PERMANENT RULES
COMMISSION
1 STATUTORY OR OTHER AUTHORITY: The Washington utilities and transportation commission (commission) takes this action under Notice No. WSR 08-17-106, filed with the code reviser on August 20, 2008. The commission brings this proceeding pursuant to RCW 80.01.040, 80.04.160, and 80.80.060.
2 STATEMENT OF COMPLIANCE: This proceeding complies with the Administrative Procedure Act (chapter 34.05 RCW), the State Register Act (chapter 34.08 RCW), the State Environmental Policy Act of 1971 (chapter 43.21C RCW), and the Regulatory Fairness Act (chapter 19.85 RCW).
3 DATE OF ADOPTION: The commission adopts these rules on the date this order is entered.
4 CONCISE STATEMENT OF PURPOSE AND EFFECT OF THE RULE: RCW 34.05.325(6) requires the commission to prepare and publish a concise explanatory statement about an adopted rule. The statement must identify the commission's reasons for adopting the rule, describe the differences between the version of the proposed rules published in the register and the rules adopted (other than editing changes), summarize the comments received regarding the proposed rule changes, and state the commission's responses to the comments reflecting the commission's consideration of them.
5 To avoid unnecessary duplication in the record of this docket, the commission designates the discussion in this order, including Appendix A (i.e., the rules adopted by this order), as its concise explanatory statement, supplemented by the October 23, 2008, staff memorandum preceding the adoption hearing, insofar as that memorandum is pertinent to, and is consistent with, the requirements of the rules adopted by this order. Together, these documents provide a complete but concise explanation of the agency actions and its reasons for taking those actions.
6 The rules establish the information required to be included in electrical company filings requesting determination by the commission that new long-term financial commitments for base-load electric generation comply with the greenhouse gases emissions performance standard (EPS), and the process by which these requests will be considered. In addition, the rules establish the information required to be included in requests electrical companies may make to be exempted from the EPS under certain circumstances. Finally, the rules specify reports required to be filed by electrical companies using the cost deferral accounting authorized under RCW 80.80.060(6).
7 The reason the commission is adopting these rules is to comply with ESSB 6001, chapter 307, Laws of 2007, with the title Climate change--Mitigating impacts (codified as chapter 80.80 RCW).
8 REFERENCE TO AFFECTED RULES: This order adopts WAC 480-100-405 Electrical company generation resource compliance with the greenhouse gases emissions performance standard, 480-100-415 Electrical company applications for commission determination outside of a general rate case of electric generation resource compliance with greenhouse gases emissions performance standard, 480-100-425 Electrical company applications for exemption from the greenhouse gas emissions performance standard, and 480-100-435 Electrical company deferral of costs associated with long-term financial commitments--Notice and reporting.
9 PREPROPOSAL STATEMENT OF INQUIRY AND ACTIONS THEREUNDER: The commission filed a preproposal statement of inquiry (CR-101) on February 5, 2008, at WSR 08-04-087. The statement advised interested persons that the commission was required to initiate a rule making to implement the requirements of RCW 80.80.060 regarding electrical company compliance with the greenhouse gases emissions performance standard contained in RCW 80.80.040. The commission also informed persons of this inquiry by providing notice of the subject and the CR-101 to everyone on the commission's list of persons requesting such information pursuant to RCW 34.05.320(3), the commission's lists of all registered electrical companies, interested persons listed in Docket UE-0618951, and by sending notices to the commission's lists of regulatory attorneys. The commission posted the relevant rule-making information on its internet web site at http://www.utc.wa.gov. Pursuant to the notice, the commission received written comments.
| 1 | In this docket the commission considered and adopted chapter 480-109 WAC concerning utility compliance with renewable energy and conservation targets in accordance with chapter 19.285 RCW. |
11 NOTICE OF PROPOSED RULE MAKING: The commission filed a notice of proposed rule making (CR-102) on August 20, 2008, at WSR 08-17-106. The commission scheduled this matter for oral comment and adoption under Notice No. WSR 08-17-106 at 10:00 a.m., Thursday, October 23, 2008, in the Commission's Hearing Room, Second Floor, Richard Hemstad Building, 1300 South Evergreen Park Drive S.W., Olympia, WA. The notice provided interested persons the opportunity to submit written comments to the commission.
12 WRITTEN COMMENTS: The commission received written comments from PSE with proposed language changes to WAC 480-100-405 Electrical company generation resource compliance with the greenhouse gases emissions performance standard.
13 RULE-MAKING HEARING: The commission considered the proposed rules for adoption at a rule-making hearing on October 23, 2008, before Chairman Mark H. Sidran and Commissioner Patrick J. Oshie. The commission heard oral comments from Tom DeBoer, representing PSE. Mr. DeBoer agreed with the disposition of PSE's written comments as described below.
14 COMMISSION ACTION: After considering all of the information regarding this proposal, the commission finds and concludes that it should adopt the rules as proposed in the CR-102 at WSR 08-17-106, changed as described below in this order.
15 SUGGESTIONS FOR CHANGES THAT ARE ACCEPTED OR REJECTED: Written comments suggested certain changes to the proposed rules. The suggested changes and the commission's reason for rejecting or accepting the suggested changes are described below.
16 CHANGES FROM PROPOSAL: The commission addressed the written comments submitted by PSE for changes to WAC 480-100-405 as follows:
WAC 480-100-405(1).
17 PSE recommends that the following language be deleted from proposed WAC 480-100-405(1): Electrical companies bear the burden to prove compliance with the greenhouse gases emissions performance standard under the requirements of WAC 480-100-405 or as part of a general rate case. For electrical companies that fail to carry their burden of proof, the commission may disallow recovery of some or all costs in rates, impose penalties, or take such other action as is consistent with law.
PSE contends that requiring electrical companies to bear the burden of proving compliance with the greenhouse gases emissions performance standard is contrary to chapter 80.80 RCW.
18 The commission rejects the proposed rule change. Being clear in the proposed rule that the burden to prove compliance with the EPS rests with the utility is reasonable for the following reasons:
| • | The statute makes specific reference to commission review in the context of general rate cases, proceedings in which PSE concedes it bears the burden of proof. It is also reasonable to clarify the utility's burden as the moving party in any special single-issue proceeding to determine compliance. |
| • | Compliance with the law is a characteristic of prudent utility management. PSE concedes it bears the burden to prove its resource choices are prudent. |
| • | Utilities - not the department of ecology or the commission - will possess the information necessary to prove compliance with the EPS. |
19 PSE recommends the proposed definition of "new ownership interest" be modified to read: "New ownership interest" means the acquisition by an electric utility of more than 50% of the assets, or more than 50% of the equity interests in the owner of the assets, of a baseload power plant or a cogeneration facility or the electrical generation portion of a cogeneration facility. In no event shall any direct or indirect change in ownership of an electric utility constitute a new ownership interest.
PSE suggested that the word "ownership" as used in the term "new ownership interest" means that the provisions of chapter 80.80 RCW apply to changes in a controlling interest of a generation asset, rather than change in a minority interest. PSE contends that the 5% ownership threshold included in the rule adopted by department of ecology at WAC 173-407-110 and proposed in the commission's rule will "create a substantial administrative burden on all parties and does not reflect the intent of chapter 80.80 RCW."
20 The statute provides no specific definition of ownership interest. Nonetheless, PSE's proposal is at odds with the express terms of the statute. If the intent was to limit the meaning of new ownership interest to only a controlling interest the statute could have said simply "new ownership." Further, adopting the same definition for this term that is included in WAC 173-407-110 will lessen administrative burden by avoiding inconsistency with the department of ecology's regulations. We reject the proposed rule change to limit the scope of the term new ownership interest.
21 We believe the final sentence in PSE's proposal is a reasonable and constructive clarification of the statutory purpose to regulate utility actions regarding base-load power facilities and contracts, rather than the ownership of utilities themselves. Consequently, the commission accepts a portion of PSE's recommendation with modifications, by adding the following language at WAC 480-100-405 (2)(e)(ii) (the new language is italicized and underlined):
(ii) Five percent of the electrical output of the power plant or cogeneration facility.
The above thresholds apply to each unit within a multiunit generation facility. A direct or indirect change in ownership of an electrical company does not constitute a new ownership interest in baseload electric generation.
WAC 480-100-405(2).
22 The reference to WAC 480-100-415 was inadvertently omitted from WAC 480-100-405(2). We consider this an inadvertent, ministerial error. The application of the definitions to all four new sections of rule was clearly stated in the memorandum and oral presentation of the proposed rules at the adoption hearing. The revised language correcting the omission is italicized and underlined:
(2) The following definitions apply for purposes of this
section, WAC 480-100-415, WAC 480-100-425 and 480-100-435:
23 STATEMENT OF ACTION; STATEMENT OF EFFECTIVE DATE: After reviewing the entire record, the commission determines that WAC 480-100-405, 480-100-415, 480-100-425, and 480-100-435 should be adopted to read as set forth in Appendix A, as rules of the Washington utilities and transportation commission, to take effect pursuant to RCW 34.05.380(2) on the thirty-first day after filing with the code reviser.
Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 0, Amended 0, Repealed 0.
Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.
Number of Sections Adopted on the Agency's Own Initiative: New 0, Amended 0, Repealed 0.
Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 4, Amended 0, Repealed 0.
Number of Sections Adopted Using Negotiated Rule Making: New 0, Amended 0, Repealed 0; Pilot Rule Making: New 0, Amended 0, Repealed 0; or Other Alternative Rule Making: New 0, Amended 0, Repealed 0.
24 THE COMMISSION ORDERS:
25 The commission adopts WAC 480-100-405, 480-100-415, 480-100-425, and 480-100-435 to read as set forth in Appendix A, as rules of the Washington utilities and transportation commission, to take effect pursuant to RCW 34.05.380(2) on the thirty-first day after the date of filing with the code reviser.
26 This order and the rule set out below, after being recorded in the register of the Washington utilities and transportation commission, shall be forwarded to the code reviser for filing pursuant to chapters 80.01, 34.05 RCW and 1-21 WAC.
DATED at Olympia, Washington, November 14, 2008.
WASHINGTON STATE UTILITIES AND TRANSPORTATION COMMISSION
Mark H. Sidran, Chairman
Patrick J. Oshie, Commissioner
Philip B. Jones, Commissioner
OTS-1829.3
PART VII -- ((ADOPTION BY REFERENCE)) GREENHOUSE GAS EMISSIONS
NEW SECTION
WAC 480-100-405
Electrical company generation resource
compliance with the greenhouse gases emissions performance
standard.
(1) No electrical company may enter into a
long-term financial commitment after June 30, 2008, for the
supply of baseload generation unless such generation complies
with the greenhouse gases emissions performance standard.
Electrical companies bear the burden to prove compliance with
the greenhouse gases emissions performance standard under the
requirements of WAC 480-100-415 or as part of a general rate
case. For electrical companies that fail to carry their
burden of proof, the commission may disallow recovery of some
or all costs in rates, impose penalties, or take such other
action as is consistent with law. Electrical companies
seeking to prove compliance with the greenhouse gases
emissions standard as part of a general rate case must submit
all of the information specified in WAC 480-100-415.
(2) The following definitions apply for purposes of this section, WAC 480-100-415, 480-100-425, and 480-100-435:
(a) "Baseload electric generation" means electric generation from a power plant that is designed and intended to provide electricity at an annualized plant capacity factor of at least sixty percent.
(b) "Electricity from unspecified sources" means electricity that is to be delivered in Washington pursuant to a long-term financial commitment entered into by an electrical company and whose sources or origins of generation and expected average annual deliveries cannot be ascertained with reasonable certainty.
(c) "Greenhouse gases emissions performance standard" means the standard established in RCW 80.80.040, WAC 173-407-120 and 173-407-130, and the verification and measurement procedures contained in WAC 173-407-140, 173-407-230, and 173-407-300.
(d) "Long-term financial commitment" means either a new ownership interest in baseload electric generation or an upgrade to a baseload electric generation facility; or a new or renewed contract for baseload electric generation with a term of five or more years for provision of retail power or wholesale power to end-use customers in this state.
(e) "New ownership interest" means a change in the ownership structure of a baseload power plant or a cogeneration facility or the electrical generation portion of a cogeneration facility affecting at least:
(i) Five percent of the market value of the power plant or cogeneration facility; or
(ii) Five percent of the electrical output of the power plant or cogeneration facility.
The above thresholds apply to each unit within a multiunit generation facility. A direct or indirect change in ownership of an electrical company does not constitute a new ownership interest in baseload electric generation.
(f) "Plant capacity factor" means the ratio of the electricity produced during a given time period, measured in kilowatt hours, to the electricity the unit could have produced if it had been operated at its rated capacity during that period, expressed in kilowatt hours.
(g) "Power plant" means a facility for the generation of electricity that is permitted as a single plant by the energy facility site evaluation council or a local jurisdiction.
(h) "Upgrade" means any modification made for the primary purpose of increasing the electric generation capacity of a baseload electric generation facility or unit. Upgrade does not include:
(i) Routine or necessary maintenance;
(ii) Installation of emission control equipment;
(iii) Installation, replacement, or modification of equipment that improves the heat rate of the facility; or
(iv) Installation, replacement, or modification of equipment for the primary purpose of maintaining reliable generation output capability that does not increase the heat input or fuel usage as specified in existing generation air quality permits as of July 22, 2007, but may result in incidental increases in generation capacity.
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(a) The electrical company's most recent integrated resource plan filed under WAC 480-100-238 and a description of how the proposed electric generation resource meets the resource need, resource investment strategies and other factors identified in the integrated resource plan.
(b) If the proposed electric generation resource is a specific power plant:
(i) The plant technology, design, fuel and fuel consumption;
(ii) Any site certificate or other permits necessary for operation of the power plant, including, for power plants located in Washington, any determination made by the department of ecology or the energy facility site evaluation council regarding compliance with the greenhouse gases emissions performance standard;
(iii) Such other information as is available concerning the exhaust emissions characteristics of the plant; and
(iv) The expected cost of the power generation to be acquired from the plant.
(c) If the proposed electric generation resource is a power purchase contract including contracts for delivery of electricity from unspecified sources:
(i) The proposed contract;
(ii) The technology, location, design, fuel and fuel consumption of any power plant, or plants, identified in the contract as the source of the contracted power deliveries, including such information as is knowable regarding the proportionate share each power source, or type of plant, will contribute to deliveries on an annual basis over the life of the contract;
(iii) Such other information as is available concerning the exhaust emissions characteristics of the plant(s) supporting contracted power deliveries; and
(iv) The contract term and expected cost of the power to be acquired through the power purchase agreement.
(2) The commission will consider the application pursuant to chapter 34.05 RCW (Part IV) following the procedures established in chapter 480-07 WAC. The schedule for a proceeding under this subsection will take into account both:
(a) The needs of the parties to the proposed resource acquisition or power purchase agreement for timely decisions that allow transactions to be completed; and
(b) The procedural rights to be provided to parties in chapter 34.05 RCW (Part IV), including intervention, discovery, briefing, and hearing.
(3) The commission will not decide in a proceeding under this section, issues involving the actual costs to construct and operate the selected resource, cost recovery, or other issues reserved by the commission for decision in a general rate case or other proceeding authorized by the commission for recovery of the resource or contract costs.
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(a) Unanticipated electric system reliability needs; or
(b) Catastrophic events or threat of significant financial harm that may arise from unforeseen circumstances.
(2) An electrical company's application under subsection (1)(a) of this section must include:
(a) A description of the electric system reliability needs including an explanation of why these needs were not anticipated, and why they cannot be addressed with other baseload electric generation that complies with the greenhouse gases performance standard.
(b) The estimated duration of the exemption necessary to address the reliability need.
(c) A description of any long-term financial commitment the company proposes to enter into to address the reliability need including all of the information specified in WAC 480-100-415.
(3) An electrical company's application under subsection (1)(b) of this section must include:
(a) A description of the catastrophic event or threat of significant financial harm and an explanation of why the circumstances from which the event or harm arose were not foreseen including:
(i) An explanation of why the circumstances cannot be addressed with baseload generation that complies with the greenhouse gases performance standard;
(ii) What the anticipated negative financial impact would be to the company if such exemption were denied;
(b) The estimated duration of the exemption necessary to address the catastrophic event or threat of significant financial harm.
(c) A description of any long-term financial commitment the company proposes to enter into to address the catastrophic event or threat of significant financial harm including all of the information specified in WAC 480-100-415.
(4) An electrical company may propose recovery of costs associated with an application under this rule as part of a general rate case.
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(2) An electrical company deferring costs under subsection (1) of this section must:
(a) Notify the commission within ten business days of its intent to defer such costs; and
(b) File quarterly with the commission a report documenting the balances of costs deferred in a form specified by the commission.
(3) The deferral begins with the date on which the power plant begins commercial operation or the effective date of the power purchase agreement and continues for a period not to exceed twenty-four months; provided that if during such period the company files a general rate case or other proceeding for the recovery of such costs, deferral ends on the effective date of the final decision by the commission in such proceeding. Creation of such a deferral account does not by itself determine the actual costs of the long-term financial commitment, whether recovery of any or all of these costs is appropriate, or other issues to be decided by the commission in a general rate case or other proceeding authorized by the commission for recovery of these costs.
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PART VIII -- ADOPTION BY REFERENCE