BILL AS PASSED BY BOTH HOUSE AND SENATE

S.138

AN ACT RELATING TO STANDARDS FOR LABELING OF ELECTRICITY AND COST MITIGATION IN CONNECTION WITH QUALIFYING FACILITIES SELLING ELECTRICITY

It is hereby enacted by the General Assembly of the State of Vermont:

Sec. 1. 30 V.S.A. § 209(f) is added to read:

(f) The public service board may prescribe, by rule or order, standards for the labeling of electricity delivered or intended for delivery to ultimate consumers as to price, terms, sources and objective environmental impacts, along with such procedures as it deems necessary for verification of information contained in such labels. The public service board may prescribe, by rule or by order, standards and criteria for the substantiation of such labeling or of any claims regarding the price, terms, sources and environmental impacts of electricity delivered or intended for delivery to ultimate consumers in Vermont, along with enforcement procedures and penalties. When establishing standards for the labeling of electricity, the board shall weigh the cost, as well as the benefits, of compliance with such standards. With respect to companies distributing electricity to ultimate consumers, the board may order disclosure and publication, not to occur more than once each year, of any labeling required pursuant to the standards established by this subsection. Standards established under this subsection may include provisions for:

(1) the form of labels;

(2) information on retail and wholesale price;

(3) terms and conditions of service;

(4) types of generation resources in a seller’s mix and percentage of power produced from each source;

(5) disclosure of the environmental effects of each energy source; and

(6) a description of other services, including, but not limited to, energy services or energy efficiency opportunities.

Sec. 2. 30 V.S.A. § 209(a)(9) is added to read:

(9) The issuance of qualified cost mitigation charge orders pertaining to facilities described in subdivision (8) of this subsection, subject to the terms and conditions of section 209a of this title.

Sec. 3. 30 V.S.A. § 209a is added to read:

§ 209a. Qualified Cost Mitigation Charge Orders

(a) Definitions. As used in this section:

(1) “Electric utility” means any entity engaged in the distribution of electricity directly to the consumers within the state of Vermont.

(2) “Issuer” means any entity approved in a qualified cost mitigation charge order to issue mitigation bonds; “issuer” may include, but is not limited to, the Vermont qualifying facility contract mitigation authority or the Vermont Public Power Supply Authority.

(3) “Mitigation bond” means a note, bond, debenture or any other evidence of indebtedness or certificate evidencing an interest in any evidence of indebtedness authorized by a qualified cost mitigation charge order.

(4) “Mitigation charge” means any volumetric charge imposed by the board pursuant to a qualified cost mitigation charge order.

(5) “Participating qualifying facility” means any facility described in subdivision 209(a)(8) of this title.

(6) “Power purchase arrangement” means a contract for sale of electricity between a participating qualifying facility with a capacity of 900 kilowatts or greater and a Rule 4.100 purchasing agent, approved by the board on or before January 1, 1995.

(7) “Qualified cost mitigation charge order” means an order of the board that complies with the requirements of this section.

(8) “Rule 4.100” means public service board Rule 4.100 or any amended or successor rule regarding small power production or cogeneration.

(9) “Rule 4.100 purchasing agent” means an entity designated by the board to perform the power and financial accounting requirements of Rule 4.100.

(10) “Savings” means the total benefit to electric ratepayers resulting from a qualified cost mitigation charge order, including specifically those benefits resulting from modifications of purchase power arrangements and benefits attributable to the availability of a qualified cost mitigation charge order to pay for those modifications, offset by the costs incurred to obtain the qualified cost mitigation charge order and purchase power arrangement modifications.

(b) General. Upon an application submitted by the Rule 4.100 purchasing agent or other person or entity, and subject to the terms and conditions of this section, the board may issue within five years following the effective date of this act one or more qualified cost mitigation charge orders. A qualified cost mitigation charge order shall impose mitigation charges payable to the issuer of mitigation bonds in order to finance the costs associated with mitigating one or more power purchase arrangements.

(c) Qualified cost mitigation charge order provisions. A qualified cost mitigation order shall contain, at a minimum, all of the following:

(1) a finding that a qualified cost mitigation charge order will promote the general good within the state of Vermont;

(2) a uniform mitigation charge imposed for the benefit of the issuer on the consumption of all electricity within the state of Vermont to the extent such electricity is conveyed to consumers by electric utilities, and a requirement that such charge be reflected on ratepayer bills in a manner which clearly reflects both the amount of the charge and the reduction in power costs resulting from the charge;

(3) a specific mechanism for automatic adjustment of the mitigation charge, at least annually, in accordance with electricity consumption forecasts prepared by the Rule 4.100 purchasing agent or other entity approved by the board, so that the mitigation charge is imposed at all levels designed to provide revenues sufficient to make timely payments of accrued interest and scheduled principal on all mitigation bonds, as well as ongoing administrative expenses, credit enhancement fees and scheduled overcollateralization amounts with respect to such mitigation bonds. This automatic adjustment may implement a system in which the mitigation charge is initially paid in full by the electric utilities, and uncollectable amounts plus reasonable carrying costs are reimbursed to the utilities as part of the adjustment;

(4) the covenant and pledge of the state of Vermont set forth in subsection (h) of this section.

(d) Approval by the board. The board may approve within five years following the effective date of this act a qualified cost mitigation charge order for buydowns or other appropriate modifications, except buyouts, of power purchase arrangements upon finding that such an order will promote the general good within the state of Vermont. To determine that such an order will promote the general good, the board shall find that:

(1) significant, quantifiable savings are substantially likely to result from the buydowns and other appropriate modification of purchase power arrangements and the amount of such savings;

(2) such savings will be passed on to electric ratepayers pursuant to subsection (m) of this section;

(3) facilities whose power purchase arrangements are the subject of the buydowns or other appropriate modifications will be reasonably assured to continue to operate for the life of their power purchase arrangements;

(e) Additional factors. The board shall also give consideration to the following factors:

(1) the feasibility of any prospective alternative methods of achieving ratepayer savings;

(2) any impact of the transaction on existing or prospective opportunities for electric consumers to exercise retail choice;

(3) the impact of the transaction on renewable energy resources;

(4) the specific regulatory and accounting treatment that will be required of the purchasing agent, the issuer, the participating qualifying facilities and the participating electric utilities; and

(5) such other related factors as the board deems appropriate.

(f) Collections and remittances. Mitigation charges and the right to receive mitigation charges shall be property of the issuer. The right to receive mitigation charges shall constitute a present interest in property. If requested by the issuer or any successor that is entitled to receive mitigation charges, mitigation charges shall be collected by each participating electric utility for the benefit of the issuer or the issuer’s transferee. Mitigation charges collected by an electric utility shall be remitted by such electric utility to the issuer or its designee within one month after receipt thereof by such electric utility, or such shorter period as shall be designated by the board. Upon 30 days’ written notice to an electric utility, the issuer or any successor entitled to receive mitigation charges at any time and for any reason may direct that the electric utility shall cease to collect mitigation charges. Any electric utility in possession of mitigation charges shall have no right, title or interest in such collections, but rather shall hold such collections in trust for the benefit of the issuer.

(g) Nonbypassable. Mitigation charges shall be separately stated on consumers’ retail electric bills, and shall be payable regardless of any change in structure or identity of the electric utility, and regardless of any change in ownership or operation of any electric generation, transmission or distribution facilities. If a consumer pays only part of its electric bill for any period, a pro rata portion of the payment may be applied to payment of the mitigation charge for the period.

(h) State pledge. The state of Vermont covenants and pledges for the benefit of the issuer, any assignee of the issuer, and the owners of mitigation bonds that neither the mitigation charge nor the automatic adjustment mechanism set forth in subsection (e) of this section shall be altered, revoked, amended, postponed, impaired, limited or terminated by the state of Vermont, by the board or by any other agency or instrumentality of the state, absent adequate provision for the protection of the issuer, any designee of the issuer, and the owners of the mitigation bonds. The board, as agent of the state of Vermont, is authorized and directed to deliver written confirmation of this covenant and pledge in connection with the issuance of all mitigation bonds.

(i) Bankruptcy. A qualified cost mitigation charge order shall remain in full force and effect, notwithstanding any bankruptcy, reorganization or other insolvency proceeding with respect to:

(1) any electric utility or successor or assign of any electric utility; or

(2) the Rule 4.100 purchasing agent or any successor or assign of the Rule 4.100 purchasing agent.

(j) Assignment of mitigation charge revenues. The issuer may grant a security interest in, or otherwise assign mitigation charges and the right to receive mitigation charges in connection with, the issuance of mitigation bonds. Such grant or assignment shall be valid and enforceable without delivery or filing.

(k) Hearing procedure. A qualified cost mitigation charge order shall be issued only upon hearing, following due notice to all electric utilities, the owners of all participating qualifying facilities, the department and the Rule 4.100 purchasing agent. A qualified cost mitigation charge order issued under this section shall involve all of the state’s electric utilities, absent a showing of good cause by any such utility as to why the requirements and customer benefits resulting from a qualified cost mitigation charge order should not be applicable to it.

(l) Pass through of savings. A qualified cost mitigation charge order shall contain measures to assure that savings resulting from that order are passed through to the benefit of electric ratepayers. Such measures may include, but shall not be limited to, reduction in utility regulatory assets or creation of regulatory liabilities, adjustments to depreciation or amortization schedules, or the filing of revised tariffs reflecting such savings, which tariffs may be ordered by the board without regard to the remaining provisions of this title.

(m) In establishing the appraisal value for the assessment of property taxes on the facilities whose power purchase arrangements are the subject of the buydowns or other appropriate modifications, the municipality may include the amount of any cost mitigation payments made under the authority of this section. For municipalities using an income-based valuation method, the value of any lump sum mitigation payment shall be amortized or prorated over the period of the cost mitigation contract.

(n) Report to legislature. Upon approval of a cost mitigation order, the board submit a report to the legislature containing the order and detailed information on the findings of the board including the risks, savings and costs likely to result from the buydowns and other appropriate modifications of purchase power arrangements contained in the order.

Sec. 4. 10 V.S.A. chapter 11A is added to read:

Chapter 11A. Vermont Qualifying Facility Contract Mitigation Authority

Subchapter 1. General Provisions

§ 171. Legislative findings

(a) The legislature finds it is necessary and strongly in the public interest to assist in the restructuring of power purchase arrangements as defined in subdivision 209a(a)(6) of Title 30 by financing the buydowns or other appropriate modifications, except buyouts, of those power purchase arrangements.

(b) The legislature further finds the availability of a mechanism to facilitate such buydowns or other appropriate modifications, except buyouts, of power purchase arrangements will promote the prosperity and general welfare of all citizens, and that this chapter is necessary and desirable in order to accomplish these purposes.

(c) The legislature further finds the lowest cost capital will be made available to the extent financing can be accomplished through:

(1) an entity that is bankruptcy‑remote from other parties; and

(2) the issuance of bonds, the interest on which is excluded from federal gross income.

(d) Therefore, the general public advantage requires low-cost capital be made available to finance such arrangements, that the provision of such capital is best accomplished through creation of a state authority uniquely suited to that purpose, and that maximum feasible use of the personnel and experience of the Vermont economic development authority in this context will best serve the public interest.

§ 172. Definitions

As used in this chapter:

(1) “Authority” means the Vermont qualifying facility contract mitigation authority established under section 173 of this title.

(2) “Debt service” means the amounts required to pay mitigation bonds according to their terms, and shall include amounts representing principal, premium and interest, including interest on overdue payments.

(3) “Eligible charges” means qualified cost mitigation charges imposed pursuant to section 209a of Title 30.

(4) “Financing document” means a written instrument establishing the rights and responsibilities of the authority with respect to a project financed by the issue of mitigation bonds. A financing document may be in the nature of a pledge, an installment sale, a secured or unsecured loan or other similar transaction, may bear any appropriate title and may involve property in addition to the mitigation charges created pursuant to section 209a of Title 30. The authority’s interest in eligible charges under a financing document may be that of owner, conditional or installment vendor, pledgor, pledgee or otherwise.

(5) “Maturity date” means the date upon which a mitigation bond secured directly or indirectly by a pledge of eligible charges would be extinguished if paid in accordance with the terms of the mitigation bond.

(6) “Mitigation bond” has the meaning set forth in subdivision 209a(a)(3) of Title 30.

(7) “Mitigation cost” means the cost of buying down or modifying the terms of one or more power purchase arrangements, including the transaction and other costs incurred to implement the buydowns and other power purchase arrangement modifications.

(8) “Mitigation effort” means the program of buying down or modifying the terms of one or more power purchase arrangements.

(9) “Participating qualifying facility” means any facility described in subdivision 209(a)(8) of Title 30, and whose power purchase arrangement is a component of a mitigation effort as defined in subdivision (8) of this section.

(10) “Power purchase arrangement” has the meaning set forth in subdivision 209a(a)(6) of Title 30.

(11) “Qualified cost mitigation charge order” has the meaning set forth in subdivision 209a(a)(7) of Title 30.

(12) “Rule 4.100” means public service board Rule 4.100 or any amended or successor rule regarding small power production or cogeneration.

(13) “Rule 4.100 purchasing agent” means an entity designated by the board to perform the power purchase and financial accounting requirements of Rule 4.100.

(14) “Security document” means a written instrument establishing the rights and responsibilities of the authority and the holders of mitigation bonds issued to finance eligible charges, and may provide for a trustee for the benefit of the holders of these mitigation bonds. A security document may contain an assignment, grant of a security interest, pledge or other encumbrance of all or part of the authority’s interest in, or right to receive payments with respect to, eligible charges under a financing document, and may bear any appropriate title. A financing document and a security document may be combined as one instrument.

§ 173. Authority; organization

(a) The Vermont qualifying facility contract mitigation authority is hereby created and established as a body corporate and politic and a public instrumentality of the state. The exercise by the authority of the powers conferred upon it in this chapter constitutes the performance of essential governmental functions.

(b) The authority shall have 13 voting members, who shall be the voting members of the Vermont economic development authority, plus one additional individual appointed by the governor. They shall be compensated at the rate of $50.00 a day for time spent in the performance of their duties, and they shall be reimbursed for necessary expenses incurred in the performance of their duties. The manager of the Vermont economic development authority shall also serve as the manager of this authority, and the Vermont economic development authority shall also have the authority to contract with this authority for the provision of management and staffing needs.

(d) Any net earnings of the authority, beyond that necessary for retirement of the indebtedness, may be applied toward the reduction of any customer charge assessed under any qualified cost mitigation charge order.

(e) Upon dissolution of the authority, title to all property owned by the authority shall vest in the state of Vermont.

(f) The authority shall not avail itself of federal bankruptcy law.

§ 174. Authority; general powers

The authority is hereby authorized:

(1) Pursuant to the specific directives and terms of any qualified cost mitigation charge order issued by the public service board pursuant to section 209a of Title 30, to borrow money, make and issue negotiable bonds, notes, commercial paper; and give other evidences of indebtedness or obligations, including, without limitation, mitigation bonds pursuant to subchapter 2 of this chapter, and give security therefor. Such evidences of indebtedness or obligations may be incurred for any of the authority’s corporate purposes. Such evidences of indebtedness or obligations shall be in such form and denominations, and with such terms and provisions, including the maturity date or dates, redemption provisions and other provisions necessary or desirable. Such evidences of indebtedness or obligations shall be either taxable or tax-exempt, and shall be noninterest bearing, or bear interest at such rate or rates, which may be fixed or variable, as may be sufficient or necessary to effect the issuance and sale or resale thereof. The authority is authorized to enter into such agreements with other persons as the authority deems necessary or appropriate in connection with the issuance, sale, and resale of such evidences of indebtedness or obligations, including, without limitation, trust indentures, bond purchase agreements, disclosure agreements, remarketing agreements, agreements providing liquidity or credit facilities, bond insurance, or other credit enhancements in connection with such evidences of indebtedness or obligations. The authority is authorized to resell or retire any such evidences of indebtedness or obligations prior to the stated maturity thereof. No indebtedness shall be issued by the authority without the written approval of the state treasurer, which approval shall be given if, based upon his or her investigation, the state treasurer has certified that:

(A) none of the nationally-recognized credit rating agencies that rate general obligation debt of the state of Vermont has concluded that such indebtedness will be included in the state of Vermont’s debt statement, as prepared by such rating agencies; or

(B) the financing structure and flow of funds for such indebtedness will not result in such indebtedness being counted as net tax supported debt, or its equivalent, on the state of Vermont’s debt statement, as prepared by any of the nationally-recognized credit rating agencies that rate general obligation debt of the state of Vermont.

(2) To acquire, hold and dispose of real and personal property; to enter into all contracts, leases, agreements and arrangements and to do all lawful acts and things necessary or incidental to the performance of its duties and the execution of its powers under this chapter, and in accordance with a qualified cost mitigation charge order issued by the public service board.

(3) To collect and receive eligible charges to assist in meeting the expenses of the authority incurred under this chapter.

(4) To sue and be sued in its own name and plead and be impleaded; service of process upon the authority in any action shall be made by service upon the secretary of state, either by hand or by leaving a copy of the process at the office of the secretary.

§ 175. Records; annual report; audit

(a) The authority shall keep an accurate account of all its activities and of all its receipts and expenditures.

(b) Each year, prior to February 1, the authority shall submit a report of its activities for the preceding fiscal year to the governor and to the general assembly. The report shall set forth a complete operating and financial statement covering its operations during the year. The authority shall cause an audit of its books and accounts to be made at least once in each year by a certified public accountant. The cost of the audit shall be considered an expense of the authority, and a copy of the audit shall be filed with the state treasurer.

(c) The auditor of accounts of the state and authorized representatives of the auditor may, at any time, examine the accounts and books of the authority.

Subchapter 2. Mitigation Bonds

§ 176. Financing documents

(a) A financing document shall provide for:

(1) payments or deposits at such times and in such amounts as are necessary in order to pay the scheduled debt service as it becomes due on all mitigation bonds issued by the authority; and

(2) the payment of all the costs and expenses of operating and administering the mitigation bond program.

(b) A financing document may:

(1) Provide for payments or deposits by the authority which include amounts in addition to the amounts required to pay scheduled debt service and other amounts required pursuant to security documents;

(2) Pursuant to subsection 209a(h) of Title 30, provide that some or all of the obligations of the authority and of the state of Vermont shall be unconditional, and shall be binding and enforceable in all circumstances whatsoever, notwithstanding any other provision of law; and

(3) Contain such other provisions and covenants relating to the eligible charges as the authority deems necessary or desirable for the protection of the authority and of the state of Vermont or others.

§ 177. Security documents

(a) An assignment, pledge or other encumbrance of all or part of the authority’s right to receive payments with respect to eligible charges contained in a security document shall be fully effective from the time when the security document is executed with or without any subsequent physical delivery or segregation of the money, and without any filing or recording under the Uniform Commercial Code or otherwise, and the Uniform Commercial Code shall not apply to such assignment, pledge or other encumbrances.

(b) A security document may contain covenants of the authority as to:

(1) the creation and maintenance of reserves;

(2) the issuance of other mitigation bonds with respect to eligible charges;

(3) the custody, investment and application of monies;

(4) the use of surplus mitigation bond proceeds to redeem mitigation bonds or to reduce charges to customers under any qualified cost mitigation charge order;

(5) action by the authority in the event of a default in connection with the assessment, collection, processing, administration or remittance of eligible charges;

(6) any servicing agreement, administration agreement or other agreement for services;

(7) the subjecting of additional property or charges to the lien of the security document;

(8) any other matter which affects the security for the mitigation bonds in any way;

(9) pledging any other security and monies, whether such security or monies are acquired by or on behalf of the authority to secure the payment of the mitigation bonds.

(c) A security document may limit the rights of holders of mitigation bonds of the authority to enforce obligations of the authority thereunder or under the financing document.

§ 178. Mitigation Bonds

(a) From time to time the authority may issue mitigation bonds to pay costs of any mitigation effort which has been approved by the public service board in a qualified cost mitigation charge order, or to refund mitigation bonds previously issued by the authority. Mitigation bonds issued by the authority shall be in accordance with all terms and conditions set forth in the applicable qualified cost mitigation charge order.

(b) Mitigation bonds issued under this section shall bear the manual or facsimile signature of the manager or treasurer of the authority and the manual or facsimile signature of the chair or vice chair of the authority; provided, however, at least one of the foregoing signatures shall be manual unless the mitigation bonds are to be manually authenticated by a bank or trust company serving as trustee for the mitigation bonds. Mitigation bonds of the authority shall be sold by the signing officers at public or private sale, and the proceeds thereof shall be paid to the trustee under the security document which secures the mitigation bonds.

(c) No financing or security document, bond or other instrument issued or entered into in the name and on behalf of the state under this subchapter shall in any way obligate the state of Vermont to raise any money by taxation or use other funds for any purpose to pay any debt or meet any financial obligation to any person at any time in relation to a project financed in whole or in part by the issue of the authority’s mitigation bonds under this subchapter, except from monies received or to be received under a financing or security document entered into under this subchapter or except as may be required by any other provision of law or from eligible charges to the extent eligible charges are property of the state of Vermont.

(d) Mitigation bonds of the authority authorized under this subchapter may, in accordance with a qualified cost mitigation charge order, be issued:

(1) in one or more series of one or more denominations and bearing one or more rates of interest;

(2) in registered form or in bearer form with or without privileges of conversion and reconversion from one form to the other;

(3) payable in serial installments, as term bonds, or as asset-backed securities, and any series may consist of any or all types of bonds; and

(4) subject to redemption prior to maturity, with or without the payment of any redemption premium, in accordance with the provisions of the security document.

(e) The price at which mitigation bonds of the authority are sold may be par or may be more or less than par, but the original purchaser of the mitigation bond shall be obligated to pay accrued interest for the period, if any, from the date of the mitigation bonds to the date of delivery.

(f) All mitigation bonds issued under this subchapter and interest coupons applicable thereto, if any, shall be deemed to be negotiable instruments and to be investment securities under the Uniform Commercial Code.

(g) The authority shall act in the name of the state of Vermont and on its behalf as its instrumentality for the execution of financing documents, security documents, mitigation bonds and other appropriate instruments, or for the taking of any action under this subchapter in accordance with a cost mitigation order of the public service board.

(h) Title to or any other interest in any eligible charges which are financed in whole or in part by mitigation bonds issued pursuant to this subchapter may be taken and held either in the name of the authority or in the name of the state of Vermont. In performing its functions under this section, the authority may exercise any and all powers conferred upon it by this subchapter.

(i) Mitigation bonds issued under the provisions of this subchapter shall not be deemed to constitute a general obligation debt or a general liability of the state. Each mitigation bond issued pursuant to this subchapter shall contain on the face thereof a statement to the effect that the authority shall not be obligated to pay the same nor the interest thereon except from the revenues or assets pledged therefor, and that neither the faith and credit nor the taxing power of the state is pledged to the payment of the principal of or the interest on such mitigation bonds.

§ 179. Trustees and trust funds

A state or national chartered bank, Vermont bank or Vermont trust company may serve as trustee for the benefit of holders of mitigation bonds of the authority under a security document, and the trustee may, at any time, own all or any part of the mitigation bonds of the authority issued under that security document, unless otherwise provided therein. All monies received or held by the authority or by a trustee pursuant to a financing or security document, other than funds received or held by the authority for its own use, shall be deemed to be trust funds, and shall be held and applied solely in accordance with the applicable document, but the person paying the money to the authority or the trustee shall not, in any way, be bound to see to its proper application.

§ 180. Mitigation bonds of the authority exempt from

taxation

All mitigation bonds issued under this subchapter and the income therefrom shall be exempt from taxation by the state of Vermont and all of its political subdivisions, agencies or instrumentalities, except that mitigation bonds shall not be exempt from inheritance, transfer and estate taxes, or taxes in the nature thereof.

§ 181. Mitigation bonds of the authority eligible for

investment

Mitigation bonds issued under this subchapter shall be legal investments for all persons without limit as to the amount held, regardless of whether they are acting for their own account or in a fiduciary capacity; such mitigation bonds shall likewise be legal investments for all public officials authorized to invest public funds. No person offering to buy or sell or buying or selling the mitigation bonds shall be required to obtain any license or register any transaction in connection with them.

§ 182. Applications

Before issuing mitigation bonds, the authority shall receive from the Rule 4.100 purchasing agent or other appropriate person or entity an application in such form as the authority may, by regulation, prescribe. The Rule 4.100 purchasing agent may simultaneously submit an application to the authority for the issuance of mitigation bonds pursuant to this subchapter and an application to the public service board for a qualified cost mitigation charge order pursuant to section 209a of Title 30.

Sec. 5. 30 V.S.A. § 219a is amended to read:

§ 219a. Self-generation and net metering

(a) As used in this section:

(1) “Customer” means a retail electric consumer who uses a net metering system.

(2) “Net metering” means measuring the difference between the electricity supplied to a customer and the electricity fed back by a net metering system during the customer’s billing period:

(A) using a single, nondemand meter or such other meter that would otherwise be applicable to the customer’s usage but for the use of net metering; or

(B) on farm systems, using multiple meters as specified in this chapter. The calculation will be made by converting all meters to a nondemand, nontime-of-day meter, and equalizing them to the tariffed kilowatt‑hour rate.

(3) “Net metering system” means a facility for generation of electricity that:

(A) is of no more than 15 kilowatts (AC) capacity, or is a farm system;

(B) operates in parallel with facilities of the electric distribution system;

(D) is located on the customer’s premises; and

(E) employs a renewable energy source and utilizes a photovoltaic array, wind turbine or, fuel cell, biomass gasification and farm electrical generating technology~~, or is a farm system~~.

(4) “Farm system” means a facility of no more than ~~125~~ 150 kilowatts (AC) capacity that generates electric energy on a farm operated by a person principally engaged in the business of farming, as that term is defined in Regulation 1.175-3 of the Internal Revenue Code of 1986, from the anaerobic digestion of agricultural ~~waste produced by farming, and which is located on a farm~~ products, byproducts or wastes, or other renewable sources as defined in subdivision (3)(E) of this subsection, intended to offset the meters designated under subdivision (g)(1)(A) of this section on the farm.

(b) A customer shall pay the same rates, fees or other payments and be subject to the same conditions and requirements as all other purchasers from the electric company in the same rate-class, except as provided for in this section, and except for appropriate and necessary conditions approved by the board for the safety and reliability of the electric distribution system.

(c) ~~By March 1, 1999 the~~ The board shall establish by rule or order standards and procedures governing application for, and issuance or revocation of a certificate of public good for net metering systems under the provisions of section 248 of this title. A net metering system shall be deemed to promote the public good of the state if it is in compliance with the criteria of this section, and board rules or orders. In developing such rules or orders, the board:

(1) may waive the requirements of section 248 of this title that are not applicable to net metering systems, including, but not limited to, criteria that are generally applicable to public service companies as defined in this title;

(2) may modify notice and hearing requirements of this title as it deems appropriate;

(3) shall seek to simplify the application and review process as appropriate; and

(4) shall find that such rules are consistent with state power plans.

(d) An applicant for a certificate of public good for a net metering system shall be exempt from the requirements of ~~section~~ subsection 202(f) of this title. Any certificate issued under this section shall be automatically transferred to any subsequent owner of the property served by the net metering system, provided, in accordance with rules adopted by the board, the board and the electric company are notified of the transfer, and the subsequent owner agrees to comply with the terms and conditions of the certificate.

(e) Consistent with the other provisions of this title, electric energy measurement for net metering systems using a single nondemand meter that are not farm systems shall be calculated in the following manner:

(1) The electric company which serves the net metering customer shall measure the net electricity produced or consumed during the customer’s billing period, in accordance with normal metering practices.

(2) If the electricity supplied by the electric company exceeds the electricity generated by the customer and fed back to the electric distribution system during the billing period, ~~then~~ the customer shall be billed for the net electricity supplied by the electric company, in accordance with normal metering practices.

(3) If electricity generated by the customer exceeds the electricity supplied by the electric company:

(A) The customer shall be billed for the appropriate charges for that month, in accordance with subsection (b) of this section; ~~and~~

(B) The customer shall be credited for the excess kilowatt-hours generated during the billing period, with this kilowatt-hour credit appearing on the bill for the following billing period.; and

(C) At the beginning of each calendar year, any remaining unused kilowatt-hour credit accumulated during the previous year shall revert to the electric company, without any compensation to the customer.

(4) For net metering systems using time of day, demand or other types of metering, the board shall specify the manner of measurement and the application of bill credits for the electric energy produced or consumed in a manner substantially similar to that specified in this subsection for use with a single nondemand meter.

(f) Consistent with the other provisions of this title, electric energy measurement for net metering farm systems shall be calculated in the following manner:

(1) Net metering customers that are farm systems may credit on-site generation against all meters designated to the farm system under subdivision (g)(1)(A) of this section;

(2) Electric energy measurement for farm systems shall be calculated by subtracting total usage of all meters included in the farm system from total generation by the farm system. If the electricity generated by the farm system is less than the total usage of all meters included in the farm system during the billing period, the farm system shall be credited for any accumulated kilowatt‑hour credit and then billed for the net electricity supplied by the electric company, in accordance with the procedures in subsection (g) of this section.

(3) If electricity generated by the farm system exceeds the electricity supplied by the electric company:

(A) The farm system shall be billed for the appropriate charges for each meter for that month, in accordance with subsection (b) of this section.

(B) Excess kilowatt-hours generated during the billing period shall be added to the accumulated balance with this kilowatt-hour credit appearing on the bill for the following billing period.

(C) Any accumulated kilowatt-hour credits shall be used within 12 months or shall revert to the electric company without any compensation to the farm system.

(g)(1) In addition to any other requirements of section 248 of this title and this section and board rules thereunder, before a net metering farm system including more than one meter may be formed and served by an electric company, the proposed net metering farm system shall file with the board, with copies to the department and the serving electric company, the following information:

(A) the meters to be included in the farm system, which shall be associated with the farm buildings and residences owned or occupied by the person operating the farm system, the person’s family or farm employees, identified by account number and location;

(B) a method for adding and removing meters included in the farm system;

(C) a designated person responsible for all communications from the farm system to the serving electric company, for receiving and paying bills for any service provided by the serving electric company for the farm system, and for receiving any other communications regarding the farm system net metering; and

(D) a binding process for the resolution of any disputes within the farm system relating to net metering that does not rely on the serving electric company, the board or the department.

(2) The farm system shall, at all times, maintain a written designation to the serving electric company of a person who shall be the sole person authorized to receive and pay bills for any service provided by the serving electric company, and for receiving any other communications regarding the farm system or net metering.

(3) The serving utility shall implement appropriate changes to the farm system net metering within 30 days after receiving written notification from the designated person. However, written notification of a change in the person designated under subdivision (2) of this subsection shall be effective upon receipt by the serving utility. The serving utility shall not be liable for action based on such notification, but shall make any necessary corrections and bill adjustments to implement revised notifications.

(4) Pursuant to subsection 231(a) of this title, after such notice and opportunity for hearing as the board may require, the board may revoke a certificate of public good issued to a farm system.

(h)(1) An electric company:

~~(1)~~(A) Shall make net metering available to any customer using a net metering system or farm system on a first-come, first-served basis until the cumulative generating capacity of net metering systems equals 1.0 percent of the distribution company's peak demand during 1996~~. An electric company may interconnect additional net metering systems above this capacity if found by the board to be in the public interest~~; or the peak demand during the most recent full calendar year, whichever is less; provided, however, an electric company and a farm system may jointly petition the board to exceed this capacity. In determining whether to exceed the cap, the board shall consider the following:

(i) the costs and benefits of net metering systems already connected to the system; and

(ii) the potential costs and benefits of exceeding the cap, including potential short and long-term impacts on rates, distribution system costs and benefits, reliability and diversification costs and benefits;

~~(2)~~(B) Shall allow net metering systems to be interconnected using a kilowatt-hour meter capable of registering the flow of electricity in two directions or such other comparably equipped meter that would otherwise be applicable to the customer’s usage but for the use of net metering;

~~(3)~~(C) May, at its own expense, and with the written consent of the customer, install one or more additional meters to monitor the flow of electricity in each direction; ~~and~~

~~(4)~~(D) Shall charge the customer a minimum monthly fee that is the same as other customers of the electric distribution company in the same rate class, but shall not charge the customer any additional standby, capacity, interconnection, or other fee or charge;

(E) May charge reasonable fees for interconnection, establishment, special meter reading, accounting, account correcting and account maintenance of farm system net metering arrangements;

(F) May charge, if the capacity of the distribution system is insufficient for the designed generation, subject to determination by the board, a reasonable fee to cover the cost of electric company improvements necessary to distribute power;

(G) May require that all meters included within a farm system be read on the same billing cycle;

(H) May book and defer, with carrying costs, additional incremental costs, to the extent that such costs are not recovered through charges, authorized in subdivisions (D), (E) and (F) of this subdivision (1), directly related to implementing farm system net metering;

(I) Shall receive from a farm system, which is designed to produce less energy than the total annual load of the meters identified in subdivision (g)(1)(A) of this section, any tradeable renewable credits for which the farm system is eligible. All other farm systems shall retain any tradeable renewable credits for which the farm is eligible;

(2) All such requirements shall be pursuant to and governed by a tariff approved by the board and any applicable board rule, which tariffs and rules shall be designed in a manner reasonably likely to facilitate net metering.

~~(g)~~(i)(1) A net metering system using photovoltaic generation shall conform to applicable electrical safety, power quality, and interconnection requirements established by the National Electrical Code, the Institute of Electrical and Electronic Engineers, and Underwriters Laboratories. The customer shall be responsible for installation, testing, accuracy, and maintenance of net metering equipment.

(2) By March 1, 1999, the board shall adopt, by rule or order, electrical safety, power quality, and interconnection requirements for net metering equipment which uses generation technologies other than photovoltaic technology. In developing safety rules, and any amendments to those rules, the board shall solicit input from representatives of utilities and agents representing line workers.

(3) The board may adopt, by rule or order, additional safety, power quality, and interconnection requirements for customers that the board determines are necessary to protect public safety and system reliability.

(4) Pending the effective date of requirements adopted by the board under subsection (c) of this section and subdivision (2) of this subsection, an electric company may allow a customer to interconnect a net metering system, to be operated as provided in this section, if the company is reasonably satisfied concerning the safety and power quality of the system. The customer may then operate the net metering system pending application for and receipt of a certificate of public good under subsection (c) of this section, provided such application shall be made within three months after the effective date of requirements adopted by the board under subsection (c).

(5) An electric company may, at its own expense, and upon reasonable written notice to the customer, perform such testing and inspection of a net metering system in order to confirm that the system conforms to applicable electrical safety, power quality, and interconnection requirements.

~~(h)~~(j) Notwithstanding the provisions of this section that define a net metering system as being of no more than 15 kilowatts (AC) capacity, the board may allow net metering for up to ~~five~~ ten systems per year for customers that produce more than 15 kilowatts (AC) capacity, but do not produce more than ~~100~~ 150 kilowatts of power and ~~do not use methane gas~~ are not farm systems.

(k) Notwithstanding the provisions of subsections (f) and (g) of this section, an electric company may contract to purchase all or a portion of the output products from a farm system, provided:

(1) the farm system obtains a certificate of public good under the terms of subsections (c) and (d) of this section;

(2) any contracted power shall be subject to the limitations set forth in subdivision (h)(1) of this section;

(3) any contract shall be subject to interconnection and metering requirements in subdivisions (h)(1)(C) and (i)(2) and (3) of this section;

(4) any contract may permit all or a portion of the tradeable renewable energy credits for which the farm system is eligible to be transferred to the electric company.

Sec. 6. 32 V.S.A. § 9741(46) is amended to read:

(46) Tangible personal property to be incorporated into:

(A) a net metering system as defined in 30 V.S.A. § 219a;

(B) a home or business energy system on a premises not connected to the electric distribution system of a utility regulated under Title 30 and that otherwise meets the requirements of 30 V.S.A. § 219a(a)(3)(A), (C), (D), and (E); or

(C) a hot water heating system that converts solar energy into thermal energy used to heat water, but limited to that property directly necessary for and used to capture, convert, or store solar energy for this purpose.