HB 328: "An Act relating to surcharges for strategic investments by public utilities."
00 HOUSE BILL NO. 328 01 "An Act relating to surcharges for strategic investments by public utilities." 02 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 03 * Section 1. AS 42.05 is amended by adding a new section to read: 04 Sec. 42.05.387. Strategic investment surcharge. (a) A public utility may 05 request that the commission approve a strategic investment surcharge to recover costs 06 incurred by the utility for a strategic investment that is not otherwise recoverable 07 through existing commission-approved rates. 08 (b) The commission shall adopt regulations relating to strategic investment 09 surcharges. The regulations must provide a process to apply for approval of a strategic 10 investment surcharge. A public utility may recover through a strategic investment 11 surcharge 12 (1) a return on construction work in progress and operating expenses 13 accrued during construction; 14 (2) a return on the rate base and operating expenses when the 15 investment is complete and in service; and
01 (3) expenses associated with the construction of a strategic investment 02 that will not be capitalized. 03 (c) The regulations must require that a public utility, when calculating the 04 amount of a strategic investment surcharge, 05 (1) for construction work in progress, including projections and actual 06 costs, use year-end information not subject to averaging beginning-of-year or end-of- 07 year balances; 08 (2) calculate the cost of capital using the cost of long-term debt 09 approved or accepted in the public utility's most recent general rate case or formula 10 rate annual revision tariff filing; 11 (3) calculate the cost of capital using the return on equity approved or 12 accepted in the public utility's most recent general rate case; 13 (4) during construction of a strategic investment, include only long- 14 term debt and equity in the capital structure; and 15 (5) for a strategic investment that is complete and in service, use the 16 capital structure and overall rate of return that was approved or accepted in the public 17 utility's most recent general rate case or formula rate annual revision tariff filing. 18 (d) A public utility shall notify the commission of the utility's intent to 19 implement a strategic investment surcharge. The notice must comply with regulations 20 adopted by the commission. 21 (e) A public utility may apply an allowance for funds used during construction 22 to specific qualifying strategic investment costs until the surcharge that includes those 23 specific costs is implemented. A public utility may not apply an allowance for funds 24 used during construction to costs that are included in the strategic investment 25 surcharge. 26 (f) A public utility shall file annual updates with the commission, as required 27 by regulations adopted by the commission. An annual update must include costs for 28 construction work in progress on which the public utility will earn a return, amounts 29 that would otherwise be recorded by the utility as allowance for funds used during 30 construction, and any expenses associated with the construction work in progress that 31 will not be capitalized.
01 (g) When construction of a strategic investment is complete and the 02 investment is in service, the public utility may earn a fair and reasonable return on 03 capitalized costs and ongoing expenses associated with the strategic investment 04 through the strategic investment surcharge until the utility's next general rate case. In 05 the public utility's next general rate case, the utility shall move capitalized amounts 06 and associated expenses for a completed strategic investment from the surcharge into 07 the utility's base rates. The public utility may continue to use the strategic investment 08 surcharge to recover costs and expenses associated with a strategic investment that is 09 not complete and in service. 10 (h) The commission shall issue a final order on a request for approval of a 11 strategic investment surcharge not later than 90 days after receiving a filing from a 12 public utility that meets the requirements of this section and regulations adopted by the 13 commission. 14 (i) If the commission determines that costs recovered in a strategic investment 15 surcharge were not prudently incurred by a public utility, the commission shall order 16 the utility to refund those costs through customer bill credits. 17 (j) In this section, 18 (1) "general rate case" means a proceeding before the commission, 19 initiated by a public utility in accordance with regulations adopted by the commission, 20 in which the commission reviews the utility's costs and revenues to establish the 21 utility's base rates and adjustment clause methodology; 22 (2) "strategic investment" means an infrastructure investment, by 23 either construction or purchase, and associated operating expenses that 24 (A) support growth and economic development in the state; and 25 (B) maintain and improve the provision of reliable utility 26 service to new and existing customers in the state.