AN ACT Relating to energy construction costs investment; amending RCW 80.04.010, 80.04.250, 80.04.320, 80.28.060, 80.50.010, 80.50.040, and 80.50.090; adding new sections to chapter 80.04 RCW; creating a new section; and repealing RCW 80.50.075.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. (1) It is essential to the health and welfare of the citizens of the state of Washington, and to the state's economic development and environmental goals, that adequate and reliable services be provided to the ratepayers of electric companies at fair and reasonable rates.

(2) It is necessary that commission regulatory procedures be adopted to allow such companies to maintain a sound financial position so that their services will be adequate in the future and can be supplied at fair and reasonable rates. Electric companies shall comply with the prudent utility practices and procedures prescribed by the commission.

(3) The legislature finds that:

(a) Ratepayers have a right to fair, just, reasonable, and sufficient representation and consideration in rate determination proceedings and hearings;

(b) Ratepayers should not experience large rate increases in order to finance large-scale electric plant construction;

(d) Ratepayers must receive reasonable assurances that electric plants to which they contribute construction funds are likely to be needed and completed.

Sec. 2. Section 80.04.010, chapter 14, Laws of 1961 as last amended by section 10, chapter 191, Laws of 1979 ex. sess. and RCW 80.04.010 are each amended to read as follows:

As used in this title, unless specifically defined otherwise or unless the context indicates otherwise:

"CCI" means construction costs investment funds.

"Commission" means the utilities and transportation commission.

"Commissioner" means one of the members of such commission.

"Corporation" includes a corporation, company, association or joint stock association.

"Person" includes an individual, a firm or copartnership.

"Gas plant" includes all real estate, fixtures and personal property, owned, leased, controlled, used or to be used for or in connection with the transmission, distribution, sale or furnishing of natural gas, or the manufacture, transmission, distribution, sale or furnishing of other type gas, for light, heat or power.

"Gas company" includes every corporation, company, association, joint stock association, partnership and person, their lessees, trustees or receiver appointed by any court whatsoever, and every city or town, owning, controlling, operating or managing any gas plant within this state.

"Electric plant" includes all real estate, fixtures and personal property operated, owned, used or to be used for or in connection with or to facilitate the generation, transmission, distribution, sale or furnishing of electricity for light, heat, or power for hire; and any conduits, ducts or other devices, materials, apparatus or property for containing, holding or carrying conductors used or to be used for the transmission of electricity for light, heat or power.

"Electrical company" includes any corporation, company, association, joint stock association, partnership and person, their lessees, trustees or receivers appointed by any court whatsoever (other than a railroad or street railroad company generating electricity solely for railroad or street railroad purposes or for the use of its tenants and not for sale to others), and every city or town owning, operating or managing any electric plant for hire within this state. "Electrical company" does not include a company or person employing a cogeneration facility solely for the generation of electricity for its own use or the use of its tenants or for sale to an electrical company, state or local public agency, municipal corporation, or quasi municipal corporation engaged in the sale or distribution of electrical energy, but not for sale to others, unless such company or person is otherwise an electrical company.

"Telephone company" includes every corporation, company, association, joint stock association, partnership and person, their lessees, trustees or receivers appointed by any court whatsoever, and every city or town owning, operating or managing any telephone line or part of telephone line used in the conduct of the business of affording telephonic communication for hire within this state.

"Telephone line" includes conduits, ducts, poles, wires, cables, cross-arms, receivers, transmitters, instruments, machines, appliances, instrumentalities and all devices, real estate, easements, apparatus, property and routes used, operated, owned or controlled by any telephone company to facilitate the business of affording telephonic communication.

"Telegraph company" includes every corporation, company, association, joint stock association, partnership and person, their lessees, trustees or receivers appointed by any court whatsoever, owning, operating or managing any telegraph line or part of telegraph line used in the conduct of the business of affording for hire communication by telegraph within this state.

"Telegraph line" includes conduits, poles, wire, cables, cross-arms, instruments, machines, appliances, instrumentalities and all devices, real estate, easements, apparatus, property and routes used, operated or owned by any telegraph company to facilitate the business of affording communication by telegraph.

"Water system" includes all real estate, easements, fixtures, personal property, dams, dikes, head gates, weirs, canals, reservoirs, flumes or other structures or appliances operated, owned, used or to be used for or in connection with or to facilitate the supply, storage, distribution, sale, furnishing, diversion, carriage, apportionment or measurement of water for power, irrigation, reclamation, manufacturing, municipal, domestic or other beneficial uses for hire.

"Water company" includes every corporation, company, association, joint stock association, partnership and person, their lessees, trustees or receivers appointed by any court whatsoever, and every city or town owning, controlling, operating, or managing any water system for hire within this state: PROVIDED, That it shall not include any water system serving less than sixty customers where the average annual gross revenue per customer does not exceed one hundred twenty dollars per year.

"Cogeneration facility" means any machinery, equipment, structure, process, or property, or any part thereof, installed or acquired for the primary purpose of the sequential generation of electrical or mechanical power and useful heat from the same primary energy source or fuel.

"Public service company" includes every gas company, electrical company, telephone company, telegraph company and water company. Ownership or operation of a cogeneration facility does not, by itself, make a company or person a public service company.

The term "service" is used in this title in its broadest and most inclusive sense.

Sec. 3. Section 80.04.250, chapter 14, Laws of 1961 and RCW 80.04.250 are each amended to read as follows:

The commission shall have power upon complaint or upon its own motion to ascertain and determine the fair value for rate making purposes of the property of any public service company used and useful for service in this state and shall exercise such power whenever it shall deem such valuation or determination necessary or proper under any of the provisions of this title: PROVIDED, That such fair value determination shall not include any portion of an electric plant financed by funds collected by a rate addition of CCI under sections 5 through 9 of this 1985 act.

The commission shall have the power to make revaluations of the property of any public service company from time to time.

The commission shall, before any hearing is had, notify the complainants and the public service company concerned of the time and place of such hearing by giving at least thirty days' written notice thereof, specifying that at the time and place designated a hearing will be held for the purpose of ascertaining the value of the company's property, used and useful as aforesaid, which notice shall be sufficient to authorize the commission to inquire into and pass upon the matters designated in this section.

Sec. 4. Section 80.04.320, chapter 14, Laws of 1961 and RCW 80.04.320 are each amended to read as follows:

The commission may prescribe the necessary rules and regulations to place RCW 80.04.300 through 80.04.330 in operation. It may, by general order, exempt in whole or in part from the operation thereof companies whose gross operating revenues are less than twenty-five thousand dollars a year. The commission may upon request of any company withhold from publication during such time as the commission may deem advisable any portion of any original or supplementary budget relating to proposed capital expenditures. The commission may not withhold from publication any portion of any original or supplemental budget relating to a request for CCI.

NEW SECTION. Sec. 5. A preconstruction hearing shall be held for any electric plant for which rate payers may be charged CCI. The commission or council shall make a finding that the plant is necessary and consistent with the power plan under RCW 80.50.090 before construction may begin.

NEW SECTION. Sec. 6. (1) When the commission determines that an electric plant is seventy-five percent financially complete, the electric company may apply to the commission for the authority to charge ratepayers for CCI.

(2) The commission shall conduct an investigation and a public hearing to determine whether CCI may be allowed. The commission shall reexamine the preconstruction hearing decision but is not bound by the decision.

(3) The commission shall specifically determine whether:

(a) The plant investment is reasonable and prudent;

(b) The plant will be used and useful for service in this state;

(d) The allowance of CCI is necessary to maintain the company's financial integrity.

The commission shall not grant the utility the right to collect CCI unless these requirements have been satisfied.

(4) If the commission determines that the company may charge the ratepayers for CCI, the amount of CCI granted may not exceed twenty percent of the plant's projected total cost as determined by the commission.

NEW SECTION. Sec. 7. The CCI funds shall be directly invested in the construction fund, to be used only in construction within two years of collection from ratepayers. The utility shall not use the funds in any other manner and the funds shall not provide a rate of return to the utility.

NEW SECTION. Sec. 8. The commission shall have the power upon complaint or upon its own motion to review any previous decision regarding CCI. A review hearing shall be called by the commission within thirty days of petition and complaint by recognized parties upon showing of good cause.

The commission may require discontinuation of CCI upon finding that:

(1) Plant completion is no longer imminent;

(2) Funds are being expended imprudently; or

(3) Other demonstrated justification, as the commission may determine is in the public interest.

Before any hearing is held, the commission shall notify the complainants and the electric company concerned, of the time and place of such hearing, by giving at least thirty days' written notice thereof, specifying the time and place that the designated hearing will be held for the purpose of ascertaining whether the company's request or previously granted request for CCI may be rescinded, revised, or approved. The notice shall be sufficient to authorize the commission to inquire into and pass upon the matters designated in this section.

NEW SECTION. Sec. 9. The commission shall adopt rules to implement sections 5 through 8 of this act.

Sec. 10. Section 80.28.060, chapter 14, Laws of 1961 and RCW 80.28.060 are each amended to read as follows:

Unless the commission otherwise orders, no change shall be made in any rate or charge or in any form of contract or agreement or in any rule or regulation relating to any rate, charge or service, or in any general privilege or facility which shall have been filed and published by a gas company, electrical company or water company in compliance with the requirements of RCW 80.28.050 except after thirty days' notice to the commission and publication for thirty days, which notice shall plainly state the changes proposed to be made in the schedule then in force and the time when the change will go into effect and all proposed changes shall be shown by printing, filing and publishing new schedules, or shall be plainly indicated upon the schedules in force at the time and kept open to public inspection. The commission, for good cause shown, may allow changes without requiring the thirty days' notice by duly filing, in such manner as it may direct, an order specifying the changes so to be made and the time when it shall take effect. All such changes shall be immediately indicated upon its schedules by the company affected. When any change is made in any rate or charge, form of contract or agreement, or any rule or regulation relating to any rate or charge or service, or in any general privilege or facility, the effect of which is to increase any rate or charge, then in existence, attention shall be directed on the copy filed with the commission to such increase by some character immediately preceding or following the item in such schedule, such character to be in form as designated by the commission. In considering an electric company's application for construction costs investment, no exception to the statutory notice and hearing requirements may be allowed.

Sec. 11. Section 1, chapter 45, Laws of 1970 ex. sess. as amended by section 29, chapter 108, Laws of 1975-'76 2nd ex. sess. and RCW 80.50.010 are each amended to read as follows:

(1) The legislature finds that the present and predicted growth in energy demands in the state of Washington requires the development of a procedure for the selection and utilization of sites for energy facilities and the identification of a state position with respect to each proposed site. The legislature recognizes that the selection of sites will have a significant impact upon the welfare of the population, the location and growth of industry and the use of the natural resources of the state.

It is the policy of the state of Washington to recognize the pressing need for increased energy facilities, and to ensure through available and reasonable methods, that the location and operation of such facilities will produce minimal adverse effects on the environment, ecology of the land and its wildlife, and the ecology of state waters and their aquatic life.

It is the intent to seek courses of action that will balance the increasing demands for energy facility location and operation in conjunction with the broad interests of the public. Such action will be based on these premises:

((~~(1)~~)) (a) To assure Washington state citizens that, where applicable, operational safeguards are at least as stringent as the criteria established by the federal government and are technically sufficient for their welfare and protection.

((~~(2)~~)) (b) To preserve and protect the quality of the environment; to enhance the public's opportunity to enjoy the esthetic and recreational benefits of the air, water and land resources; to promote air cleanliness; and to pursue beneficial changes in the environment.

((~~(3)~~)) (c) To provide abundant energy at reasonable cost.

(2) The legislature further finds that:

(a) The construction of electric plants is becoming more expensive and controversial;

(b) Electric utilities faced with increasing power demands and costs need to consider all feasible means of providing and conserving electric energy in order to select the lowest cost resources; and

(c) The need for power shall be conclusively demonstrated before certification of any electric plant in this state, or before any expenditure on a plant affecting the health and welfare of the population of this state.

Sec. 12. Section 4, chapter 45, Laws of 1970 ex. sess. as last amended by section 1, chapter 254, Laws of 1979 ex. sess. and RCW 80.50.040 are each amended to read as follows:

The council shall have the following powers:

(1) To adopt, promulgate, amend, or rescind suitable rules and regulations, pursuant to chapter 34.04 RCW, to carry out the provisions of this chapter, and the policies and practices of the council in connection therewith;

(2) To appoint an executive secretary to serve at the pleasure of the council;

(3) To appoint and prescribe the duties of such clerks, employees, and agents as may be necessary to carry out the provisions of this chapter: PROVIDED, That such persons shall be employed pursuant to the provisions of chapter 41.06 RCW;

(4) To develop and apply environmental and ecological guidelines in relation to the type, design, location, construction, and operational conditions of certification of energy facilities subject to this chapter;

(5) To establish rules of practice for the conduct of public hearings pursuant to the provisions of the Administrative Procedure Act, as found in chapter 34.04 RCW;

(6) To prescribe the form, content, and necessary supporting documentation for site certification;

(7) To receive applications for energy facility locations and to investigate the sufficiency thereof;

(8) To make and contract, when applicable, for independent studies of sites proposed by the applicant;

(9) To conduct hearings on the proposed location of the energy facilities;

(10) To prepare written reports to the governor which shall include: (a) A statement indicating whether the application is in compliance with the council's guidelines, (b) a finding based on the evidence in the record that the applicant has demonstrated, by clear, cogent, and convincing evidence, to the council's satisfaction that the proposed electric plant is necessary to meet present and future forecast need for power, (c) criteria specific to the site and transmission line routing, ((~~(c)~~)) (d) a council recommendation as to the disposition of the application, and ((~~(d)~~)) (e) a draft certification agreement when the council recommends approval of the application;

(11) To prescribe the means for monitoring of the effects arising from the construction and the operation of energy facilities to assure continued compliance with terms of certification and/or permits issued by the council pursuant to chapter 90.48 RCW or RCW 80.50.040(14): PROVIDED, That any on-site inspection required by the council shall be performed by other state agencies pursuant to interagency agreement: PROVIDED FURTHER, That the council shall retain authority for determining compliance relative to monitoring;

(12) To integrate its site evaluation activity with activities of federal agencies having jurisdiction in such matters to avoid unnecessary duplication;

(13) To present state concerns and interests to other states, regional organizations, and the federal government on the location, construction, and operation of any energy facility which may affect the environment, health, or safety of the citizens of the state of Washington;

(14) To issue permits in compliance with applicable provisions of the federally approved state implementation plan adopted in accordance with the Federal Clean Air Act, as now existing or hereafter amended, for the new construction, reconstruction, or enlargement or operation of energy facilities: PROVIDED, That such permits shall become effective only if the governor approves an application for certification and executes a certification agreement pursuant to this chapter: AND PROVIDED FURTHER, That all such permits be conditioned upon compliance with all provisions of the federally approved state implementation plan which apply to energy facilities covered within the provisions of this chapter.

Sec. 13. Section 9, chapter 45, Laws of 1970 ex. sess. and RCW 80.50.090 are each amended to read as follows:

(1) The council shall conduct a public hearing in the county of the proposed site within sixty days of receipt of an application for site certification: PROVIDED, That the place of such public hearing shall be as close as practical to the proposed site.

(2) The council must determine at the initial public hearing whether or not the proposed site is consistent and in compliance with county or regional land use plans or zoning ordinances. If it is determined that the proposed site does conform with existing land use plans or zoning ordinances in effect as of the date of the application, the county or regional planning authority shall not thereafter change such land use plans or zoning ordinances so as to affect the proposed site.

(3) Prior to the issuance of a council recommendation to the governor under RCW 80.50.100 a public hearing, conducted as a contested case under chapter 34.04 RCW, shall be held. At such public hearing any person shall be entitled to be heard in support of or in opposition to the application for certification.

(4) Prior to the issuance of a council recommendation to the governor under RCW 80.50.100, the council shall reach findings based on evidence in the record that:

(a) The type, size, and proposed construction schedule of the proposed electric plant is necessary to meet the present and future forecasted need for power; and

(b) The proposed electric plant is consistent with the provisions of the Northwest Conservation and Electric Power Plan prepared pursuant to 16 U.S.C. Sec. 837 et seq.

(5) Additional public hearings shall be held as deemed appropriate by the council in the exercise of its functions under this chapter.

NEW SECTION. Sec. 14. Section 17, chapter 371, Laws of 1977 ex. sess. and RCW 80.50.075 are each repealed.

NEW SECTION. Sec. 15. Sections 5 through 9 of this act are each added to chapter 80.04 RCW.