Massachusetts General Laws
Chapter 164 - Manufacture and Sale of Gas and Electricity
Section 94g - Proposed Performance Program; Unit Heat Rate Audit; Public Hearing; Periodic Report; Deductions; Fuel Charge; Base Rates; Rules and Regulations

Section 94G. (a) At least once a year, on dates set by the department, each electric company having a fuel charge approved by the department shall file with the department and simultaneously with the attorney general a proposed performance program relating to fuel procurement and use. Such program shall describe for the time period or periods designated reasonably attainable targets which shall include a thermal efficiency target for the performance of the company, consistent with reasonable regional power exchange requirements; provided, however, that such requirements do not impede an individual utility within the regional power exchange system from producing and distributing electric power at optimum efficiency and economy in a manner not detrimental to the public interest. Such program also shall provide for the efficient and cost-effective operation of individual generating units by an electric utility company in meeting the minimum needs of each unit of said company to maintain sufficient reserves of power for purposes of reliability and efficiency. Such program also shall describe the historic data, industry standards or reports, simulation models or other information and techniques upon which projections of the company's performance are based and shall include, as goals for individual and system plant performance, availability, equivalent availability, capacity factor, forced outage rate, heat rate on a unit by unit basis and such other factors or operating characteristics required by the department. Any such program may specify a value or a range of values for the operating characteristic in question and shall reflect operating conditions when overall performance is optimized.
Each company shall provide with the above filing the results of a unit by unit heat rate audit supervised and certified by the department or such independent auditing or engineering firm designated by the department and a statement prescribed under the pains and penalties of perjury that said company has used all reasonable means to procure the lowest possible costs for all fuel and purchased power. In addition, the department shall require each company to file as part of any review or investigation pursuant to this section, all fuel contracts, invoices and agreements with fuel suppliers, and such other information and reports as the department deems necessary. The department also shall require each company to file any reports of tests, studies or audits conducted or compiled for filing with or for review by any regional power exchange, research association or federal agency to which said company is affiliated, associated, or is required to report to, as the case may be. The department shall review, and may investigate upon its own motion or upon motion of the attorney general, any agreements, practices, and procedures which exist between the electric company and any of its suppliers of fuel or purchased power to determine whether such agreement, practices and procedures are in the best interest of the retail customers of such company.
Upon receipt of such filing, the department shall, after public notice, hold a public hearing to review the proposed program. In its proceedings to evaluate a performance program, the department may consider studies, analyses, audits and other tests relative to the program or any part thereof, any of which the department may perform itself or require the company to provide. The department shall within ninety days of such filing approve such program for each company as proposed or as modified by order of the department after such hearing. In no event shall such program allow for the recovery of zero power costs as defined herein.
Each such electric company shall file with the department, with the frequency and in the standardized form established by the department, data and reports on the actual unit by unit and system performance of the company with respect to each target set forth in the approved performance program. If any such periodic report indicates that actual system performance varied from the approved targets, upon order by the department or petition of any party to the proceeding the company shall, at the next following fuel charge hearing under subsection (b), present evidence explaining such variance. In the course of such hearing, the department shall investigate such variance, may otherwise inquire into an issue related to the procurement or use of fuel or purchased power included in the fuel charge and properly raised by any party, and, in either event, shall make a finding whether the company failed to make all reasonable or prudent efforts consistent with accepted management practices, safety and reliability of electric service and reasonable regional power exchange requirements to achieve the lowest possible overall costs to the customers of the company for the procurement and use of fuel and purchased power included in the fuel charge. If the department finds that the company has been unreasonable or imprudent in such performance, in light of the facts which were known or should reasonably have been known by the company at the time of the actions in question, it shall deduct from the fuel charge proposed for the next quarter or such other period as it deems proper the amount of those fuel costs determined by the department to be directly attributable to the unreasonable or imprudent performance. The department may continue the hearing into any such performance issue for a period of up to ninety days after its commencement, during which period the department shall render its decision; provided, however, that any such continuance shall not delay the approval by the department of any proposed fuel charges. At such time or times, the department shall specify, the portion, if any, of the fuel charges which is conditionally approved pending resolution of the performance issue. If the hearing results in a finding of unreasonable or imprudent performance, the department shall deduct from the fuel charge for the next following quarter the imprudently incurred fuel costs with interest calculated at such rate and for such period as the department deems appropriate to make the customers whole.
Any deductions ordered by the department pursuant to this subsection shall be subject to judicial review and the electric company shall be made whole with interest if the department's finding of imprudence is overruled. The department may allow for the deduction of imprudently incurred fuel costs from the fuel charge over a fixed period of time, as determined to be appropriate by the department, whenever, in its judgment, the full deduction, as provided in the preceding paragraph, of such costs would jeopardize the financial integrity of the company or otherwise be contrary to the public interest.
All materials required to be filed with the department pursuant to this section shall be in such standardized form and with such frequency as established by the department.
(b) The department may approve an itemized fuel charge in rates filed by electric companies to reflect changes in prudently incurred reasonable costs of fuels and power purchased by such companies. Such fuel charge may be based on reasonable estimates of the total costs of fuel to be used in generating or supplying electricity to customers and power purchased for resale to customers, as appropriate in accordance with the company's fuel charge rate schedule, during the quarter in which the charge shall apply. The burden of proof shall be upon the utility company to demonstrate the reasonableness of energy expenses sought to be recovered through the fuel charge. The fuel charge shall be billed to all customers of the company at uniform per kilowatt-hour rates and the total amount of such costs to a customer shall be itemized on the customer's bill. Such rates may be time-differentiated but shall not otherwise differ among classes of customers or by the amount of a customer's usage.
Electric companies shall file quarterly under the pains and penalties of perjury, proposed fuel charges with the department which shall be filed simultaneously with the attorney general. No such fuel charge shall be billed to customers without the specific approval of the department after a public hearing. Such hearing shall be held within fourteen days after the filing by the electric company of a proposed fuel charge. Upon receipt of such a filing, the department shall forthwith cause notice of the time, place and subject matter of the public hearing to be published once at least seven days prior to such hearing in a newspaper of general circulation in the area served by the filing company. At such hearing the department shall consider and investigate the filing of the company with all related materials and reports of actual fuel and purchased power costs and fuel charge revenues for the three months preceding the month of the filing which shall be subscribed and sworn to by the company under the pains and penalties of perjury. The department shall render its decision within thirty days following the commencement of such hearing, except as provided under subsection ninety-four G (a). The approved fuel charge shall reflect a reconciliation for any differences between the fuel charge revenues and actual fuel and purchased power costs, less zero power costs as defined herein, for the three months preceding the month of the filing as well as estimated differences for the month of the filing and all other adjustments determined by the department pursuant to this subsection and subsection (a).
In the event of overcollection of fuel charges by a utility for the preceding three month period, the department shall determine what part, if any, of such overcollection is attributable to the overestimation of unit fuel prices by the utility and shall order that interest on that part, calculated at a rate to be determined by the department, be returned to the ratepayers; provided, however, that such rate of interest shall be applied to that part of the overcollection only in the event that the estimates of unit fuel prices for the preceding three months exceeded the actual unit fuel price by more than five per cent. Any such overcollection and interest payments shall be returned to the ratepayers in the aforementioned reconciliation process at a fuel charge hearing held quarterly pursuant to the provisions of this section. In no case shall such interest payments be included in any fuel charge or in the normal operating costs of each such electric utility company.
Electric companies filing fuel charges shall submit monthly data in a standardized format determined by the department, of fuel costs, purchased power charges with the accompanying service classification for each type of power received or dispatched, zero power costs, kilowatt-hour usages, revenues derived from fuel charges and any other such information as the bureau may require for monitoring such fuel and purchased power costs. If, after review of said data, the bureau determines that a utility company is operating an individual generating unit in a manner inconsistent with its most recently approved annual performance program, or otherwise does not provide its consumers with energy in an efficient and cost-effective manner, the bureau shall notify the department of its findings. Upon receipt of such notification, the department shall order the company to present evidence, at the next following fuel charge hearing held pursuant to this section, explaining such variance or submit plans and specifications to repair or improve said unit. In the course of such hearings, the department shall investigate such variance and if the department finds that the company has been unreasonable or imprudent in such performance, in light of the facts which were known or should reasonably have been known by the company at the time of the actions in question, it shall deduct from the fuel charge proposed for the next quarter the amount of those fuel costs determined by the department to be directly attributable to the company's defective operation of such generating unit above its minimum needs to maintain sufficient reserves of power for purposes of reliability and efficiency. The department shall also take additional steps as it deems necessary to ensure compliance with this subsection. Such monthly data, all electric company fuel and power supply contracts and agreements, fuel invoices and all reports required pursuant to subsection (a) shall be included with, or submitted prior to, the company's fuel charge filing and shall become part of the department's records.
Upon request of an electric company, the department, after public hearing, may approve an interim adjustment in the fuel charge then in effect for such company upon a finding that actual fuel costs exceed the approved quarterly estimates by more than ten per cent, and upon a finding that the company has demonstrated by clear and convincing evidence that all reasonably possible efforts were made to meet the standards established pursuant to subsection (a). Whenever an electric utility company determines that collections from the approved quarterly fuel charge will exceed the actual fuel costs of an electric company by more than ten per cent, said electric utility company shall forthwith notify the department and the department may, after public hearing, approve an interim adjustment in the fuel charge then in effect for such company.
(c) The department shall from time to time review the participation of an electric company in a regional power exchange and report its findings to the clerk of the senate and the clerk of the house, along with its recommendations. The department may petition the appropriate federal regulatory authority to implement its findings and recommendations.
(d) Upon request filed by an electric company, the department may allow interim adjustments to the base rates of such company to reflect extraordinary increases in operating, maintenance or capital costs for fuel procurement or the improvement of efficiency in operating generation facilities whenever the department finds by clear and convincing evidence after a public hearing that such increased expenditures were neither incurred as a result of company imprudence nor incurred in the ordinary course of business and would result in a net reduction in the cost of electric service by virtue of a reduction in fuel or purchased power costs in excess of the costs of such increased expenditures.
Nothing in this subsection shall be interpreted to authorize such interim adjustments to the base rates of any electric company for operation and maintenance expenses incurred as a result of a forced or unscheduled outage. Nothing herein shall be interpreted to authorize such interim adjustments for the immediate recovery by a utility company of the costs of construction work in progress.
(e) The department may promulgate such rules and regulations as it deems appropriate to carry out the provisions of this section and may, after public hearing, incorporate the use of any factors, in addition to and not inconsistent with factors set forth in this section, in its considerations under any subsection hereof.
(f) For the purpose of this section, the following terms shall have the following meanings:-
"Line losses", the unavoidable losses of electricity that occur during the transmission and distribution of electric power.
"Retail customer", any purchaser of electricity regulated by the department.
"Zero power costs", fuel costs attributable to a utility company's generation of electricity which was neither purchased nor consumed by a retail customer of said company and is in excess of minimum needs to maintain sufficient reserves of power for purposes of reliability and efficiency, as determined by the fuel charge monitoring bureau, and to maintain the most economical levels of operation, consistent with reasonable regional power exchange requirements; provided, however, that such electricity shall not include line losses as defined herein.
(g) The department is authorized to exempt any electric or generation company or supplier from any or all of the provisions of this section upon a determination by the department, after notice and a hearing, that an alternative process or incentive mechanism is in the public interest.

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