§ 218d — Alternative regulation of electric and natural gas companies

(a) Notwithstanding section 218 and sections 225-227 of this title, upon petition of an electric or natural gas company, upon request of the Department of Public Service, or on its own initiative, the Public Utility Commission may, after opportunity for hearing, approve alternative forms of regulation for an electric or natural gas company; provided, however, in the case of a municipal plant or department formed under local charter or chapter 79 of this title or an electric cooperative formed under chapter 81 of this title, any alternative forms of regulation approved by the Commission shall also be approved by a majority of the voters of a municipality or cooperative voting upon the question at a duly warned annual or special meeting held for that purpose. Before doing so, the Commission shall find that the proposed form of alternative regulation will:
(1) establish a system of regulation in which such companies have clear incentives to provide least cost energy service to their customers;
(2) provide just and reasonable rates for service to all classes of customers;
(3) deliver safe and reliable service;
(4) offer incentives for innovations and improved performance that advance state energy policy such as increasing reliance on Vermont-based renewable energy and decreasing the extent to which the financial success of distribution utilities between rate cases is linked to increased sales to end use customers and may be threatened by decreases in those sales;
(5) promote improved quality of service, reliability, and service choices;
(6) encourage innovation in the provision of service;
(7) establish a reasonably balanced system of risks and rewards that encourages the company to operate as efficiently as possible using sound management practices; and
(8) provide a reasonable opportunity, under sound and economical management, to earn a fair rate of return, provided such opportunity must be consistent with flexible design of alternative regulation and with the inclusion of effective financial incentives in such alternatives.
(b) If savings result from alternative regulation, the savings shall be shared with ratepayers as determined by the Commission.
(c) In the case of a municipal plant or department formed under local charter or chapter 79 of this title or an electric cooperative formed under chapter 81 of this title, alternative regulation may include authority for local elected officials to set and revise rates.
(d) Alternative regulation may include such changes or additions to, waivers of, or alternatives to, traditional rate-making procedures, standards, and mechanisms, including substantive changes to rate base-rate of return rate setting, as the Commission finds will promote the public good and will support the required findings in subsection (a) of this section. In addition, the Commission shall not allow a company to set aside funds collected from ratepayers for the purpose of supporting a future expansion or upgrade of its transmission or distribution network except after notice and opportunity for hearing and only if all of the following apply:
(1) There is a cost estimate for the expansion or upgrade that the company demonstrates is consistent with the principles of least-cost integrated planning as defined in section 218c of this title.
(2) The amount of such funds does not exceed 20 percent of the estimated cost of the expansion or upgrade.
(3) Interest earned on the funds is credited to the ratepayers.
(4) The funds are not disbursed to the company until after expansion or upgrade is in service.
(5) The funds are not used to defray any portion of the costs of expansion or upgrade in excess of the cost estimate described in subdivision (1) of this subsection.
(e) The Public Utility Commission may establish, by rule or order, requirements governing the filing of a petition to approve an alternative regulation plan.
(f) The Commission shall act on the petition within 12 months of the filing of a petition that complies with the Commission’s rules.
(g) An alternative regulation plan shall take effect not sooner than 30 days following its approval by the Commission.
(h) The Commission may establish, by rule or order, and may amend from time to time standards and procedures by which the effectiveness of the alternative form of regulation can be determined.
(i) The Commission, on its own motion or the motion of the Department of Public Service or a company operating under an alternative regulation plan pursuant to this section, may investigate any alternative regulation plan that is in effect. Following notice and an opportunity for hearing, the Commission may terminate or modify the alternative regulation plan upon a finding of good cause. Where the Commission revokes prior approval, the Commission shall determine whether the company’s current rates are just and reasonable, and, if not, shall establish new rates that are just and reasonable.
(j) Notwithstanding any provision of this section, a company may file for rates determined under and in accordance with sections 218, 225, 226, and 227 of this title to be effective at the time of the termination of any approved alternative regulation plan.
(k) In the case of a municipal utility, the Commission shall approve an alternative regulation plan only if the Commission finds that the plan will:
(1) Permit the municipal plant or department to fulfill all of its obligations, including its obligations to the holders of bonds issued under local charter or State law.
(2) Not violate existing covenants in outstanding municipal bonds or in contracts securing bonds issued by the Vermont Public Power Supply Authority.
(3) Not impair the municipality’s access to capital, including that in the municipal bond market. The Commission will consider the opinion of the utility’s bond counsel in making this decision.
(4) Not impair the municipal utility’s ability to participate in future bond issues by the Authority as contemplated by chapter 84 of this title. The Commission will consider the opinion of the Vermont Public Power Supply Authority in making this decision.
(l) In the case of an electric cooperative, the Commission shall approve an alternative regulation plan only if the Commission finds the plan will not violate covenants in existing mortgages or impair the cooperative’s access to capital.
(m) In the case of an investor-owned company, the Commission shall approve an alternative regulation plan, only if the Commission finds the plan will:
(1) not have an adverse impact on the electric company’s eligibility for rate-regulated accounting in accordance with generally accepted accounting standards if applicable; and
(2) reasonably preserve the availability of equity and debt capital resources to the company on favorable terms and conditions.
(n)(1) Notwithstanding subsection (a) of this section and sections 218, 225, 226, 227, and 229 of this chapter, a municipal company formed under local charter or under chapter 79 of this title and an electric cooperative formed under chapter 81 of this title shall be authorized to change its rates for service to its customers if the rate change is:
(A) applied to all customers equally;
(B) not more than three percent during any 12-month period;
(C) cumulatively not more than 10 percent from the rates last approved by the Commission; and
(D) not going to take effect more than 10 years from the last approval for a rate change from the Commission.
(2) The municipal company or electric cooperative shall provide written notice of a rate change pursuant to this subsection to its customers, the Department of Public Service, and the Commission at least 45 days prior to implementing the rate change. Included with the submission shall be a rate analysis describing the rationale for the rate change. Unless an objection to the rate change is filed by the Department of Public Service with the Commission within 45 days following this notice or the Commission orders an investigation on its own motion, the municipal company or electric cooperative may implement the rate change.
(3) If the Department does not object to the change within 30 days, five persons adversely affected by the change may apply at their own expense to the Commission by petition alleging why the change is unreasonable and unjust and asking that the Commission investigate the matter and make such orders as justice and law require.
(4) A municipal company or electric cooperative shall be eligible to change its rates pursuant to this subsection only if it has received approval for a rate change from its governing body at a duly warned meeting held for such purpose prior to filing its written notice with the Department and the Commission.
(5) The Commission shall establish, by rule or order, standards and procedures for implementing this subsection.
(o)(1) Notwithstanding subsections (a) and (n) of this section and sections 218, 225, 226, 227, and 229 of this chapter, a municipal company formed under local charter or under chapter 79 of this title and an electric cooperative formed under chapter 81 of this title shall be authorized to offer innovative rates or services to their customers as pilot programs without obtaining prior approval from the Commission if the rate or service:
(A) is designed to satisfy the requirements of subdivision 8005(a)(3) of this title or to advance the goals of the State Comprehensive Energy Plan;
(B) has a duration of 18 months or less; and
(C) shall not result in:
(i) additions of more than two percent of the municipal company’s or electric cooperative’s net assets; or
(ii) an increase in the municipal company’s or electric cooperative’s overall cost-of-service by more than two percent.
(2) The municipal company or electric cooperative shall provide written notice of an innovative rate or service to its customers, the Department of Public Service, and the Commission at least 45 days prior to offering the innovative rate or service to its customers. Included with the submission shall be the terms and conditions of service. Unless an objection to the innovative rate or service is filed with the Commission within 45 days following this notice or the Commission orders an investigation on its own motion, the municipal company or electric cooperative may commence offering the innovative rate or service to its customers.
(3) The municipal company or electric cooperative shall provide written notice to the Department of Public Service and the Commission at least 45 days prior to the end of an innovative rate or service duration period with any proposed modifications to the terms and conditions. Unless an objection to the innovative rate or service is filed with the Commission within 45 days following this notice or the Commission orders an investigation on its own motion, the municipal company or electric cooperative may continue offering the innovative rate or service to its customers. The Commission may allow for the innovative rate or service to remain in effect pending the outcome of an investigation into the notice filing.
(4) The Commission may establish, by rule or order, standards and procedures for implementing and interpreting this section. (Added 2003, No. 69, § 2, eff. June 17, 2003; amended 2005, No. 61, § 11; 2015, No. 174 (Adj. Sess.), § 15a; 2021, No. 13, § 1; 2021, No. 105 (Adj. Sess.), § 435, eff. July 1, 2022; 2023, No. 85 (Adj. Sess.), § 370, eff. July 1, 2024; 2023, No. 179 (Adj. Sess.), § 1, eff. July 1, 2024.)