(a) Program.--The commission shall, by January 15, 2009, adopt an energy efficiency and conservation program to require electric distribution companies to adopt and implement cost-effective energy efficiency and conservation plans to reduce energy demand and consumption within the service territory of each electric distribution company in this Commonwealth. The program shall include:

(1) Procedures for the approval of plans submitted under subsection (b).

(2) An evaluation process, including a process to monitor and verify data collection, quality assurance and results of each plan and the program.

(3) An analysis of the cost and benefit of each plan submitted under subsection (b) in accordance with a total resource cost test approved by the commission.

(4) An analysis of how the program and individual plans will enable each electric distribution company to achieve or exceed the requirements for reduction in consumption under subsections (c) and (d).

(5) Standards to ensure that each plan includes a variety of energy efficiency and conservation measures and will provide the measures equitably to all classes of customers.

(6) Procedures to make recommendations as to additional measures that will enable an electric distribution company to improve its plan and exceed the required reductions in consumption under subsections (c) and (d).

(7) Procedures to require that electric distribution companies competitively bid all contracts with conservation service providers.

(8) Procedures to review all proposed contracts prior to the execution of the contract with conservation service providers to implement the plan. The commission may order the modification of a proposed contract to ensure that the plan meets the requirements for reduction in demand and consumption under subsections (c) and (d).

(9) Procedures to ensure compliance with requirements for reduction in consumption under subsections (c) and (d).

(10) A requirement for the participation of conservation service providers in the implementation of all or part of a plan.

(11) Cost recovery to ensure that measures approved are financed by the same customer class that will receive the direct energy and conservation benefits.

(b) Duties of electric distribution companies.--

(1) (i) By July 1, 2009, each electric distribution company shall develop and file an energy efficiency and conservation plan with the commission for approval to meet the requirements of subsection (a) and the requirements for reduction in consumption under subsections (c) and (d). The plan shall be implemented upon approval by the commission. The following are the plan requirements:

(A) The plan shall include specific proposals to implement energy efficiency and conservation measures to achieve or exceed the required reductions in consumption under subsections (c) and (d).

(B) A minimum of 10% of the required reductions in consumption under subsections (c) and (d) shall be obtained from units of Federal, State and local government, including municipalities, school districts, institutions of higher education and nonprofit entities.

(C) The plan shall explain how quality assurance and performance will be measured, verified and evaluated.

(D) The plan shall state the manner in which the plan will achieve the requirements of the program under subsection (a) and will achieve or exceed the required reductions in consumption under subsections (c) and (d).

(E) The plan shall include a contract with one or more conservation service providers selected by competitive bid to implement the plan or a portion of the plan as approved by the commission.

(F) The plan shall include estimates of the cost of implementation of the energy efficiency and conservation measures in the plan.

(G) The plan shall include specific energy efficiency measures for households at or below 150% of the Federal poverty income guidelines. The number of measures shall be proportionate to those households' share of the total energy usage in the service territory. The electric distribution company shall coordinate measures under this clause with other programs administered by the commission or another Federal or State agency. The expenditures of an electric distribution company under this clause shall be in addition to expenditures made under 52 Pa. Code Ch. 58 (relating to residential low income usage reduction programs).

(H) The plan shall include a proposed cost-recovery tariff mechanism, in accordance with section 1307 (relating to sliding scale of rates; adjustments), to fund the energy efficiency and conservation measures and to ensure full and current recovery of the prudent and reasonable costs of the plan, including administrative costs, as approved by the commission.

(I) The electric distribution company shall demonstrate that the plan is cost effective using a total resource cost test approved by the commission and provides a diverse cross section of alternatives for customers of all rate classes.

(J) The plan shall require an annual independent evaluation of its cost-effectiveness and a full review of the results of each five-year plan required under subsection (c)(3) and, to the extent practical, how the plan will be adjusted on a going-forward basis as a result of the evaluation.

(K) The plan shall include an analysis of the electric distribution company's administrative costs.

(ii) A new plan shall be filed with the commission every five years or as otherwise required by the commission. The plan shall set forth the manner in which the company will meet the required reductions in consumption under subsections (c) and (d).

(iii) No more than 2% of funds available to implement a plan under this subsection shall be allocated for experimental equipment or devices.

(2) The commission shall direct an electric distribution company to modify or terminate any part of a plan approved under this section if, after an adequate period for implementation, the commission determines that an energy efficiency or conservation measure included in the plan will not achieve the required reductions in consumption in a cost-effective manner under subsections (c) and (d).

(3) If part of a plan is modified or terminated under paragraph (2), the electric distribution company shall submit a revised plan describing actions to be taken to offer substitute measures or to increase the availability of existing measures in the plan to achieve the required reductions in consumption under subsections (c) and (d).

(c) Reductions in consumption.--The plans adopted under subsection (b) shall reduce electric consumption as follows:

(1) By May 31, 2011, total annual weather-normalized consumption of the retail customers of each electric distribution company shall be reduced by a minimum of 1%. The 1% load reduction in consumption shall be measured against the electric distribution company's expected load as forecasted by the commission for June 1, 2009, through May 31, 2010, with provisions made for weather adjustments and extraordinary loads that the electric distribution company must serve.

(2) By May 31, 2013, the total annual weather-normalized consumption of the retail customers of each electric distribution company shall be reduced by a minimum of 3%. The 3% load reduction in consumption shall be measured against the electric distribution company's expected load as forecasted by the commission for June 1, 2009, through May 31, 2010, with provisions made for weather adjustments and extraordinary loads that the electric distribution company must serve.

(3) By November 30, 2013, and every five years thereafter, the commission shall evaluate the costs and benefits of the program established under subsection (a) and of approved energy efficiency and conservation plans submitted to the program. The evaluation shall be consistent with a total resource cost test or a cost-benefit analysis determined by the commission. If the commission determines that the benefits of the program exceed the costs, the commission shall adopt additional required incremental reductions in consumption.

(d) Peak demand.--The plans adopted under subsection (b) shall reduce electric demand as follows:

(1) By May 31, 2013, the weather-normalized demand of the retail customers of each electric distribution company shall be reduced by a minimum of 4.5% of annual system peak demand in the 100 hours of highest demand. The reduction shall be measured against the electric distribution company's peak demand for June 1, 2007, through May 31, 2008.

(2) By November 30, 2013, the commission shall compare the total costs of energy efficiency and conservation plans implemented under this section to the total savings in energy and capacity costs to retail customers in this Commonwealth or other costs determined by the commission. If the commission determines that the benefits of the plans exceed the costs, the commission shall set additional incremental requirements for reduction in peak demand for the 100 hours of greatest demand or an alternative reduction approved by the commission. Reductions in demand shall be measured from the electric distribution company's peak demand for the period from June 1, 2011, through May 31, 2012. The reductions in consumption required by the commission shall be accomplished no later than May 31, 2017.

(e) Commission approval.--

(1) The commission shall conduct a public hearing on each plan and allow for the submission of recommendations by the Office of Consumer Advocate and the Office of Small Business Advocate and by members of the public as to how the electric distribution company could improve its plan or exceed the required reductions in consumption under subsections (c) and (d).

(2) The commission shall approve or disapprove a plan filed under subsection (b) within 120 days of submission. The following shall apply to an order disapproving a plan:

(i) The commission shall describe in detail the reasons for the disapproval.

(ii) The electric distribution company shall have 60 days to file a revised plan to address the deficiencies identified by the commission. The revised plan shall be approved or disapproved by the commission within 60 days.

(f) Penalties.--

(1) The following shall apply for failure to submit a plan:

(i) An electric distribution company that fails to file a plan under subsection (b) shall be subject to a civil penalty of $100,000 per day until the plan is filed.

(ii) An electric distribution company that fails to file a revised plan under subsection (e)(2)(ii) shall be subject to a civil penalty of $100,000 per day until the plan is filed.

(iii) Penalties collected under this paragraph shall be deposited in the low-income electric customer assistance program of the energy distribution company for the respective service territory.

(2) The following shall apply to an electric distribution company that fails to achieve the reductions in consumption required under subsection (c) or (d):

(i) The electric distribution company shall be subject to a civil penalty not less than $1,000,000 and not to exceed $20,000,000 for failure to achieve the required reductions in consumption under subsection (c) or (d). Any penalty paid by an electric distribution company under this subparagraph shall not be recoverable from ratepayers.

(ii) If an electric distribution company fails to achieve the required reductions in consumption under subsection (c) or (d), responsibility to achieve the reductions in consumption shall be transferred to the commission. The commission shall do all of the following:

(A) Implement a plan to achieve the required reductions in consumption under subsection (c) or (d).

(B) Contract with conservation service providers as necessary to implement any portion of the plan.

(g) Limitation on costs.--The total cost of any plan required under this section shall not exceed 2% of the electric distribution company's total annual revenue as of December 31, 2006. The provisions of this paragraph shall not apply to the cost of low-income usage reduction programs established under 52 Pa. Code Ch. 58 (relating to residential low income usage reduction programs).

(h) Costs.--The commission shall recover from electric distribution companies the costs of implementing the program established under this section.

(i) Report.--The following shall apply:

(1) Each electric distribution company shall submit an annual report to the commission relating to the results of the energy efficiency and conservation plan within each electric distribution service territory. The report shall include all of the following:

(i) Documentation of program expenditures.

(ii) Measurement and verification of energy savings under the plan.

(iii) Evaluation of the cost-effectiveness of expenditures.

(iv) Any other information required by the commission.

(2) Beginning five years following the effective date of this section and annually thereafter, the commission shall submit a report to the Consumer Protection and Professional Licensure Committee of the Senate and the Consumer Affairs Committee of the House of Representatives.

(j) Existing funding sources.--Each electric distribution company shall, upon request by any person, provide a list of all eligible Federal and State funding programs available to ratepayers for energy efficiency and conservation. The list shall be posted on the electric distribution company's Internet website.

(k) Recovery.--

(1) An electric distribution company shall recover on a full and current basis from customers, through a reconcilable adjustment clause under section 1307, all reasonable and prudent costs incurred in the provision or management of a plan provided under this section. This paragraph shall apply to all electric distribution companies, including electric distribution companies subject to generation or other rate caps.

(2) Except as set forth in paragraph (3), decreased revenues of an electric distribution company due to reduced energy consumption or changes in energy demand shall not be a recoverable cost under a reconcilable automatic adjustment clause.

(3) Decreased revenue and reduced energy consumption may be reflected in revenue and sales data used to calculate rates in a distribution-base rate proceeding filed by an electric distribution company under section 1308 (relating to voluntary changes in rates).

(l) Applicability.--This section shall not apply to an electric distribution company with fewer than 100,000 customers.

(m) Definitions.--As used in this section, the following words and phrases shall have the meanings given to them in this subsection:

"Conservation service provider." An entity that provides information and technical assistance on measures to enable a person to increase energy efficiency or reduce energy consumption and that has no direct or indirect ownership, partnership or other affiliated interest with an electric distribution company.

"Electric distribution company total annual revenue." Amounts paid to the electric distribution company for generation, transmission, distribution and surcharges by retail customers.

"Energy efficiency and conservation measures."

(1) Technologies, management practices or other measures employed by retail customers that reduce electricity consumption or demand if all of the following apply:

(i) The technology, practice or other measure is installed on or after the effective date of this section at the location of a retail customer.

(ii) The technology, practice or other measure reduces consumption of energy or peak load by the retail customer.

(iii) The cost of the acquisition or installation of the measure is directly incurred in whole or in part by the electric distribution company.

(2) Energy efficiency and conservation measures shall include solar or solar photovoltaic panels, energy efficient windows and doors, energy efficient lighting, including exit sign retrofit, high bay fluorescent retrofit and pedestrian and traffic signal conversion, geothermal heating, insulation, air sealing, reflective roof coatings, energy efficient heating and cooling equipment or systems and energy efficient appliances and other technologies, practices or measures approved by the commission.

"Peak demand." The highest electrical requirement occurring during a specified period. For an electric distribution company, the term shall mean the sum of the metered consumption for all retail customers over that period.

"Quality assurance." All of the following:

(1) The auditing of buildings, equipment and processes to determine the cost-effectiveness of energy efficiency and conservation measures using nationally recognized tools and certification programs.

(2) Independent inspection of completed energy efficiency and conservation measures completed by third-party entities to evaluate the quality of the completed measure.

"Real-time price." A rate that directly reflects the different cost of energy during each hour.

"Time-of-use rate." A rate that reflects the costs of serving customers during different time periods, including off-peak and on-peak periods, but not as frequently as each hour.

"Total resource cost test." A standard test that is met if, over the effective life of each plan not to exceed 15 years, the net present value of the avoided monetary cost of supplying electricity is greater than the net present value of the monetary cost of energy efficiency conservation measures.

(Oct. 15, 2008, P.L.1592, No.129, eff. 30 days)

2008 Amendment. Act 129 added section 2806.1. See the preamble to Act 129 of 2008 in the appendix to this title for special provisions relating to legislative findings and declarations.

Cross References. Section 2806.1 is referred to in section 1330.