the date of filing. The petition shall be
 3             deemed approved if no decision is made within the
 4             nine-month period.
 5                  (C)   The petition shall include the results of at
 6             least one request for proposals for new generation
 7             resources from the third-party generation developers.
 8             The request for proposals shall, at a minimum,
 9             evaluate new generation resource proposals based on
10             the following factors:
11                        (I)    Impact on addressing resource
12                  inadequacy.
13                        (II)    Certainty of permitting and timely
14                  construction for new generation resources.
15                        (III)    Ability to mitigate risk to customers,
16                  including price volatility.
17                  (D)   The commission shall determine which
18             proposal, including the electric distribution
19             company's proposal, is reasonable and prudent and
20             issue an order approving either the electric
21             distribution company's proposal or a proposal
22             submitted in response to the electric distribution
23             company's request for proposals. An electric
24             distribution company shall be permitted to recover
25             the cost of preparing, filing and litigating the
26             proposal, including the cost of conducting a request
27             for proposals, in accordance with clause (G).
28                  (E)   Electric distribution companies are not
29             required to include the results of a request for
30             proposals under clause (C) if the electric

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 1             distribution company demonstrates that the time or
 2             cost involved in conducting the request for proposals
 3             would inhibit timely action in addressing threats to
 4             resource adequacy.
 5                  (F)   If the commission approves a proposal that
 6             does not involve the electric distribution company's
 7             direct ownership of new generation resources, the
 8             commission shall order the electric distribution
 9             company to enter into a long-term resource adequacy
10             agreement for the approved new generation resource.
11             The electric distribution company shall recover its
12             costs from entering into the long-term resource
13             adequacy agreement under clause (G). In addition to
14             the cost recovery under clause (G), the commission
15             shall allow an additional financial incentive at a
16             reasonable rate set by the commission to incentivize
17             electric distribution companies to enter into long-
18             term resource adequacy agreements under this section
19             with such rate not less than the electric
20             distribution company's weighted cost of capital and
21             no more than the electric distribution company's
22             authorized return on equity. In the absence of a
23             stated return on equity established in a distribution
24             rate case, the commission shall use the return on
25             equity for capital recovered under the distribution
26             system improvement charge under section 1353
27             (relating to distribution system improvement charge)
28             in effect at the time of the commission's order.
29                  (G)   Costs for new generation resources and long-
30             term resource adequacy agreements, including all

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 1             costs of preparing, filing and litigating the
 2             petition, shall be recovered from customers in all
 3             customer classes through a nonbypassable cost-
 4             recovery tariff mechanism in accordance with section
 5             1307 (relating to sliding scale of rates;
 6             adjustments), to ensure full and timely recovery of
 7             all prudent and reasonable costs of investment by the
 8             electric distribution company in new generation
 9             resources, as approved by the commission, including,
10             but not limited to, administrative costs, operation
11             and maintenance expenses and a just and reasonable
12             pretax return on the electric distribution company's
13             capital investments in the new generation resources.
14             An electric distribution company or the owner of the
15             new generation resources under a long-term resource
16             adequacy agreement shall credit to customers through
17             a reconciliation of the nonbypassable cost-recovery
18             tariff mechanism a portion of the net revenues
19             received from offering resources associated with the
20             new generation resources into wholesale markets.
21                  (H)   The pretax return for the electric
22             distribution company's capital investments in the new
23             generation resources shall be calculated using the
24             Federal and State income tax rates, the utility's
25             actual capital structure and actual cost rates for
26             long-term debt and preferred stock as of the last day
27             of the three-month period ending one month prior to
28             the effective date of the surcharge mechanism
29             established in accordance with clause (G) and any
30             subsequent updates. The cost of equity shall be the

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 1             equity return rate approved in the utility's most
 2             recent fully litigated base rate proceeding for which
 3             a final order was entered not more than two years
 4             prior to the effective date of the surcharge
 5             mechanism. If more than two years have elapsed
 6             between the entry of a final order and the effective
 7             date of the surcharge mechanism, the equity return
 8             rate used in the calculation shall be the equity
 9             return rate calculated by the commission in the most
10             recent Quarterly Report on the Earnings of
11             Jurisdictional Utilities released by the commission.
12             (ii)   This paragraph shall supersede any conflicting
13        provisions of this title or other laws of this
14        Commonwealth and shall specifically supersede all
15        provisions of Chapter 28 (relating to restructuring of
16        electric utility industry).
17        * * *
18    Section 3.    This act shall take effect in 60 days.




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