Electric Utility Environmental Cost Recovery Mechanisms Filing and Submission Requirements

PURPOSE: This rule implements the provisions of Senate Bill 179, codified at section 386.266, RSMo Supp. 2008, which permits the commission to authorize the inclusion of an environmental cost recovery mechanism in utility rates. (1) As used in this rule, the following terms mean: (A) EFIS means the electronic filing and information system of the commission; (B) Electric utility means electrical corporation as defined in section 386.020, RSMo, subject to commission regulation pursuant to Chapters 386 and 393, RSMo; (C) Environmental compliance plan means a twenty (20)- year forecast of environmental compliance investments and a detailed four (4)-year plan for complying with federal, state, and local environmental laws, regulations, and rules. The four (4)-year plan will include plans to use emission allowances for compliance, plans for emission allowance transactions, and, on a generation unit basis, plans for investments in emission control equipment. The environmental compliance plan shall be consistent with the implementation plan of the most recent resource plan filing except as otherwise explained by the electric utility. Approval of an Environmental Cost Recovery Mechanism (ECRM) does not imply approval or predetermination of prudence of the environmental compliance plan; (D) Environmental Cost Recovery Mechanism (ECRM) means a mechanism established in a general rate proceeding that allows periodic rate adjustments, outside a general rate proceeding, to reflect the net increases or decreases in an electric utility’s environmental revenue requirement, plus additional environmental costs incurred since the prior general rate proceeding; (E) Environmental costs means prudently incurred costs, both capital and expense, directly related to compliance with any federal, state, or local environmental law, regulation, or AND INSURANCE rule. 1. Environmental costs do not include fuel and purchased power costs as defined in 4 CSR 240-3.161(1)(A). 2. Prudently incurred costs do not include any increased costs resulting from negligent or wrongful acts or omissions by the utility; (F) The environmental revenue requirement shall be comprised of the following: 1. All expensed environmental costs (other than taxes and depreciation associated with capital projects) that are included in the electric utility’s revenue requirement in the general rate proceeding in which the ECRM is established; and 2. The costs (i.e., the return, taxes, and depreciation) of any major capital projects whose primary purpose is to permit the electric utility to comply with any federal, state, or local environmental law, regulation, or rule. Representative examples of such capital projects to be included (as of the date of adoption of this rule) are electrostatic precipitators, fabric filters, nitrous oxide emissions control equipment, and flue gas desulfurization equipment. The costs of such capital projects shall be those identified on the electric utility’s books and records as of the last day of the test year, as updated, utilized in the general rate proceeding in which the ECRM is established; (G) General rate proceeding means a general rate increase proceeding or complaint proceeding before the commission in which all relevant factors that may affect the costs, or rates and charges, of the electric utility are considered by the commission; and (H) Rate class is a customer class defined in an electric utility’s tariff. Generally, rate classes include Residential, Small General Service, Large General Service, and Large Power Service, but may include additional rate classes. Each rate class includes all customers served under all variations of the rate schedules available to that class. (2) When an electric utility files to establish an ECRM as described in 4 CSR 240-20.091(2), the electric utility shall file the following supporting information as part of, or in addition to, its direct testimony: (A) An example of the notice to be provided to customers as required by 4 CSR 240-20.091(2)(E); (B) An example customer bill showing how the proposed ECRM shall be separately identified on affected customers’ bills in accordance with 4 CSR 240-20.091(8); (C) Proposed ECRM rate schedules; (D) A general description of the design and intended operation of the proposed ECRM; (E) A complete explanation of how the proposed ECRM is reasonably designed to provide the electric utility a sufficient opportunity to earn a fair return on equity; (F) A complete explanation of how the proposed ECRM shall be trued-up to reflect over- or under-collections on at least an annual basis; (G) A complete description of how the proposed ECRM is compatible with the requirement for prudence reviews; (H) A complete explanation of all the costs that shall be considered for recovery under the proposed ECRM and the specific account used for each cost item on the electric utility’s books and records; (I) A complete explanation of all of the costs, both capital and expense, incurred to comply with any current federal, state, or local environmental law, regulation, or rule that the electric utility is proposing be included in base rates and the specific account used for each cost item on the electric utility’s books and records; (J) A complete explanation of all the revenues that shall be considered in the determination of the amount eligible for recovery under the proposed ECRM and the specific account where each such revenue item is recorded on the electric utility’s books and records; (K) A complete explanation of any feature designed into the proposed ECRM or any existing electric utility policy, procedure, or practice that can be relied upon to ensure that only prudent costs shall be eligible for recovery under the proposed ECRM; (L) For each of the major categories of costs that the electric utility seeks to recover through its proposed ECRM, a complete explanation of the specific rate class cost allocations and rate design used to calculate the proposed environmental revenue requirement and any subsequent ECRM rate adjustments during the term of the proposed ECRM; (M) A complete explanation of any change in business risk to the electric utility resulting from implementation of the proposed ECRM in setting the electric utility’s allowed return in any rate proceeding, in addition to any other changes in business risk experienced by the electric utility; (N) The electric utility’s environmental compliance plan including a complete description of— 1. The electric utility’s long-term environmental compliance planning process; 2. The analysis performed to develop the electric utility’s environmental compliance plan; and 3. If the environmental compliance plan is inconsistent with the electric utility’s most recent resource plan filing, a detailed explanation of why such inconsistencies exist; and (O) Authorization for the commission staff to release the previous five (5) years of historical surveillance reports submitted to the commission staff by the electric utility to all parties to the case. (3) When an electric utility files a general rate proceeding following the general rate proceeding that established its ECRM as described by 4 CSR 240-20.091(2) in which it requests that its ECRM be continued or modified, the electric utility shall file with the commission and serve parties, as provided in sections (9) through (11) in this rule, the following supporting information as part of, or in addition to, its direct testimony: (A) An example of the notice to be provided to customers as required by 4 CSR 240-20.091(2)(E); (B) If the electric utility proposes to change the identification of the ECRM on the customer’s bill, an example customer bill showing how the proposed ECRM shall be separately identified on affected customers’ bills, including the proposed language, in accordance with 4 CSR 240-20.091(8); (C) Proposed ECRM rate schedules; (D) A general description of the design and intended operation of the proposed ECRM; (E) A complete explanation of how the proposed ECRM is reasonably designed to provide the electric utility a sufficient opportunity to earn a fair return on equity; (F) A complete explanation of how the proposed ECRM shall be trued-up to reflect over- or under-collections on at least an annual basis; (G) A complete description of how the proposed ECRM is compatible with the requirement for prudence reviews; (H) A complete explanation of all the costs that shall be considered for recovery under the proposed ECRM and the specific account used for each cost item on the electric utility’s books and records; (I) A complete explanation of all of the costs, both capital and expense, incurred to comply with any current federal, state, or local environmental law, regulation, or rule that the electric utility is proposing be included in base rates and the specific account used for each cost item on the electric utility’s books and records; (J) A complete explanation of all the revenues that shall be considered in the determination of the amount eligible for recovery under the proposed ECRM and the specific account where each such revenue item is recorded on the electric utility’s books and records; (K) A complete explanation of any feature designed into the proposed ECRM or any existing electric utility policy, procedure, or practice that can be relied upon to ensure that only prudent costs shall be eligible for recovery under the proposed ECRM; (L) For each of the major categories of costs that the electric utility seeks to recover through its proposed ECRM, a complete explanation of the specific rate class cost allocations and rate design used to calculate the proposed environmental revenue requirement and any subsequent ECRM rate adjustments during the term of the proposed ECRM; (M) A complete explanation of any change in business risk to the electric utility resulting from implementation of the proposed ECRM in setting the electric utility’s allowed return in any rate proceeding, in addition to any other changes in business risk experienced by the electric utility; (N) A description of how responses to subsections (3)(B) through (M) differ from responses to subsections (3)(B) through (M) for the currently approved ECRM; (O) The electric utility’s environmental compliance plan including a complete description of— 1. The electric utility’s long-term environmental compliance planning process; 2. The analysis performed to develop the electric utility’s environmental compliance plan; and 3. If the environmental compliance plan is inconsistent with the electric utility’s most recent resource plan filing, a detailed explanation of why such inconsistencies exist; and (P) Any additional information that may have been ordered by the commission in the prior general rate proceeding to be provided. (4) When an electric utility files a general rate proceeding following the general rate proceeding that established its ECRM as described in 4 CSR 240-20.091(3) in which it requests that its ECRM be discontinued, the electric utility shall file with the commission and serve parties, as provided in sections (9) through (11) in this rule, the following supporting information as part of, or in addition to, its direct testimony: (A) An example of the notice to be provided to customers as required by 4 CSR 240-20.091(3)(B); (B) A complete explanation of how the over-collection or under-collection of the ECRM that the electric utility is proposing to discontinue shall be handled; (C) A complete explanation of why the ECRM is no longer necessary to provide the electric utility a sufficient opportunity to earn a fair return on equity; (D) A complete explanation of any change in business risk to the electric utility resulting from discontinuation of the ECRM in setting the electric utility’s allowed return, in addition to any other changes in business risk experienced by the electric utility; and (E) Any additional information that may have been ordered by the commission in the prior general rate proceeding to be provided. (5) Each electric utility with an ECRM shall submit, with an affidavit attesting to the veracity of the information, the following information on a monthly basis to the manager of the auditing department of the commission, the Office of the Public Counsel (OPC), and others, as provided in sections (9) through (11) in this rule. The information may be submitted to the manager of the auditing department through EFIS. The following information shall be aggregated by month and supplied no later than sixty (60) days after the end of each month when the ECRM is in effect. The first submission shall be made within sixty (60) days after the end of the first complete month after the ECRM goes into effect. It shall contain, at a minimum, the following: (A) The revenues billed pursuant to the ECRM by rate class and voltage level, as applicable; (B) The revenues billed through the electric utility’s base rate allowance by rate class and voltage level; (C) All significant factors that have affected the level of ECRM revenues along with workpapers documenting these significant factors; (D) The difference, by rate class and voltage level, as applicable, between the total billed ECRM revenues and the projected ECRM revenues; (E) Any additional information ordered by the commission to be provided; and (F) To the extent any of the requested information outlined above is provided in response to another section, the information only needs to be provided once. (6) Each electric utility with an ECRM shall submit, with an affidavit attesting to the veracity of the information, a Surveillance Monitoring Report, which shall be treated as highly confidential, as required in 4 CSR 240-20.091(9), to the manager of the auditing department of the commission, OPC, and others, as provided in sections (9) through (11) in this rule. The information may be submitted to the manager of the auditing department through EFIS. (A) There are five (5) parts to the electric utility Surveillance Monitoring Report. Each part, except Part One, Rate Base Quantifications, shall contain information for the last twelve (12)-month period and the last quarter data for total company electric operations and Missouri jurisdictional operations. Part One, Rate Base Quantifications, shall contain only information for the ending date of the period being reported. The form of the Surveillance Monitoring Report form is included herein. 1. Rate Base Quantifications Report. The quantification of rate base items on page one shall be consistent with the methods or procedures used in the most recent rate proceeding unless otherwise specified. The report shall consist of specific rate base quantifications of— A. Plant in service; B. Reserve for depreciation; C. Materials and supplies; D. Cash working capital; E. Fuel inventory; F. Prepayments; G. Other regulatory assets; H. Customer advances; I. Customer deposits; J. Accumulated deferred income taxes; K. Any other item included in the utility’s rate base in the most recent rate proceeding; L. Net Operating Income from page three; and M. Calculation of the overall return on rate base. 2. Capitalization Quantifications Report. Page two shall consist of specific capitalization quantifications of— AND INSURANCE A. Common stock equity (net); B. Preferred stock (par or stated value outstanding); C. Long-term debt (including current maturities); D. Short-term debt; and E. Weighted cost of capital including component costs. 3. Income Statement. Page three shall consist of an income statement containing specific quantification of— A. Operating revenues to include sales to industrial, commercial, and residential customers, sales for resale, and other components of total operating revenues; B. Operating and maintenance expenses for fuel expense, production expenses, purchased power energy, and capacity; C. Transmission expenses; D. Distribution expenses; E. Customer accounts expenses; F. Customer service and information expenses; G. Sales expenses; H. Administrative and general expenses; I. Depreciation, amortization, and decommissioning expense; J. Taxes other than income taxes; K. Income taxes; and L. Quantification of heating degree and cooling degree days, actual and normal. 4. Jurisdictional Allocation Factor Report. Page four shall consist of a listing of jurisdictional allocation factors for the rate base, capitalization quantification reports, and income statement. 5. Financial Data Notes. Page five shall consist of notes to financial data including, but not limited to: A. Out-of-period adjustments; B. Specific quantification of material variances between actual and budget financial performance; C. Material variances between current twelve (12)-month period and prior twelve (12)-month period revenue; D. Expense level of items ordered by the commission to be tracked pursuant to the order establishing the ECRM; E. Budgeted capital projects; F. Events that materially affect debt or equity surveillance components; and G. All settlements in regards to environmental compliance causing the electric utility to incur expenses or make investments in excess of one hundred thousand dollars ($100,000) or fines against the electric utility in regards to environmental compliance greater than one hundred thousand dollars ($100,000). (B) The Surveillance Monitoring Report shall contain any additional information ordered by the commission to be provided. (C) The electric utility shall annually submit its approved budget, in electronic form, based upon its budget year in a format similar to the Surveillance Monitoring Report. The budget submission shall provide a quarterly and annual quantification of the electric utility’s income statement. The budget shall be submitted within thirty (30) days of its approval by the electric utility’s management or within sixty (60) days of the beginning of the electric utility’s fiscal year, whichever is earliest. The budget submission shall be treated as highly confidential pursuant to 4 CSR 240-2.135. (D) If the electric utility has a rate adjustment mechanism as defined in 4 CSR 240-20.090(1)(G), the surveillance report submitted by the electric utility as required by 4 CSR 240-3.161(6) along with information submitted in response to subparagraph (6)(A)5.G. shall meet the surveillance reporting required by this section. (7) When an electric utility files tariff schedules to adjust an ECRM rate as described in 4 CSR 240-20.091(4) with the commission, and serves upon parties as provided in sections (9) through (11) in this rule, the tariff schedules must be accompanied by supporting testimony, and at least the following supporting information: (A) The following information shall be included with the filing: 1. For the period from which historical costs are used to adjust the ECRM rate: A. Emission allowance costs differentiated by purchases, swaps, and loans; B. Net revenues from emission allowance sales, swaps, and loans; C. Extraordinary costs not to be passed through, if any, due to such costs being an insured loss, or subject to reduction due to litigation, or for any other reason; D. Base rate component of environmental compliance costs and revenues; E. Identification of capital projects placed in service that were not anticipated in the previous general rate proceeding; and F. Any additional requirements ordered by the commission in the prior general rate proceeding; 2. The levels of environmental capital costs and expenses in the base rate revenue requirement from the prior general rate proceeding; 3. The levels of environmental capital costs in the base rate revenue requirement from the prior general rate proceeding as adjusted for the proposed date of the periodic adjustment; 4. The capital structure as determined in the prior general rate proceeding; 5. The cost rates for the electric utility’s debt and preferred stock as determined in the prior general rate proceeding; 6. The electric utility’s cost of common equity as determined in the prior general rate proceeding; 7. Calculation of the proposed ECRM collection rates; and 8. Calculations underlying any seasonal variation in the ECRM collection rates; and (B) Workpapers supporting all items in subsection (7)(A) shall be submitted to the manager of the auditing department and served upon parties as provided in sections (9) through (11) in this rule. The workpapers may be submitted to the manager of the auditing department through EFIS. (8) When an electric utility that has an ECRM files its application containing its annual true-up with the commission, as described in 4 CSR 240-20.091(5), any rate schedule filing must be accompanied by supporting testimony, and the electric utility shall— (A) File the following information with the commission and serve upon parties as provided in sections (9) through (11) in this rule: 1. Amount of costs that it has over-collected or under-collected through the ECRM by rate class and voltage level, as applicable; 2. Proposed adjustments or refunds by rate class and voltage level as applicable; 3. Electric utility’s short-term borrowing rate; and 4. Any additional information ordered by the commission; (B) Submit the following information to the manager of the auditing department and serve upon the parties as provided in sections (9) through (11) in this rule. The information may be submitted to the manager of the auditing department through EFIS. 1. Workpapers detailing how the determination of the over-collection or under-collection of costs through the ECRM was made including any model inputs and outputs and the derivation of any model inputs. 2. Workpapers detailing the proposed adjustments or refunds. 3. Basis for the electric utility’s short-term borrowing rate. 4. Any additional information ordered by the commission to be provided. (9) Providing to other parties items required to be filed or submitted in preceding sections (3) through (8). Information required to be filed with the commission or submitted to the manager of the auditing department of the commission and to OPC in sections (3) through (8) shall also be, in the same format, served on or submitted to any party to the related general rate proceeding in which the ECRM was approved by the commission, periodic adjustment proceeding, annual true-up, prudence review, or general rate case to modify, extend, or discontinue the same ECRM, pursuant to the procedures in 4 CSR 240-2.135 for handling confidential information, including any commission order issued thereunder. (10) Party status and providing to other parties affidavits, testimony, information, reports, and workpapers in related proceedings subsequent to general rate proceeding establishing ECRM. (A) A person or entity granted intervention in a general rate proceeding in which an ECRM is approved by the commission shall be a party to any subsequent related periodic adjustment proceeding, annual true-up, or prudence review, without the necessity of applying to the commission for intervention. In any subsequent general rate proceeding, such person or entity must seek and be granted status as an intervenor to be a party to that case. Affidavits, testimony, information, reports, and workpapers to be filed or submitted in connection with a subsequent related periodic adjustment proceeding, annual true-up, prudence review, or general rate case to modify, extend, or discontinue the same ECRM shall be served on or submitted to all parties from the prior related general rate proceeding and on all parties from any subsequent related periodic adjustment proceeding, annual true-up, prudence review, or general rate case to modify, extend, or discontinue the same ECRM, concurrently with filing the same with the commission or submitting the same to the manager of the auditing department of the commission and OPC, pursuant to the procedures in 4 CSR 240-2.135 for handling confidential information, including any commission order issued thereunder. (B) A person or entity not a party to the general rate proceeding in which an ECRM is approved by the commission may timely apply to the commission for intervention, pursuant to 4 CSR 240-2.075(2) through (4) of the commission’s rule on intervention, respecting any related subsequent periodic adjustment proceeding, annual true-up, or prudence review, or, pursuant to 4 CSR 240-2.075(1) through (5), respecting any subsequent general rate case to modify, extend, or discontinue the same ECRM. If no party to a subsequent periodic adjustment proceeding, annual true-up, or prudence review objects within ten (10) days of the filing of an application for intervention, the applicant shall be deemed as having been granted intervention without a specific commission order granting intervention, unless within the above-referenced ten (10)-day period the commission denies the application for intervention on its own motion. If an objection to the application for intervention is filed on or before the end of the above-referenced ten (10)- day period, the commission shall rule on the application and the objection within ten (10) days of the filing of the objection. (11) Discovery. The results of discovery from a general rate proceeding where the commission may approve, modify, reject, extend, or discontinue an ECRM, or from any subsequent periodic adjustment proceeding, annual true-up, or prudence review relating to the same ECRM, may be used without a party resubmitting the same discovery requests (data requests, interrogatories, requests for production, requests for admission, or depositions) in the subsequent proceeding to parties that produced the discovery in the prior proceeding, subject to a ruling by the commission concerning any evidentiary objection made in the subsequent proceeding. (12) Supplementing and updating data requests in subsequent related proceedings. If a party, which submitted data requests relating to a proposed ECRM in the general rate proceeding where the ECRM was established or in the general rate proceeding where the same ECRM was modified or extended, or in any subsequent related periodic adjustment proceeding, annual true-up, or prudence review, wants the responding party to whom the prior data requests were submitted to supplement or update that responding party’s prior responses for possible use in a subsequent related periodic adjustment proceeding, annual true-up, prudence review, or general rate case to modify, extend, or discontinue the same ECRM, the party which previously submitted the data requests shall submit an additional data request to the responding party to whom the data requests were previously submitted which clearly identifies the particular data requests to be supplemented or updated and the particular period to be covered by the updated response. A responding party to a request to supplement or update shall supplement or update a data request response from: a related general rate proceeding where a ECRM was established; a general rate case where the same ECRM was modified or extended; or a related periodic adjustment proceeding, annual true-up, or prudence review, which the responding party has learned or subsequently learns is in some material respect incomplete or incorrect. (13) Separate cases for each general rate proceeding involving an ECRM and for each mutually exclusive twelve (12)-month annual true-up period of an ECRM. Each general rate proceeding where the commission may approve, modify, or reject an ECRM; each general rate case where the commission may authorize the modification, extension, or discontinuance of an ECRM; and each mutually exclusive twelve (12)-month period of an ECRM that encompasses an annual true-up, prudence review, and possible periodic adjustments shall comprise a separate case. The same procedures for handling confidential information shall apply, pursuant to 4 CSR 240-2.135, as in the immediately preceding ECRM case for the particular electric utility, unless otherwise directed by the commission on its own motion or as requested by a party and directed by the commission. (14) New ECRM. For the purposes of this rule, an ECRM, if continued, modified, or extended in a general rate case, even in substantially the form approved in the prior general rate proceeding, shall be considered to be a new distinct ECRM after each general rate proceeding required by section 386.266.4(3), RSMo. AND INSURANCE (15) Right to Discovery Unaffected. In addressing certain discovery matters and the provision of certain information by electric utilities, this rule is not intended to restrict the discovery rights of any party. (16) Waivers. Provisions of this rule may be waived by the commission for good cause shown. (17) Rule Review. The commission shall review the effectiveness of this rule by no later than December 31, 2011, and may, if it deems necessary, initiate rulemaking proceedings to revise this rule. AND INSURANCE AND INSURANCE AND INSURANCE AUTHORITY: sections 386.250 and 393.140, RSMo 2000 and section 386.266, RSMo Supp. 2008.* This rule originally filed as 4 CSR 240-3.162. Original rule filed Oct. 31, 2007, effective June 30, 2008, terminated Jan. 4, 2009. Refiled: Dec. 31, 2008, effective Aug. 30, 2009. Moved to 20 CSR 4240-3.162, effective Aug. 28, 2019. *Original authority: 386.250, RSMo 1939, amended 1963, 1967, 1977, 1980, 1987, 1988, 1991, 1993, 1995, 1996; 386.266, RSMo 2005; and 393.140, RSMo 1939, amended 1949, 1967. Rule Action Notice: On December 4, 2008, the circuit court granted the moving parties’ (Office of Public Counsel and Missouri Industrial Energy Consumers) motion for reversal and entered a judgment reversing the Public Service Commission’s Final Order of Rulemaking. The circuit court’s judgment reversing the commission’s Final Order of Rulemaking became final on January 4, 2009. After January 4, 2009, 4 CSR 240-3.162 shall be terminated and of no further force and effect.