BILL REQ. #:  H-0755.1 

Read first time 01/18/11.   Referred to Committee on Technology, Energy & Communications.

     AN ACT Relating to the utility and transportation commission's review of certain investments made by electrical companies; amending RCW 80.04.250; and creating a new section.

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

NEW SECTION.  Sec. 1   The legislature finds that Washington is a leader in addressing climate change by having established limits to reduce greenhouse gas emissions and in ensuring the development of new renewable energy resources by requiring large electrical utilities to meet renewable energy resource targets through renewable portfolio standards.
     However, the legislature finds achieving the state's goals for greenhouse gas emission reduction and implementation of renewable energy resource standards is hindered by the fact that investments in renewable energy resources by investor-owned electrical companies are subject to retroactive prudence review of expenditures that may disallow investments or expenditures.
     The legislature established the clean energy leadership council in 2009 and directed the council to develop a plan by December 2010 for growing Washington's clean energy sector and positioning Washington as a national leader in clean energy development and policy. The council determined that retroactive prudence review is an important influence on the ease and speed of demonstrating leading edge clean energy solutions by Washington companies.
     The legislature finds that it is important that electrical companies be able to make investments in renewable energy resources and reduction in greenhouse gas emissions without fear of subsequent disallowance of those investments from their future rate base.
     The legislature intends to reduce the deterrent effect of a retroactive prudence review on the ability of electrical companies to make investments in renewable energy resources and to achieve the renewable portfolio targets applicable to electrical companies.
     The legislature intends that in making its prudence determination, the utilities and transportation commission recognize that while there are risks of unknowns created by the fact that the prudence determination is being made at an early stage at which some information that would be considered in a retroactive review may not be available, there are also risks to the public from the continued reliance on fossil fuels, and that it is in the public interest that the state achieve its objectives for reduction in greenhouse gas emissions.

Sec. 2   RCW 80.04.250 and 1991 c 122 s 2 are each amended to read as follows:
     (1) 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. In determining what property is used and useful for providing electric, gas, or water service, the commission may include the reasonable costs of construction work in progress to the extent that the commission finds that inclusion is in the public interest.
     (2)(a) If an electrical company desires a determination regarding the prudence of an investment in a plant or other property that will supply electricity from sources other than fossil fuels, increase efficiency, or reduce the fossil fuel used in producing electricity before making that investment, the electrical company may file a petition with the commission to obtain such a determination.
     (b) When a petition is filed, the commission shall provide notice to the public and potentially affected parties and expedite the hearing of that petition. The hearing of such a petition is not considered a general rate increase filing, and an administrative law judge of the commission may enter an initial order including findings of fact and conclusions of law, as provided in RCW 80.01.060(3). The commission shall issue a final order, or if the matter is heard by an administrative law judge, an initial order, within ninety days after filing the petition.
     (c) In considering the prudence of the investment, the commission may establish a limit to the amount of the investment that will be considered prudent. The commission shall balance against any risk of unknowns of the investment the risk to the public of continued reliance on fossil fuels and the state's objectives for reduction in greenhouse gas emissions. If the investment is found to be prudent, recovery of a return in rates on the amount of the investment determined to be prudent will not occur until the next general rate increase filing by the company after the plant or equipment is put into service.
     (3) The commission shall have the power to make revaluations of the property of any public service company from time to time.
     (4) 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.