Section 393.1705

Title XXV INCORPORATION AND REGULATION OF CERTAIN UTILITIES AND CARRIERS

Chapter 393

Effective - 28 Aug 2021   

  393.1705.  Replacement resources investment — petition, approval, amount — base determination — deferrals — petition procedure. — 1.  For purposes of this section, the term "replacement resources" shall mean:

  (1)  Renewable generation facilities which produce electric energy from wind, solar thermal sources, photovoltaic cells and panels, dedicated crops grown for energy production, cellulosic agricultural residues, plant residues, methane from landfills, from agricultural operations, or from wastewater treatment, thermal depolymerization or pyrolysis for converting waste material to energy, clean and untreated wood such as pallets, hydropower, not including pumped storage, that does not require a new diversion or impoundment of water and that has a nameplate rating of ten megawatts or less, and fuel cells using hydrogen produced by one of the above-named replacement sources;

  (2)  Generation facilities which produce electric energy from natural gas that enable the electrical corporation to:

  (a)  Provide electric energy when renewable generation facilities and energy storage facilities are insufficient to meet the needs of the electrical corporation's system;

  (b)  Meet requirements of the electrical corporation's regional transmission organization; or

  (c)  Serve the objectives of both paragraphs (a) and (b) of this subdivision;

  (3)  Energy storage facilities that enable the electrical corporation to:

  (a)  Provide electric energy when renewable generation facilities are not generating electric energy in sufficient quantities to meet the needs of the electrical corporation's system;

  (b)  Meet requirements of the electrical corporation's regional transmission organization; or

  (c)  Serve the objectives of both paragraphs (a) and (b) of this subdivision; and

  (4)  Transmission facilities that enable the delivery of electric energy from renewable generation facilities or energy storage facilities, including but not limited to, interconnection, network upgrades, voltage and reactive power support, and transmission facilities needed to maintain reliability as a result of the retirement of generation facilities.

  2.  If requested by an electrical corporation in a petition filed concurrently with a petition filed under subsection 2 of section 393.1700 to recover securitized utility tariff costs and notwithstanding any other provision of chapter 386 or this chapter to the contrary, including section 393.170 which section shall not apply to the construction of replacement resources as defined in subsection 1 of this section:

  (1)  Except for electric generating facilities retired or abandoned prior to August 28, 2021, unless the commission issues an order rejecting a petition for a financing order filed under the provisions of section 393.1700 that was accompanied by a petition for approval of investment in replacement resources filed under the provisions of this section, the commission shall approve investment in replacement resources by the electrical corporation of an amount that is approximately equal to the undepreciated investment in the electric generating facilities covered by such petition to acquire or build an existing or new replacement resource to replace the retired or abandoned or to be retired or abandoned unit.  There is no requirement that the replacement resource's capacity or energy production match the energy or capacity production of the retired or abandoned unit.  Such approval shall constitute an affirmative and binding determination by the commission, to be applied in all subsequent proceedings respecting the rates of the electrical corporation, that such investment is prudent and reasonable, that the replacement resource is necessary for the electrical corporation's provision of electric service to its customers, and that such investment shall be reflected in the revenue requirement used to set the electrical corporation's base rates, subject only to the commission's authority to determine that the electrical corporation did not manage or execute the project in a reasonable and prudent manner in some respect and its authority to disallow for ratemaking purposes only that portion of the investment that would not have been incurred had the unreasonable or imprudent management or execution of the project not occurred; and

  (2)  The commission shall create a deferral mechanism by which the electrical corporation shall defer, to a regulatory asset or regulatory liability as appropriate, the changes in the electrical corporation's revenue requirement used to last set its base rates as specified in this subdivision.  Such changes shall be deferred during the period starting on the date of retirement or abandonment of the subject unit and ending when the base rates of the electrical corporation that is the subject of the petition are changed as the result of a general rate proceeding where the rate base cutoff date in that general rate proceeding occurs on or after the retirement or abandonment.  For purposes of this subdivision, the changes in the electrical corporation's revenue requirement that shall be deferred shall only consist of:

  (a)  Changes in depreciation expense associated with the retired or abandoned unit;

  (b)  Changes in labor and benefit costs for employees or contractors no longer employed or retained by the electrical corporation who formerly worked at the retired or abandoned unit, net of severance and relocation costs of the electrical corporation paid to such employees or contractors;

  (c)  Changes in nonlabor, nonfuel operations, and maintenance costs caused by the retirement or abandonment of the unit;

  (d)  The return on the retired or abandoned unit once it is removed from plant-in-service on the electrical corporation's books at the electrical corporation's weighted average cost of capital, plus applicable federal, state, and local income or excise taxes, used to establish the electrical corporation's revenue requirement last used to set its base rates;

  (e)  Depreciation expense on the replacement resources starting with the date it is recorded to plant-in-service on the electrical corporation's books;

  (f)  Labor and benefits costs for employees or contractors who work at the replacement resources;

  (g)  Nonlabor, nonfuel operations, and maintenance costs of the replacement resources; and

  (h)  The return on the replacement resources once they are recorded to plant-in-service on the electrical corporation's books at the electrical corporation's weighted average cost of capital, plus applicable federal, state, and local income or excise taxes, used to establish the electrical corporation's revenue requirement last used to set its base rates.

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The base against which changes under paragraphs (a), (b), and (c) of this subdivision shall be the values of each such item used to set the electrical corporation's base electric rates in its last general rate proceeding concluded prior to the time the deferrals are made, provided, if the docketed record in such general rate proceeding does not specify one or more necessary revenue requirement parameters to establish the base for paragraphs (a) to (c) of this subdivision because of a black box settlement or otherwise, the commission shall, in the docket created by a petition filed under this section and based on the docketed record in such prior general rate proceeding, establish the missing parameters, which shall then be used to accomplish the deferrals.  The base with respect to paragraphs (e), (f), and (g) of this subdivision shall be zero.  Notwithstanding the foregoing provisions of this subdivision, deferrals created by this subdivision shall cease on the effective date of rates from a base rate case that shall be filed no later than one year after the subject electric generating unit was retired or abandoned.  For purposes of this subdivision, the return in paragraphs (d) and (h) shall equal the weighted average cost of capital used to set the electrical corporation's base electrical rates in its last general rate proceeding concluded prior to the time the deferrals are made, provided, if the docketed record in such general rate proceeding does not specify one or more necessary revenue requirement parameters to establish the base for an item because of a black box settlement or otherwise, the commission shall, in the docket created by a petition filed under this section and based on the docketed record in such general rate proceeding, establish the missing parameters, which shall then be used to accomplish the deferrals;

  (3)  The commission shall also create a deferral mechanism by which the electrical corporation shall defer to a regulatory asset the changes in the electrical corporation's revenue requirement last used to set its base rates as specified in this subdivision.  Such changes shall be deferred during the period beginning on the date deferrals cease under subdivision (2) of this subsection and ending when the electrical corporation's base rates are next changed as a result of a general rate proceeding.  For purposes of this subdivision, such changes in the electrical corporation's revenue requirement that shall be deferred shall only consist of:

  (a)  Return on the replacement resources once they go into service on the electrical corporation's books at the electrical corporation's weighted average cost of capital, plus applicable federal, state, and local income or excise taxes, used to establish the electrical corporation's revenue requirement last used to set its base rates;

  (b)  Depreciation expense on the replacement resources starting with the date the replacement resource is recorded to plant in-service on the electrical corporation's books;

  (c)  Increase in-labor and benefits costs for employees or contractors who work at the replacement resources; and

  (d)  Increase in nonlabor, nonfuel operations, and maintenance costs of the replacement resources.

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Notwithstanding the foregoing provisions of this subdivision, deferrals to the regulatory asset created by this subdivision shall cease at the earlier of the date the electrical corporation's base rates are first changed after the replacement resource is recorded to plant in service on the electrical corporation's books where the rate base cutoff date in that general rate proceeding occurred on or after the retirement or abandonment, or the effective date of rates from a base rate case that shall be filed no later than one year after the unit was retired or abandoned.  If there is more than one replacement resource for the retired or abandoned plant and if one or more such replacement resource is placed in service prior to the rate base cutoff date in the general rate proceeding described in subdivision (2) of this subsection, the deferrals called for under this subdivision shall be reduced as needed to reflect that event.  The base with respect to paragraphs (b) and (c) of this subdivision shall be zero.  For purposes of this subdivision, the return in paragraph (a) shall equal the weighted average cost of capital used to set the electrical corporation's base electric rates in its last general rate proceeding concluded prior to the time the deferrals are made, provided, if the docketed record in such general rate proceeding does not specify one or more necessary revenue requirement parameters to establish the base for an item because of a black box settlement or otherwise, the commission shall, in the docket created by a petition filed under this section and based on the docketed record in such prior general rate proceeding, establish the missing parameters, which shall then be used to accomplish the deferrals;

  (4)  Notwithstanding the provisions of section 393.1400 to the contrary, a replacement resource shall not constitute qualifying electric plant for purposes of section 393.1400, nor shall it constitute a renewable energy resource under section 393.1030, during the period when a deferral is occurring under subdivision (2) or (3) of this subsection.  In addition, and notwithstanding the provisions of section 393.1400 to the contrary, deferrals required by this section relating to the electrical corporation's undepreciated investment in the retired or abandoned unit shall not constitute a change in accumulated depreciation when determining the return deferred on qualifying electric plant under section 393.1400;

  (5)  Parts of regulatory asset or liability balances created under this section that are not yet being recovered or returned through rates shall include carrying costs at the electrical corporation's weighted average cost of capital last used to set its base electric service rates or, if such cost of capital was not specified for the revenue requirement last used to set such electric service rates at the weighted average cost of capital determined by the commission under subdivision (3) of this subsection, in each case plus applicable federal, state, and local income or excise taxes.  All regulatory asset or liability balances from deferrals under this subsection shall be recovered in base rates over a period equal to the remaining useful life of the replacement resource;

  (6)  In each general rate proceeding concluded after a deferral commences under subdivision (2) or (3) of this subsection, the regulatory asset or liability balances arising from such deferrals, as of the rate base cutoff date, shall be included in the electrical corporation's rate base without any offset, reduction, or adjustment based upon consideration of any other factor, other than to reflect any prudence disallowances ordered by the commission, with the regulatory asset balances arising from such deferrals that occur after the rate base cutoff date to be included in rate base in the next general rate proceeding.  The provisions of this section shall not be construed to affect existing law respecting burdens of production and persuasion in general rate proceedings.

  3.  Proceedings on a petition submitted pursuant to this section begin with the filing of a petition by an electrical corporation under this section that is filed concurrently with a petition submitted under section 393.1700, and shall be disposed of in accordance with the requirements of chapter^* 386 and this chapter and the rules of the commission, except as follows:

  (1)  The commission shall establish a procedural schedule that permits a commission decision no later than two hundred fifteen days after the date the petition is filed.  Such procedural schedule adopted by the commission in connection with a petition filed under this section shall contain the same milestones and requirements as the procedural schedule adopted in a proceeding seeking approval of a financing order under section 393.1700 and shall run concurrently therewith;

  (2)  No later than two hundred fifteen days after the date the petition is filed, the commission shall issue an order approving the petition or, if it also rejects the accompanying petition for a financing order filed under section 393.1700, rejecting the petition.  Judicial review may be had only in accordance with sections 386.500 and 386.510.

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(L. 2021 H.B. 734)

*Word "chapters" appears in original rolls.