HB 1824-1_ Filed 03/29/2007, 12:00

COMMITTEE REPORT




MADAM PRESIDENT:

    The Senate Committee on Utilities and Regulatory Affairs, to which was referred House Bill No. 1824, has had the same under consideration and begs leave to report the same back to the Senate with the recommendation that said bill be AMENDED as follows:

SOURCE: Page 1, line 1; (07)AM182408.1. -->     Page 1, between the enacting clause and line 1, begin a new paragraph and insert:
SOURCE: IC 8-1-2-6.1; (07)AM182408.1. -->     "SECTION 1. IC 8-1-2-6.1 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE UPON PASSAGE]: Sec. 6.1. (a) As used in this section, "clean coal technology" means a technology (including precombustion treatment of coal):
        (1) that is used at a new or existing electric or steam generating facility and directly or indirectly reduces or avoids airborne emissions of sulfur or nitrogen based pollutants that are:
            (A)
associated with the combustion or use of coal; and
             (B) regulated, or reasonably anticipated by the commission to be regulated, by:
                (i) the federal government;
                (ii) the state;
                (iii) a political subdivision of the state; or
                (iv) any agency of a unit of government described in items (i) through (iii); and

        (2) that either:
            (A) is not in general commercial use at the same or greater scale in new or existing facilities in the United States as of

January 1, 1989; or
            (B) has been selected by the United States Department of Energy for funding under its Innovative Clean Coal Technology program and is finally approved for such funding on or after January 1, 1989.
    (b) As used in this section, "Indiana coal" means coal from a mine whose coal deposits are located in the ground wholly or partially in Indiana regardless of the location of the mine's tipple.
    (c) Except as provided in subsection (d), the commission shall allow a utility to recover as operating expenses those expenses associated with:
        (1) research and development designed to increase use of Indiana coal; and
        (2) preconstruction costs (including design and engineering costs) associated with employing clean coal technology at a new or existing coal burning electric or steam generating facility if the commission finds that the facility:
            (A) utilizes and will continue to utilize (as its primary fuel source) Indiana coal; or
            (B) is justified, because of economic considerations or governmental requirements, in utilizing nonIndiana coal;
        after the technology is in place.
    (d) The commission may only allow a utility to recover preconstruction costs as operating expenses on a particular project if the commission awarded a certificate under IC 8-1-8.7 for that project.
    (e) The commission shall establish guidelines for determining recoverable expenses.

SOURCE: IC 8-1-2-6.6; (07)AM182408.2. -->     SECTION 2. IC 8-1-2-6.6 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE UPON PASSAGE]: Sec. 6.6. (a) As used in this section:
    "Clean coal technology" means a technology (including precombustion treatment of coal):
        (1) that is used at a new or existing electric or steam generating facility and directly or indirectly reduces or avoids airborne emissions of sulfur or nitrogen based pollutants that are:
            (A)
associated with the combustion or use of coal; and
            (B) regulated, or reasonably anticipated by the commission to be regulated, by:
                (i) the federal government;
                (ii) the state;
                (iii) a political subdivision of the state; or
                (iv) any agency of a unit of government described in

items (i) through (iii); and
        (2) that either:
            (A) is not in general commercial use at the same or greater scale in new or existing facilities in the United States as of January 1, 1989; or
            (B) has been selected by the United States Department of Energy for funding under its Innovative Clean Coal Technology program and is finally approved for such funding on or after January 1, 1989.
    "Indiana coal" means coal from a mine whose coal deposits are located in the ground wholly or partially in Indiana regardless of the location of the mine's tipple.
    "Qualified pollution control property" means an air pollution control device on a coal burning electric or steam generating facility or any equipment that constitutes clean coal technology that has been approved for use by the commission, that meets applicable state or federal requirements, and that is designed to accommodate the burning of coal from the geological formation known as the Illinois Basin.
    "Utility" refers to any electric or steam generating utility allowed by law to earn a return on its investment.
    (b) Upon the request of a utility that began construction after October 1, 1985, and before March 31, 2002, of qualified pollution control property that is to be used and useful for the public convenience, the commission shall for ratemaking purposes add to the value of that utility's property the value of the qualified pollution control property under construction, but only if at the time of the application and thereafter:
        (1) the facility burns only Indiana coal as its primary fuel source once the air pollution control device is fully operational; or
        (2) the utility can prove to the commission that the utility is justified because of economic considerations or governmental requirements in utilizing some nonIndiana coal.
    (c) The commission shall adopt rules under IC 4-22-2 to implement this section.

SOURCE: IC 8-1-2-6.7; (07)AM182408.3. -->     SECTION 3. IC 8-1-2-6.7 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE UPON PASSAGE]: Sec. 6.7. (a) As used in this section, "clean coal technology" means a technology (including precombustion treatment of coal):
        (1) that is used in a new or existing electric or steam generating facility and directly or indirectly reduces or avoids airborne emissions of sulfur or nitrogen based pollutants that are:
            (A)
associated with the combustion or use of coal; and
             (B) regulated, or reasonably anticipated by the commission to be regulated, by:
                (i) the federal government;
                (ii) the state;
                (iii) a political subdivision of the state; or
                (iv) any agency of a unit of government described in items (i) through (iii); and

        (2) that either:
            (A) is not in general commercial use at the same or greater scale in new or existing facilities in the United States as of January 1, 1989; or
            (B) has been selected by the United States Department of Energy for funding under its Innovative Clean Coal Technology program and is finally approved for such funding on or after January 1, 1989.
    (b) The commission shall allow a public or municipally owned electric or steam utility that incorporates clean coal technology to depreciate that technology over a period of not less than ten (10) years or the useful economic life of the technology, whichever is less and not more than twenty (20) years if it finds that the facility where the clean coal technology is employed:
        (1) utilizes and will continue to utilize (as its primary fuel source) Indiana coal; or
        (2) is justified, because of economic considerations or governmental requirements, in utilizing nonIndiana coal;
after the technology is in place.
SOURCE: IC 8-1-2-6.8; (07)AM182408.4. -->     SECTION 4. IC 8-1-2-6.8 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE UPON PASSAGE]: Sec. 6.8. (a) This section applies to a utility that begins construction of qualified pollution control property after March 31, 2002.
    (b) As used in this section, "clean coal technology" means a technology (including precombustion treatment of coal):
        (1) that is used in a new or existing energy or steam generating facility and directly or indirectly reduces or avoids airborne emissions of sulfur, mercury, or nitrogen oxides or other regulated air emissions that are:
            (A)
associated with the combustion or use of coal; and
             (B) regulated, or reasonably anticipated by the commission to be regulated, by:
                (i) the federal government;
                (ii) the state;
                (iii) a political subdivision of the state; or
                (iv) any agency of a unit of government described in items (i) through (iii); and

        (2) that either:
            (A) was not in general commercial use at the same or greater scale in new or existing facilities in the United States at the time of enactment of the federal Clean Air Act Amendments of 1990 (P.L.101-549); or
            (B) has been selected by the United States Department of Energy for funding under its Innovative Clean Coal Technology program and is finally approved for such funding on or after the date of enactment of the federal Clean Air Act Amendments of 1990 (P.L.101-549).
    (c) As used in this section, "qualified pollution control property" means an air pollution control device on a coal burning energy or steam generating facility or any equipment that constitutes clean coal technology that has been approved for use by the commission and that meets applicable state or federal requirements.
    (d) As used in this section, "utility" refers to any energy or steam generating utility allowed by law to earn a return on its investment.
    (e) Upon the request of a utility that begins construction after March 31, 2002, of qualified pollution control property that is to be used and useful for the public convenience, the commission shall for ratemaking purposes add to the value of that utility's property the value of the qualified pollution control property under construction.
    (f) The commission shall adopt rules under IC 4-22-2 to implement this section.
SOURCE: IC 8-1-8.7-1; (07)AM182408.5. -->     SECTION 5. IC 8-1-8.7-1 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE UPON PASSAGE]: Sec. 1. As used in this chapter, "clean coal technology" means a technology (including precombustion treatment of coal):
        (1) that is used in a new or existing electric or steam generating facility and directly or indirectly reduces or avoids airborne emissions of sulfur or nitrogen based pollutants that are:
            (A)
associated with the combustion or use of coal; and
             (B) regulated, or reasonably anticipated by the commission to be regulated, by:
                (i) the federal government;
                (ii) the state;
                (iii) a political subdivision of the state; or
                (iv) any agency of a unit of government described in items (i) through (iii); and

        (2) that either:
            (A) is not in general commercial use at the same or greater scale in new or existing facilities in the United States as of January 1, 1989; or
            (B) has been selected by the United States Department of Energy for funding under its Innovative Clean Coal Technology program and is finally approved for such funding on or after January 1, 1989.
SOURCE: IC 8-1-8.7-3; (07)AM182408.6. -->     SECTION 6. IC 8-1-8.7-3 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE UPON PASSAGE]: Sec. 3. (a) Except as provided in subsection (c), a public utility may not use clean coal technology at a new or existing electric or steam generating facility without first applying for and obtaining from the commission a certificate that states that public convenience and necessity will be served by the use of clean coal technology.
    (b) The commission shall issue a certificate of public convenience and necessity under subsection (a) if the commission finds that a clean coal technology project offers substantial potential of reducing sulfur or nitrogen based pollutants described in section 1(1) of this chapter in a more efficient manner than conventional technologies in general use as of January 1, 1989. For purposes of this chapter, a project that the United States Department of Energy has selected for funding under its Innovative Clean Coal Technology program and is finally approved for funding after December 31, 1988, is not considered a conventional technology in general use as of January 1, 1989. When determining whether to grant a certificate under this section, the commission shall examine the following factors:
        (1) The costs for constructing, implementing, and using clean coal technology compared to the costs for conventional emission reduction facilities.
        (2) Whether a clean coal technology project will also extend the useful life of an existing electric or steam generating facility and the value of that extension.
        (3) The potential reduction of sulfur and nitrogen based pollutants described in section 1(1) of this chapter that can be achieved by the proposed clean coal technology system.
        (4) The reduction of sulfur nitrogen based pollutants described in section 1(1) of this chapter that can be achieved by conventional pollution control equipment.
        (5) Federal sulfur and nitrogen based pollutant emission standards.
        (6) The likelihood of success of the proposed project.
        (7) The cost and feasibility of the retirement of an existing electric

or steam generating facility.
        (8) The dispatching priority for the facility utilizing clean coal technology, considering direct fuel costs, revenues and expenses of the utility, and environmental factors associated with byproducts resulting from the utilization of the clean coal technology.
        (9) Any other factors the commission considers relevant, including whether the construction, implementation, and use of clean coal technology is in the public's interest.
    (c) A public utility is not required to obtain a certificate under this chapter for a clean coal technology project that constitutes a research and development project that may be expensed under IC 8-1-2-6.1.

SOURCE: IC 8-1-8.8-3; (07)AM182408.7. -->     SECTION 7. IC 8-1-8.8-3 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE UPON PASSAGE]: Sec. 3. As used in this chapter, "clean coal technology" means a technology (including precombustion treatment of coal):
        (1) that is used in a new or existing energy or steam generating facility and directly or indirectly reduces airborne emissions of sulfur, mercury, or nitrogen oxides or other regulated air emissions that are:
            (A)
associated with the combustion or use of coal; and
             (B) regulated, or reasonably anticipated by the commission to be regulated, by:
                (i) the federal government;
                (ii) the state;
                (iii) a political subdivision of the state; or
                (iv) any agency of a unit of government described in items (i) through (iii); and

        (2) that either:
            (A) was not in general commercial use at the same or greater scale in new or existing facilities in the United States at the time of enactment of the federal Clean Air Act Amendments of 1990 (P.L.101-549); or
            (B) has been selected by the United States Department of Energy for funding under its Innovative Clean Coal Technology program and is finally approved for such funding on or after the date of enactment of the federal Clean Air Act Amendments of 1990 (P.L.101-549).
SOURCE: IC 8-1-8.8-6.3; (07)AM182408.8. -->     SECTION 8. IC 8-1-8.8-6.3 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE UPON PASSAGE]: Sec. 6.3. (a) As used in this chapter, "existing electric or steam generating facility" refers to a facility in Indiana,

other than a new energy generating facility, that, regardless of its fuel source, is used to generate electricity or steam.
    (b) The term does not include a facility that generates electricity or steam from the incineration, burning, or heating of any:
        (1) general household;
        (2) institutional;
        (3) commercial;
        (4) industrial lunchroom;
        (5) office; or
        (6) landscape;
waste.

SOURCE: IC 8-1-8.8-11.5; (07)AM182408.9. -->     SECTION 9. IC 8-1-8.8-11.5 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE UPON PASSAGE]: Sec. 11.5. (a) As used in this section, "regulated air emissions" means air emissions from an electric or steam generating facility that are regulated, or reasonably anticipated by the commission to be regulated, by:
        (1) the federal government;
        (2) the state;
        (3) a political subdivision of the state; or
        (4) any agency of a unit of government described in subdivisions (1) through (3).
    (b) As used in this section, "regulated air emissions project" means a project designed to reduce regulated air emissions from an existing electric or steam generating facility. The term includes projects that provide offset programs, such as agricultural and forestry activities, that reduce the level of greenhouse gases in the atmosphere.
    (c) An energy utility (as defined in IC 8-1-2.5-2) may petition the commission for approval of the construction, installation, and operation of a regulated air emissions project. If the commission finds, after notice and hearing, the proposed regulated air emissions project to be reasonable and necessary, the commission shall approve the project and provide the following incentives:
        (1) The timely recovery of costs associated with the regulated air emissions project, including capital, operation, maintenance, depreciation, tax, and financing costs incurred during the construction and operation of the project.
        (2) The recovery of costs associated with:
            (A) the purchase of emissions allowances; or
            (B) the payment of emission taxes;
        arising from compliance with air emissions regulations.
    (d) In addition to the incentives described in subsection (c), the commission may provide any other financial incentives the commission considers appropriate.

SOURCE: IC 8-1-8.9; (07)AM182408.10. -->     SECTION 10. IC 8-1-8.9 IS ADDED TO THE INDIANA CODE AS A NEW CHAPTER TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2007]:
     Chapter 8.9. Conservation and Load Management Programs for Electric Utilities
    Sec. 1. (a) The general assembly makes the following findings:
        (1) Growth of Indiana's population and economic base has created a need for additional sources of reliable electric energy in Indiana.
        (2) In addition to the construction of new energy generating facilities, the development and implementation of cost effective conservation and load management programs is needed if Indiana is to continue to provide reliable electric utility service at reasonable prices.
        (3) Economic barriers exist to the increased development and implementation of conservation and load management programs by electric utilities.
        (4) It is in the public interest for the state to encourage the increased development and implementation of cost effective conservation and load management programs by:
            (A) removing economic barriers to the development and implementation of conservation and load management programs; and
            (B) providing financial incentives to electric utilities to develop and implement conservation and load management programs.
    (b) The purpose of this chapter is to:
        (1) enhance the competitiveness of Indiana's economy; and
        (2) complement the state's efforts to encourage the construction of new energy generating facilities;
through the promotion and increased use of cost effective conservation and load management programs.
    Sec. 2. As used in this chapter, "conservation and load management program" means a program that:
        (1) is sponsored by an electric utility;
        (2) is designed to:
            (A) reduce the amount of electricity consumed by the electric utility's customers; or
            (B) otherwise influence customers' timing or use of

electricity to reduce the demand placed on the electric utility's distribution system; and
        (3) employs any of the following to achieve the reduction or change in customers' electricity use described in subdivision (2):
            (A) End use devices or other equipment.
            (B) Special rates or rate structures.
            (C) Customer incentives.
            (D) Customer education initiatives.
            (E) Other technologies or services.
    Sec. 3. (a) As used in this chapter, "conservation and load management costs" means the capital, operating, and maintenance costs incurred by an electric utility in developing and implementing a conservation and load management program.
    (b) The term includes the following costs associated with an electric utility's conservation and load management program:
        (1) Research and development costs.
        (2) Administrative costs.
        (3) Labor costs, including costs for services of contractors and subcontractors.
        (4) Equipment and depreciation costs.
        (5) Tax costs.
        (6) Financing costs.
        (7) Financial incentives paid to participating customers.
        (8) Marketing and advertising costs.
        (9) Monitoring and evaluation costs.
        (10) Financial incentives offered by the electric utility for:
            (A) investment in; or
            (B) performance associated with;
        its conservation and load management program.
    Sec. 4. (a) As used in this chapter, "electric utility" means a utility:
        (1) that generates or distributes electricity; and
        (2) whose rates and charges are regulated by the commission.
    (b) The term includes the following:
        (1) A rural electric membership corporation organized under IC 8-1-13.
        (2) A corporation organized under IC 23-17 that is an electric cooperative and that has at least one (1) member that is a corporation organized under IC 8-1-13.
    Sec. 5. As used in this chapter, "lost revenues" refers to revenues lost by an electric utility as a result of not generating

electricity because of the implementation of a conservation and load management program. In determining the revenues lost as a result of a conservation and load management program, an electric utility shall subtract the value of any reduced operating or maintenance costs resulting from the program, including fuel cost savings.
    Sec. 6. As used in this chapter, "performance based shared savings incentive" means an incentive mechanism designed to allocate the net system benefits of an electric utility's conservation and load management programs between:
        (1) the electric utility's shareholders; and
        (2) the electric utility's retail customers.
    Sec. 7. (a) The commission shall encourage electric utilities to implement conservation and load management programs by creating the following incentives for the implementation of conservation and load management programs, if the programs are found by the commission to be reasonable and necessary:
        (1) The timely recovery of conservation and load management costs over a reasonable amortization period, as determined by the commission.
        (2) The timely recovery of lost revenues, or the authorization of other mechanisms to remove lost revenues as a barrier to the implementation of conservation and load management programs.
        (3) The authorization of a return to the electric utility in the form of:
            (A) a timely return equal to the electric utility's weighted cost of capital (as determined under 170 IAC 4-6-14) with respect to the electric utility's total unrecovered capital investment in conservation and load management programs; or
            (B) a performance based shared savings incentive.
        (4) Other financial incentives the commission considers appropriate.
    (b) An electric utility that seeks one (1) or more of the incentives described in subsection (a) must file, on a form approved by the commission, an application with the commission for approval of the incentives sought.
    (c) The commission shall, after notice and hearing, issue a determination on the eligibility of the electric utility's conservation and load management program for the financial incentives described in subsection (a) not later than one hundred twenty (120)

days after the date of the electric utility's application under subsection (b).".

SOURCE: Page 1, line 10 -->     Page 1, line 10, after "counties," insert " each of".
    Renumber all SECTIONS consecutively.
    (Reference is to HB 1824 as reprinted February 24, 2007.)

and when so amended that said bill do pass .

Committee Vote: Yeas 9, Nays 0.

____________________________________

Senator Hershman, Chairperson


AM 182413/DI 101    2007