Whereas, The deferred operation of this act would tend to defeat its purpose, which is to provide forthwith for the conversion of oil to coal by electric generating facilities, therefore it is hereby declared to be an emergency law, necessary for the immediate preservation of the public convenience.
Be it enacted by the Senate and House of Representatives
in General Court assembled, and by the authority of the same,
SECTION 1. Chapter 164 of the General Laws is hereby amended by striking out section 94G1/2 and inserting in place thereof the following section:-
Section 94G 1/2. An electric company or other person which distributes to retail customers all or a portion of the output of any existing oil-burning electric generating facility which is proposed to be converted from oil to coal-fired operation may file with the department an application, in such form as the department may prescribe, for an adjustment in its rates through the oil conservation adjustment described in this section; provided, however, that environmental controls for sulfur and particulates will be required to ensure that approved long-term emissions from the facility shall not significantly contribute to any condition of non-attainment of ambient air quality standards established and approved by the environmental protection agency and the department of environmental quality engineering and, provided further, that the conversion of any electric generating facility in an urban area with a population in excess of two hundred thousand people will enhance the air quality in the area by reducing sulfur dioxide emissions. Such application may be filed prior to the time the applicant incurs costs in connection with the conversion and operation of the facility.
Within thirty-five days of receipt of such application the department shall hold a public hearing to determine the oil conservation adjustment, and the manner in which said adjustment shall be recovered from all retail customers of the applicant. The department shall render a decision upon such application within one hundred and twenty days of the beginning of such hearing. Said adjustment shall not be authorized unless it is determined by the department that there is a substantial probability that the share of the cost of conversion of such facility attributable to the applicant's retail customers, together with any incremental operating expenses necessitated by the conversion will be less than or equal to the fuel cost savings to accrue to said retail customers over the remaining life of the electric generating facility.
The oil conservation adjustment shall be determined by the department in such manner that the applicant will recover the total cost of conversion within eighty-four months of the effective date of the adjustment, such conversion being hereinafter referred to as a short-term conversion, or will recover the total cost of conversion over a period more than seven years but within twelve years of the effective date of the adjustment, such conversion being hereinafter referred to as a long-term conversion. The effective date of the adjustment shall be the earlier of the date of initial conversion or, in the case of a cancellation of the conversion, the date on which the department makes the finding required by the next paragraph concerning such cancellation.
All revenues derived through said adjustment shall be applied solely to the cost of conversion of said facility. Except as provided in this section, said adjustment, once authorized by the department, shall not be disapproved, reduced, terminated, suspended or, without the consent of the applicant, otherwise modified by the department nor shall any portion thereof be applied by the department to reduce or modify the otherwise lawfully authorized rates and charges of the applicant provided, however, that in the event a conversion is cancelled, the department shall review the reasons therefor and may modify the adjustment to allow recovery only of those costs prudently incurred at the time of their incurrence or may cancel the adjustment if no costs were prudently incurred; and provided further that, in the case of a long-term conversion any application for a delayed order of compliance or any similar request with respect to environmental protections shall work as an automatic denial of any application for an oil conversion adjustment or as an automatic revocation of any adjustment authorized by this section. The department shall not recognize for purposes of establishing any rate, price or charge, pursuant to section ninety-four or section ninety-four G, costs of conversion which are recovered from said customers under said adjustment.
The applicant may assign to any person or entity, in whole or in part, the revenues to be collected under the oil conservation adjustment in connection with financing the cost of conversion. If such assignment is made, or if the applicant has filed its application in whole or in part for the benefit of any other person or entity that proposes to own and finance all or part of the assets to be added to the facility in connection with the conversion, the revenues to be collected by applicant under said adjustment shall constitute revenues of such person or entity and not revenues of the applicant. The applicant shall collect such revenues solely for the benefit of such person or entity.
In this section the following words and phrases shall have the following meanings, unless the context requires otherwise:
"Coal", coal used as a primary energy source and any other primary energy source which is derived from coal or synthetic fuels which use coal as a base.
"Cost of conversion", costs as determined by the department to be reasonable and necessary for the conversion of an oil-burning electric generating facility to the burning of coal. Such costs shall include, but not be limited to, engineering, administrative and legal costs, the cost of environmental studies, and control equipment, coal handling and storage equipment, equipment and facilities necessary to permit the combustion of coal, the cost of retro-fitting or refurbishing boilers to permit the combustion of coal, the cost of on-site and off-site facilities for handling, storing, and disposing of wastes resulting from the combustion of coal, and the cost of all other facilities reasonable and necessary to allow the conversion of an oil-burning electric generating facility to burn coal, whether such costs are incurred before or after the date of initial conversion of such facility. Such costs shall also include the reasonable costs of capital for such conversion until such costs are recovered as provided in this section. In no case shall costs of conversion include any costs incurred pursuant to an expansion of an electric generating facility's generating capacity above the generating capacity of said facility that existed prior to the oil conservation adjustment period.
"Date of initial conversion", the first day on which an existing oil-burning electric generating facility or is certified as having the capacity to do so generates electricity for continuous distribution to customers by the combustion of coal, whether or not additional facilities must be constructed or installed.
"Fuel cost saving", the differential costs between an equal amount of coal and oil calculated on the basis of British Thermal Units.
"Oil conservation adjustment", in the case of a short-term conversion, shall be an amount which is the greater of (a) two-thirds of the fuel cost savings per kilowatt hour sold accruing to retail customers on the date of initial conversion or (b) the cost of conversion of an existing oil-burning electric generation facility to coal divided by the estimated kilowatt hours to be generated for sale by the facility during the first eighty-four calendar months after the date of initial conversion; provided, however, that if the total amount of cost of conversion per kilowatt hour initially calculated by application of method (b) exceeds one hundred per cent of the fuel cost savings per kilowatt hour sold accruing to retail customers on the date of initial conversion, the eighty-four month period referred to in said method (b) shall be extended so that the total amount of cost of conversion per kilowatt hour shall be no more than one hundred per cent of such fuel cost saving per kilowatt hour; or, in the case of a long-term conversion, amounts which will provide sufficient revenues during a period not to exceed twelve years to repay or otherwise discharge all obligations incurred by or on behalf of the applicant in connection with financing arrangements that the department determines to be reasonably necessary for financing the cost of conversion. The oil conservation charge determined by the department shall permit recovery by the applicant of the cost of conversion net of such federal, state, or local taxes based on revenue and income which may be imposed upon the applicant for receipt of proceeds of the oil conservation adjustment which cannot be reasonably avoided by the applicant using due diligence. In no event shall the oil conservation adjustment include amounts attributable to non-retail customers.
Upon recovery by the applicant of its share of the cost of conversion as herein provided, the applicant shall terminate the oil conservation adjustment. Upon such termination the applicant shall demonstrate to the department that its oil conservation adjustment revenue collections are in compliance with orders issued pursuant to this section. In the event such collections are lesser or greater than the applicant's share of the cost of conversion, the department shall make such determinations and issue such orders as are necessary to result in compliance with this section.
In the event the facility or the applicant should become entitled, by reason of the conversion, to any federal or state grant, the department shall make such determinations and issue such orders as are necessary to reduce the amount of conversion costs which the applicant would otherwise recover by means of such oil conservation adjustment, or if such grant is received after termination of such adjustment make such determinations and issue such orders as are necessary to result in the applicant receiving no more than the cost of conversion after taking into account the retail customers' apportioned share of such grant.
In the case of a long-term conversion, the department shall, every six months, review the revenues collected pursuant to the oil conservation adjustment in order to determine whether the applicant is recovering the cost of conversion over the period approved by the department. In the event any overcollection of such cost of conversion has occurred, the department shall order such overcollection to be returned to the ratepayers.
In the case of a short-term conversion, the department shall, upon its own initiative or upon petition of the original applicant, but in any event at least twice each year, review the actual cost of conversion and fuel cost savings and changes in estimates thereof, and may, where necessary after notice and public hearing, modify the oil conservation adjustment to permit, if method (a) referred to in the definition of "oil conservation adjustment" in this section was initially used, recovery by the applicant of two-thirds of the recalculated fuel cost saving per kilowatt hour accruing to retail customers on the date of recalculation of the saving by the department or, if method (b) referred to in said definition was initially used, to permit recovery by the applicant of the recalculated cost of conversion over such recalculated number of months as would not result in a charge exceeding the fuel cost saving per kilowatt hour accruing to retail customers on the date of recalculation of the saving by the department. Said adjustment also may be modified to permit switching from said method (a) to method (b) or from method (b) to method (a), where necessary to either permit the applicant to recover the cost of conversion as promptly as possible, consistent with the intent of this section that no adjustment for a short-term conversion shall exceed fuel cost savings accruing to retail customers or prevent such adjustment from exceeding fuel cost savings accruing to retail customers.
Any corporation or agent for the corporation responsible for said coal conversion projects shall give priority in employment to individuals residing within the city, town or political subdivision in which said project is taking place provided that those individuals have displayed the necessary qualifications for employment.
SECTION 2. The provisions of this act are severable and if any of its provisions shall be held invalid in any circumstances, such invalidity shall not effect any other provisions or circumstances.