Utility Construction Review Act

Summary

 ALEC’s model Utility Construction Review Act is designed to ensure adequate and reliable electric power supply at the availability of a reasonable cost through reducing risks and uncertainties from the rate review process and encourage utilities to provide new capacity. Key components of the Act include: a provision for certificate review of electric power plants under construction and investment recovery under certain circumstances and a provision for construction progress reports.

 Model Legislation

Section 1. {Short Title.} This act shall be known and may be cited as the Utility construction Review Act.

Section 2. {Legislative findings and declarations.} The Legislature finds and declares that:

(A)  An adequate and reliable electric power supply, available at a reasonable cost to the residents, commerce, and industry of the state is necessary to maintain both a healthy economic climate in the state and the general wellbeing of its residents; and

(B)   To better assure the required financing for those new electric generating facilities approved to meet increased demand, the procedure for regulatory review of construction costs must be equitable, predictable, and orderly.

Section 3. {Definitions.} The following words and phrases when used in this act shall have the meanings given them in this section unless the context clearly indicates otherwise:

(A)  “Certificate.” The certificate of public convenience and necessity (or insert the appropriate prior authorization by the commission required for the utility to begin facility construction).

(B)   “Commission.” The {insert appropriate state public utility commission}.

(C)   “Facility.” An electric generation facility regulated by the commission.

(D)  “Utility.” Any electric generating utility allowed by state law to earn a regulated return on its investment.

Section 4. {Certificate review and investment recovery.}

(A). Commission review. When, in the opinion of the commission, changes in the estimate of probable future growth of the use of electricity so indicate, the commission shall commence a review of any certificate previously granted to determine whether the public convenience and necessity continues to require the facility under construction.  If the commission finds that completion of the facility under construction is no longer in the public interest, the commission may modify or revoke the certificate.

(B). Investment recovery. If the public utility cancels construction of the facility as a result of the modification or revocation of the certificate, it may recover, over a reasonable period of time, through rates, absent fraud, concealment, or gross mismanagement, the amount of its investment in that facility, along with a reasonable return on the unamortized balance.  Recovery may not be challenged on the basis of assumptions regarding probable future growth of the use of electricity.

Section 5. {Construction progress reports.}

(A)  Reporting requirements. The commission shall, at the request of the public utility, maintain an ongoing review of facility construction as it proceeds. The applicant shall submit each year during construction or at such other periods as the Commission and the public utility mutually agree a progress report and any revisions in the cost estimates for the construction.

(B)   Prohibition of subsequent challenges.  If the commission approves the construction and the cost of the portion of the facility under review, that approval forecloses subsequent challenges to the inclusion of that portion of the facility in the public utility’s rate base on the basis of excessive cost or inadequate quality control.

(C)   Investment recovery. If the commission disapproves of all or part of the construction or cost of the portion of the facility under review, the commission may modify or revoke the certificate.  If the public utility cancels construction of the facility as a result of the modifications or revocation of the certificate, the facility may recover, over a reasonable period of time through rates, absent fraud, concealment, or gross mismanagement, the amount of its investment in the facility along with a reasonable return on the unamortized balance, to the extent the construction and the cost were approved previously by the commission.

 Section 6. {Severability Clause.}

 Section 7. {Repealer Clause.}

 Section 8. {Effective Date.}

Approved by ALEC Board of Directors in 1995.

Reapproved by ALEC Board of Directors on January 28, 2013.

Keyword Tags: Electricity, Energy, Power Plants