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S.B. 4002

             1     

INDUSTRIAL ELECTRIC INFRASTRUCTURE

             2     
ACT

             3     
2002 FOURTH SPECIAL SESSION

             4     
STATE OF UTAH

             5     
Sponsor: Curtis S. Bramble

             6      John L. Valentine
Ed P. Mayne



             7      This act modifies the Public Utilities title to enact the Industrial Electric Infrastructure Act
             8      including the definition of terms. The act establishes what is a covered expense of an
             9      electrical corporation for new industrial electric infrastructure and how customers become
             10      eligible to participate in infrastructure agreements. The act provides the requirements for
             11      infrastructure agreements. The act provides that covered expenses will be recovered by the
             12      electrical corporation from its customers in Utah. The act provides for the accounting
             13      treatment of covered expenses. This act provides direction regarding how recovery of
             14      covered expenses are to be apportioned amongst customers should an eligible customer fail
             15      to pay amounts owed under an infrastructure agreement. The act has an immediate effective
             16      date.
             17      This act affects sections of Utah Code Annotated 1953 as follows:
             18      ENACTS:
             19          54-16-101, Utah Code Annotated 1953
             20          54-16-102, Utah Code Annotated 1953
             21          54-16-201, Utah Code Annotated 1953
             22          54-16-202, Utah Code Annotated 1953
             23          54-16-203, Utah Code Annotated 1953
             24          54-16-301, Utah Code Annotated 1953
             25          54-16-302, Utah Code Annotated 1953
             26      Be it enacted by the Legislature of the state of Utah:
             27          Section 1. Section 54-16-101 is enacted to read:


             28     
CHAPTER 15. INDUSTRIAL ELECTRIC INFRASTRUCTURE ACT

             29     
Part 1. General Provisions

             30          54-16-101. Title.
             31          This chapter is known as the "Industrial Electric Infrastructure Act."
             32          Section 2. Section 54-16-102 is enacted to read:
             33          54-16-102. Definitions.
             34          As used in this chapter:
             35          (1) "Covered expense" means an expense classified as a covered expense in accordance
             36      with Section 54-16-201 .
             37          (2) "Eligible customer" means a person that is an eligible customer under Section
             38      54-16-202 .
             39          (3) "Expense" means an expense incurred by an electrical corporation in connection with
             40      new industrial electric infrastructure, including:
             41          (a) design and engineering;
             42          (b) acquisition of rights-of-way;
             43          (c) purchase of new industrial electric infrastructure;
             44          (d) construction of new industrial electric infrastructure;
             45          (e) capital overhead charges, such as labor and other charges, that:
             46          (i) have been identified as capital; and
             47          (ii) are general in nature and not directly related to the new industrial electric
             48      infrastructure; and
             49          (f) an expense similar to an expense listed in Subsections (3)(a) through (e).
             50          (4) "Infrastructure agreement" means an agreement that:
             51          (a) is required by Section 54-16-201 ; and
             52          (b) complies with Subsections 54-16-203 (1) through (3).
             53          (5) (a) "New industrial electric infrastructure" means a facility or equipment that is:
             54          (i) constructed, expanded, installed, or upgraded:
             55          (A) under an infrastructure agreement; and
             56          (B) after the day on which the infrastructure agreement is executed; and
             57          (ii) reasonably necessary or appropriate to provide electric service to a new industrial
             58      facility.


             59          (b) "New industrial electric infrastructure" includes any of the following that meet the
             60      conditions listed in Subsection (5)(a):
             61          (i) the construction, expansion, or upgrading of:
             62          (A) an electric substation;
             63          (B) an electric transformer;
             64          (C) a switching gear;
             65          (D) a facility related to a facility described in Subsections (5)(b)(i)(A) through (C); or
             66          (E) from an electric substation to a new industrial facility:
             67          (I) a transmission or distribution line;
             68          (II) a transmission or distribution pole; or
             69          (III) a facility related to a facility described in Subsections (5)(b)(i)(E)(I) or (II); or
             70          (ii) any necessary or appropriate upgrading of an electric line or facility affected by the
             71      construction, expansion, installation, or upgrading of other industrial electric infrastructure.
             72          (6) "New industrial facility" means one or more buildings, machinery, equipment, or other
             73      facilities that:
             74          (a) in the aggregate will be used:
             75          (i) in a manufacturing process within the state; or
             76          (ii) for activities related to the manufacturing process described in Subsection (6)(a)(i); and
             77          (b) the construction or acquisition of which will require capital investment by the eligible
             78      customer:
             79          (i) after the day on which a statement of eligibility is filed under Section 54-16-202 ; and
             80          (ii) in an amount equal to or in excess of the capital costs required by Subsection
             81      54-16-202 (2).
             82          Section 3. Section 54-16-201 is enacted to read:
             83     
Part 2. Determining Covered Expenses

             84          54-16-201. Classifying an expense as a covered expense.
             85          For purposes of this chapter, an electrical corporation may classify an expense incurred by
             86      the electrical corporation as a covered expense if:
             87          (1) prior to the expense being incurred:
             88          (a) the electrical corporation executes:
             89          (i) an infrastructure agreement that complies with Subsections 54-16-203 (1) through (3);


             90      and
             91          (ii) a contract for electric services as provided in Subsection 54-16-203 (4); and
             92          (b) the eligible customer has secured financing for the construction of the new industrial
             93      facility; and
             94          (2) the expense is:
             95          (a) reasonable; and
             96          (b) directly related to the new industrial electric infrastructure specified in the
             97      infrastructure agreement required by Subsection (1)(a).
             98          Section 4. Section 54-16-202 is enacted to read:
             99          54-16-202. Eligible customer.
             100          (1) A person becomes an eligible customer:
             101          (a) 15 days after the day on which the person files with the commission a statement of
             102      eligibility that complies with Subsection (2) if no request for findings is filed in accordance with
             103      Subsection (3); or
             104          (b) the day on which the commission makes a finding in accordance with Subsection (3)
             105      that the person is an eligible customer if:
             106          (i) the person files with the commission a statement of eligibility that complies with
             107      Subsection (2); and
             108          (ii) a request for findings on the statement of eligibility is filed in accordance with
             109      Subsection (3).
             110          (2) A statement of eligibility filed under this section shall certify that:
             111          (a) the person filing the statement is a customer of the electrical corporation on the day on
             112      which the statement of eligibility is filed;
             113          (b) the person filing the statement of eligibility reasonably believes that within five years
             114      from the day on which the statement of eligibility is filed the person will begin operating a new
             115      industrial facility:
             116          (i) that requires new industrial electric infrastructure;
             117          (ii) operation of which will require peak electric loads that exceed the person's peak
             118      electric loads during the calendar year in which the person files the statement of eligibility by at
             119      least 50 megawatts;
             120          (iii) for which during the five year period beginning on the day on which the person files


             121      the statement of eligibility the person will have capital costs that equal or exceed $50,000,000; and
             122          (iv) operation of which will require the creation or retention of at least 500 jobs:
             123          (A) within the state; and
             124          (B) that are:
             125          (I) related to the operation of the new industrial facility;
             126          (II) full-time positions; and
             127          (III) anticipated to be filled for not less than one year; and
             128          (c) the person filing the statement of eligibility reasonably believes that the new industrial
             129      electric infrastructure described in Subsection (2)(b)(i):
             130          (i) will have a cost to the electrical corporation equal to or in excess of $20,000,000; and
             131          (ii) but for the operation of the new industrial facility:
             132          (A) would not be built by the electrical corporation; or
             133          (B) would be built by the electrical corporation at a time that would unreasonably delay
             134      the construction or operation of the new industrial facility.
             135          (3) (a) Within 15 days of the day on which a person files a statement of eligibility under
             136      this section, a person may file a request for findings by the commission if that person believes that
             137      there is clear and convincing evidence that:
             138          (i) the person filing the statement of eligibility is not a customer of the electrical
             139      corporation on the day on which the statement of eligibility is filed; or
             140          (ii) one or more of the reasonable beliefs included in the statement of eligibility is not
             141      supportable.
             142          (b) If a request for findings is filed in accordance with Subsection (3)(a), the commission
             143      shall:
             144          (i) issue an order stating the commission's findings no later than 45 days from the day on
             145      which the statement of eligibility is filed with the commission; and
             146          (ii) find that the person is an eligible customer unless the commission finds that there is
             147      clear and convincing evidence that:
             148          (A) the person filing the statement of eligibility is not a customer of the electrical
             149      corporation on the day on which the statement of eligibility is filed; or
             150          (B) one or more of the reasonable beliefs included in the statement of eligibility is not
             151      supportable.


             152          Section 5. Section 54-16-203 is enacted to read:
             153          54-16-203. Infrastructure agreement -- Electric services agreement.
             154          (1) An infrastructure agreement required by Section 54-16-201 shall:
             155          (a) specify the new industrial facility that requires new industrial electric infrastructure;
             156          (b) specify the new industrial electric infrastructure that under the infrastructure agreement
             157      the electrical corporation will provide the new industrial facility;
             158          (c) subject to Subsection (2), state the amount the eligible customer shall pay the electrical
             159      corporation for the portion of the new industrial electric infrastructure that is attributable to electric
             160      services to be provided to the new industrial facility;
             161          (d) subject to Subsection (3), state the time period during which the eligible customer is
             162      required to pay the amount described in Subsection (1)(c); and
             163          (e) be subject to approval by the commission in accordance with this title.
             164          (2) The amount an eligible customer is required to pay under Subsection (1)(c) may not
             165      be less than an amount calculated by:
             166          (a) estimating as of the day on which the infrastructure agreement is executed the covered
             167      expenses that the electrical corporation will incur for the new industrial electric infrastructure; and
             168          (b) determining the portion of the covered expenses estimated under Subsection (2)(a) that
             169      are properly the responsibility of the eligible customer under:
             170          (i) applicable tariffs;
             171          (ii) applicable rules of the commission; and
             172          (iii) the standard practices of the electrical corporation on the day on which the
             173      infrastructure agreement is executed.
             174          (3) (a) The time period described in Subsection (1)(d) may not be longer than seven years
             175      from the day on which the infrastructure agreement is executed.
             176          (b) The time period described in Subsection (1)(d) may not affect the time period over
             177      which the new industrial electric infrastructure is amortized.
             178          (4) The contract for electric services required by Section 54-16-201 shall:
             179          (a) require the eligible customer to purchase electric services:
             180          (i) from the electrical corporation;
             181          (ii) to be used by the eligible customer for operation of the new industrial facility; and
             182          (iii) for a time period that may be shorter than the time period described in Subsection


             183      (1)(d); and
             184          (b) provide the rates, terms, and conditions under which the eligible customer shall
             185      purchase the electric services described in Subsection (4)(a) subject to approval by the commission
             186      in accordance with this title.
             187          Section 6. Section 54-16-301 is enacted to read:
             188     
Part 3. Recovery of Covered Expenses

             189          54-16-301. Covered expenses to be recovered by customers in the state.
             190          (1) In accordance with this section an electrical corporation shall recover the entire amount
             191      of a covered expense:
             192          (a) in rates, except to the extent that the covered expense is paid for by an eligible
             193      customer under an infrastructure agreement;
             194          (b) solely from the electrical corporation's customers located within the state; and
             195          (c) in the manner determined by the commission in accordance with this title.
             196          (2) Subsection (1) applies whether or not:
             197          (a) the covered expense is specifically identified as being paid by the eligible customer;
             198          (b) the eligible customer:
             199          (i) purchases electric services from the electrical corporation after the day on which the
             200      infrastructure agreement is executed;
             201          (ii) operates the new industrial facility; or
             202          (iii) continues to engage in business in this state;
             203          (c) once a person becomes an eligible customer under Section 54-16-201 , the eligible
             204      customer actually achieves one or more of the reasonable beliefs included in the eligible customer's
             205      statement of eligibility filed under Section 54-16-202 ;
             206          (d) the new industrial electric infrastructure includes transmission facilities;
             207          (e) any portion of the new industrial electric infrastructure is used by a customer of the
             208      electrical corporation other than an eligible customer; or
             209          (f) the electric corporation takes any action to recover monies owed by an eligible
             210      customer under an infrastructure agreement in the case of a breach of the infrastructure agreement.
             211          (3) Notwithstanding the other provisions of this section, the commission may determine
             212      whether for any purpose under this title an expense qualifies as a covered expense under Section
             213      54-16-201 .


             214          Section 7. Section 54-16-302 is enacted to read:
             215          54-16-302. Accounting treatment of covered expenses.
             216          (1) An electrical corporation that has entered into an infrastructure agreement shall
             217      maintain an account for covered expenses:
             218          (a) that permits the electrical corporation to account for a covered expense at the time the
             219      covered expense is incurred;
             220          (b) that includes a carrying charge on the unamortized balance of the account at a rate
             221      equal to the electrical corporation's weighted average cost of capital as approved by the
             222      commission at the time the covered expense is incurred; and
             223          (c) to which the electrical corporation will credit any payments from an eligible customer
             224      received by the electrical corporation under the infrastructure agreement.
             225          (2) In the first general rate case of the electrical corporation that begins on or after a
             226      covered expense is incurred, the commission shall provide for the recovery by the electrical
             227      corporation:
             228          (a) of all amounts in the account described in Subsection (1), including accrued carrying
             229      charges; and
             230          (b) solely from the customers of the electrical corporation located in the state.
             231          (3) (a) For purposes of this Subsection (3), "eligible customer's share that is in default"
             232      means the portion of the amount in the account described in Subsection (1) that the commission
             233      finds is attributable to the eligible customer failing to pay monies that:
             234          (i) are owed by the eligible customer:
             235          (A) under an infrastructure agreement; and
             236          (B) at the time the general rate case described in Subsection (2) is filed; and
             237          (ii) but for the eligible customer failing to pay the monies, would have been credited to the
             238      account as provided in Subsection (1)(c).
             239          (b) In the general rate case described in Subsection (2), the commission shall provide for
             240      the apportionment of the eligible customer's share that is in default:
             241          (i) to all customer classes; and
             242          (ii) in a manner so that the rate impacts of the apportionment is reasonably equivalent for
             243      each of the customer classes.
             244          Section 8. Effective date.


             245          If approved by two-thirds of all the members elected to each house, this act takes effect
             246      upon approval by the governor, or the day following the constitutional time limit of Utah
             247      Constitution Article VII, Section 8, without the governor's signature, or in the case of a veto, the
             248      date of veto override.




Legislative Review Note
    as of 5-22-02 6:12 PM


A limited legal review of this legislation raises no obvious constitutional or statutory concerns.

Office of Legislative Research and General Counsel


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