SB3144 93RD GENERAL ASSEMBLY

LRB093 18812 AMC 44547 b

93RD GENERAL ASSEMBLY
State of Illinois
2003 and 2004
SB3144

Introduced 2/6/2004, by Jeffrey M. Schoenberg

SYNOPSIS AS INTRODUCED:

220 ILCS 5/8-403.1

from Ch. 111 2/3, par. 8-403.1

Amends the Public Utilities Act. Provides additional requirements for contracts in which an electric utility is purchasing electricity from a qualified solid waste energy facility. Provides that all qualified solid waste energy facilities shall receive a monthly incentive payment from the State Treasurer for all the monthly kilowatt-hours sold to an electric utility. Provides circumstances under which the incentive payment may be suspended or revoked. Provides that, after the effective date of this amendatory Act, public utilities are not entitled to State tax credits for the purchase of electricity from a qualified solid waste energy facility. Requires qualified solid waste energy facilities to have a Commission-approved plan to reimburse the State for tax credits resulting from electricity sold prior to the effective date of this Act. Effective immediately.

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning utilities.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Public Utilities Act is amended by changing Section 8-403.1 as follows:

(220 ILCS 5/8-403.1) (from Ch. 111 2/3, par. 8-403.1)

Sec. 8-403.1. Electricity purchased from qualified solid waste energy facility; tax credit; distributions for economic development.

(a) It is hereby declared to be the policy of this State to encourage the development of alternate energy production facilities in order to conserve our energy resources and to provide for their most efficient use.

(b) For the purpose of this Section and Section 9-215.1, "qualified solid waste energy facility" or "QSWEF" means a facility determined by the Illinois Commerce Commission to qualify as such under the Local Solid Waste Disposal Act, to use methane gas generated from landfills as its primary fuel, and to possess characteristics that would enable it to qualify as a cogeneration or small power production facility under federal law, to meet the ownership requirements set forth in this Section, to meet the primary fuel use requirements set forth in this Section, to meet the requirements for the reimbursement of State tax credits set forth in this Section, and to meet all other requirements set forth in this Section. The Commission, in order to promote the development of landfill sites for QSWEF use, shall have the authority to determine the number of QSWEFs approved at a single landfill site. In determining, for the purposes of this Section, whether a facility meets the requirements to become a small power production facility under federal law, the Commission may consider, but is not bound by, any action or inaction of a federal administrative agency or any self-certification of a facility under federal law.

(c) In furtherance of the policy declared in this Section, the Illinois Commerce Commission shall require electric utilities to enter into long-term contracts, pursuant to a tariff approved by the Commission, to purchase electricity from qualified solid waste energy facilities located in the electric utility's service area, for a period beginning on the date that the facility begins generating electricity and having a duration of not less than 10 years in the case of facilities fueled by landfill-generated methane, or 20 years in the case of facilities fueled by methane generated from a landfill owned by a forest preserve district. The purchase rate contained in such contracts shall be equal to the average amount per kilowatt-hour paid from time to time by the unit or units of local government in which the electricity generating facilities are located, excluding amounts paid for street lighting and pumping service. Utilities may not enter into contracts pursuant to this subsection with QSWEFs to purchase amounts of electricity greater than amounts determined by the Commission. Such contracts are not transferable from the petitioning owners to other entities without prior Commission approval. The Commission shall not require electric utilities to enter into any contracts pursuant to this Section with any facilities that filed a formal application with the Commission for QSWEF status unless the facilities filed formal application with the Commission for QSWEF status before the effective date of this amendatory Act of the 93rd General Assembly and began commercial operation within 6 months after that effective date.

For all facilities approved by the Illinois Commerce Commission as a QSWEF prior to the effective date of this amendatory Act of the 93rd General Assembly, the purchase rate for the remainder of their existing contracts with electric utilities shall be the then current rate at which the utility must purchase the output of qualified facilities pursuant to the federal Public Utility Regulatory Policies Act of 1978.

Beginning on the effective date of this amendatory Act of the 93rd General Assembly, and pursuant to this subsection, all QSWEFs shall receive a monthly incentive payment from the State Treasurer for all of the monthly kilowatt-hours sold to an electric utility under this subsection. The amount of the incentive payment shall be calculated by the electric utility that purchases the output of the QSWEF and by using the following formulae:

(1) for all QSWEFs using landfill methane as their primary fuel, IP = 0.5 x (RR - AC), or

(2) for all QSWEFs using landfill methane generated from a landfill owned by a forest preserve district as their primary fuel, IP = 0.5 x (RR - AC).

For the purposes of this subsection, "IP" means incentive payment, "RR" means retail rate or the average amount per kilowatt-hour paid from time to time by the unit or units of local government in which the electricity generating facilities are located, excluding amounts paid for street lighting and pumping service, multiplied by the qualified solid waste energy facility's monthly kilowatt-hours sold to the electric utility, and "AC" means avoided costs or the then current rate at which the utility must purchase the output of qualified facilities pursuant to the federal Public Utility Regulatory Policies Act of 1978 and as determined pursuant to 83 Ill. Adm. Code 430.80 multiplied by the qualified solid waste energy facility's monthly kilowatt-hours sold to the electric utility.

The electric utility shall submit the monthly calculation of the incentive payment to the State Treasurer and the Illinois Commerce Commission and shall include the kilowatt-hours and per kilowatt-hours rates used in calculating retail rates and avoided costs.

The electric utility shall file a tariff with the Illinois Commerce Commission that sets forth the calculations required by this subsection.

(d) Until the effective date of this amendatory Act of the 93rd General Assembly, whenever a public utility is required to purchase electricity pursuant to subsection (c) above, it shall be entitled to credits in respect of its obligations to remit to the State taxes it has collected under the Electricity Excise Tax Law equal to the amounts, if any, by which payments for such electricity exceed (i) the then current rate at which the utility must purchase the output of qualified facilities pursuant to the federal Public Utility Regulatory Policies Act of 1978, less (ii) any costs, expenses, losses, damages or other amounts incurred by the utility, or for which it becomes liable, arising out of its failure to obtain such electricity from such other sources. The amount of any such credit shall, in the first instance, be determined by the utility, which shall make a monthly report of such credits to the Illinois Commerce Commission and, on its monthly tax return, to the Illinois Department of Revenue. Under no circumstances shall a utility be required to purchase electricity from a qualified solid waste energy facility at the rate prescribed in subsection (c) of this Section if such purchase would result in estimated tax credits that exceed, on a monthly basis, the utility's estimated obligation to remit to the State taxes it has collected under the Electricity Excise Tax Law. The owner or operator shall negotiate facility operating conditions with the purchasing utility in accordance with that utility's posted standard terms and conditions for small power producers. If the Department of Revenue disputes the amount of any such credit, such dispute shall be decided by the Illinois Commerce Commission.

Whenever a qualified solid waste energy facility that has sold electricity at rates in effect prior to the effective date of this amendatory Act of the 93rd General Assembly has paid or otherwise satisfied in full the capital costs or indebtedness incurred in developing and implementing the qualified facility or at the end of the contract entered into pursuant to subsection (c), whichever occurs first, the QSWEF qualified facility shall reimburse the Public Utility Fund and the General Revenue Fund in the State treasury for the actual reduction in payments to those Funds caused by this subsection (d) in a manner to be determined by the Illinois Commerce Commission and based on the manner in which revenues for those Funds were reduced. The payments shall be made to the Illinois Commerce Commission, which shall determine the appropriate disbursements to the Public Utility Fund and the General Revenue Fund.

The purchasing utility may not enter into any new contracts to purchase electricity from a QSWEF until after the Commission has approved a plan submitted by the facility that assures the reimbursement to the State treasury required by subsection (d).

A QSWEF that lacks a Commission approved plan to reimburse the State for tax credits resulting from electricity sold prior to the effective date of this amendatory Act of the 93rd General Assembly, shall submit such a plan for Commission approval within 60 days of the effective date of this amendatory Act of the 93rd General Assembly. Failure to do so may result in the suspension of the incentive payment provided for in subsection (c). The Commission shall have the authority to alter any reimbursement plan submitted by a QSWEF pursuant to this subsection. If a QSWEF fails to comply with the Commission's Order pursuant to this subsection, then the Commission shall automatically suspend the incentive payment. If the incentive payment is suspended pursuant to this subsection, then it can only be reinstated by an Order of the Illinois Commerce Commission that finds that a QSWEF is in compliance with the requirements of this subsection.

The Commission shall have the authority to alter, pursuant to an investigation based upon its own motion or a petition filed with the Commission, any previously approved plan submitted by a QSWEF to reimburse the State treasury as required by this subsection. A QSWEF's failure to comply with the Commission's Order pursuant to this subsection shall result in the automatic suspension of the incentive payment provided for in subsection (c). If the incentive payment is suspended pursuant to this subsection, then it can only be reinstated by an Order of the Illinois Commerce Commission that finds that a QSWEF is in compliance with the Commission's action taken pursuant to this subsection.

(e) The Illinois Commerce Commission shall not require an electric utility to purchase electricity from any qualified solid waste energy facility which is directly or indirectly owned or operated by an entity that is primarily engaged in the business of producing or selling electricity, gas, or useful thermal energy from a source other than one or more qualified solid waste energy facilities. Commission-approved owners and operators of QSWEFs must meet the requirements of this subsection for the duration of the contract entered into with a utility pursuant to subsection (c). Failure to remain in compliance will result in the forfeiture of the incentive payment set forth in subsection (c). Such forfeiture will not excuse the repayment to the State treasury required by subsection (d) for utility tax credits accumulated prior to the effective date of this amendatory Act of the 93rd General Assembly and up to the time of the forfeiture.

No part of a QSWEF's ownership or operation may be sold or otherwise transferred to any entity, corporation, partnership, trust, or holding company without prior Commission approval. Failure to obtain such prior approval will result in the forfeiture of the incentive payment set forth in subsection (c). Such forfeiture will not excuse the repayment to the State treasury required by subsection (d) for utility tax credits accumulated prior to the effective date of this amendatory Act of 93rd General Assembly and up to the time of the forfeiture.

(e-5) A QSWEF shall receive the subsection (c) incentive payment only for kilowatt-hours generated by the use of methane gas generated from landfills. The Commission shall have the authority to suspend or revoke the right to the subsection (c) incentive payment for all amounts of electricity that the Commission determines are generated by the use of a fuel that is not methane gas generated from landfills. The Commission shall make such a determination pursuant to an investigation on its own motion or pursuant to a petition filed with the Commission. The Commission shall have the authority to require a QSWEF to repay amounts received for electricity purchased under the subsection (c) contracts between the electric utility and the QSWEF for all amounts of electricity that the Commission determines are generated in violation of the landfill methane requirement set forth in this subsection. The Commission shall make such a determination pursuant to an investigation on its own motion or pursuant to a petition filed with the Commission.

If the Commission determines that a QSWEF has violated the requirement regarding the use of methane gas generated from a landfill as set forth in this subsection, then the Commission shall require that the QSWEF repay the State for all dollar amounts of electricity sales that are determined by the Commission to be the result of the violations. If the amount owed by the QSWEF is not received by the Commission within 90 days of the date of the Commission's Order that requires re-payment, then the Commission shall issue an Order that vacates the facility's QSWEF approval that was previously granted under subsection (b). Commission action that vacates prior QSWEF approval does not excuse the repayment to the State treasury required by subsection (d) for utility tax credits accumulated up to the time of the Commission action.

A QSWEF must receive Commission approval before it can use any fuel in addition to methane gas generated from a landfill in order to generate electricity.

If a QSWEF or an entity seeking QSWEF approval petitions the Commission to use any fuel in addition to methane gas generated from a landfill to generate electricity, then the Commission shall have the authority to:

(i) establish the methodology for determining the amount of electricity that is generated by the use of methane gas generated from a landfill and the amount that is generated by the use of other fuel;

(ii) determine all reporting requirements for the QSWEF that are necessary for the Commission to determine the amount of electricity that is generated by the use of methane gas from a landfill and the amount that is generated by the use of other fuel, and the resulting payments to the QSWEF;

(iii) Require that the QSWEF, at the QSWEF's expense, install metering equipment that the Commission determines is necessary to enforce compliance with this subsection;

If the Commission approves a petition to use any fuel in addition to methane gas generated from a landfill for the generation of electricity, the Commission shall establish procedures for calculating the subsection (c) incentive payment that is applicable only to kilowatt-hours generated by the use of methane gas generated from a landfill and for submitting these calculations to the State Treasurer.

If a QSWEF fails to comply with a Commission Order, pursuant to this subsection, then the Commission shall automatically suspend the incentive payment prescribed by subsection (c). If the incentive payment is suspended pursuant to this subsection, then it can only be reinstated by an Order of the Illinois Commerce Commission that finds that a QSWEF is in compliance with the requirements of this subsection.

(f) This Section does not require an electric utility to construct additional facilities unless those facilities are paid for by the owner or operator of the affected qualified solid waste energy facility.

(g) The Illinois Commerce Commission shall require that: (1) electric utilities use the electricity purchased from a qualified solid waste energy facility to displace electricity generated from nuclear power or coal mined and purchased outside the boundaries of the State of Illinois before displacing electricity generated from coal mined and purchased within the State of Illinois, to the extent possible, and (2) electric utilities report annually to the Commission on the extent of such displacements.

(h) Nothing in this Section is intended to cause an electric utility that is required to purchase power hereunder to incur any economic loss as a result of its purchase. All amounts paid for power which a utility is required to purchase pursuant to subparagraph (c) shall be deemed to be costs prudently incurred for purposes of computing charges under rates authorized by Section 9-220 of this Act. Tax credits provided for herein shall be reflected in charges made pursuant to rates so authorized to the extent such credits are based upon a cost which is also reflected in such charges.

(i) Beginning in February 1999 and through January 2009, each qualified solid waste energy facility that sells electricity to an electric utility at the purchase rate described in subsection (c) shall file with the Department of Revenue on or before the 15th of each month a form, prescribed by the Department of Revenue, that states the number of kilowatt hours of electricity for which payment was received at that purchase rate from electric utilities in Illinois during the immediately preceding month. This form shall be accompanied by a payment from the qualified solid waste energy facility in an amount equal to six-tenths of a mill ($0.0006) per kilowatt hour of electricity stated on the form. Beginning on the effective date of this amendatory Act of the 92nd General Assembly, a qualified solid waste energy facility must file the form required under this subsection (i) before the 15th of each month regardless of whether the facility received any payment in the previous month. Payments received by the Department of Revenue shall be deposited into the Municipal Economic Development Fund, a trust fund created outside the State treasury. The State Treasurer may invest the moneys in the Fund in any investment authorized by the Public Funds Investment Act, and investment income shall be deposited into and become part of the Fund. Moneys in the Fund shall be used by the State Treasurer as provided in subsection (j). The obligation of a qualified solid waste energy facility to make payments into the Municipal Economic Development Fund shall terminate upon either: (1) expiration or termination of a facility's contract to sell electricity to an electric utility at the purchase rate described in subsection (c); or (2) entry of an enforceable, final, and non-appealable order by a court of competent jurisdiction that Public Act 89-448 is invalid. Payments by a qualified solid waste energy facility into the Municipal Economic Development Fund do not relieve the qualified solid waste energy facility of its obligation to reimburse the Public Utility Fund and the General Revenue Fund for the actual reduction in payments to those Funds as a result of credits received by electric utilities under subsection (d).

A qualified solid waste energy facility that fails to timely file the requisite form and payment as required by this subsection (i) shall be subject to penalties and interest in conformance with the provisions of the Illinois Uniform Penalty and Interest Act.

Every qualified solid waste energy facility subject to the provisions of this subsection (i) shall keep and maintain records and books of its sales pursuant to subsection (c), including payments received from those sales and the corresponding tax payments made in accordance with this subsection (i), and for purposes of enforcement of this subsection (i) all such books and records shall be subject to inspection by the Department of Revenue or its duly authorized agents or employees.

When a qualified solid waste energy facility fails to file the form or make the payment required under this subsection (i), the Department of Revenue, to the extent that it is practical, may enforce the payment obligation in a manner consistent with Section 5 of the Retailers' Occupation Tax Act, and if necessary may impose and enforce a tax lien in a manner consistent with Sections 5a, 5b, 5c, 5d, 5e, 5f, 5g, and 5i of the Retailers' Occupation Tax Act. No tax lien may be imposed or enforced, however, unless a qualified solid waste energy facility fails to make the payment required under this subsection (i). Only to the extent necessary and for the purpose of enforcing this subsection (i), the Department of Revenue may secure necessary information from a qualified solid waste energy facility in a manner consistent with Section 10 of the Retailers' Occupation Tax Act.

All information received by the Department of Revenue in its administration and enforcement of this subsection (i) shall be confidential in a manner consistent with Section 11 of the Retailers' Occupation Tax Act. The Department of Revenue may adopt rules to implement the provisions of this subsection (i).

For purposes of implementing the maximum aggregate distribution provisions in subsections (j) and (k), when a qualified solid waste energy facility makes a late payment to the Department of Revenue for deposit into the Municipal Economic Development Fund, that payment and deposit shall be attributed to the month and corresponding quarter in which the payment should have been made, and the Treasurer shall make retroactive distributions or refunds, as the case may be, whenever such late payments so require.

(j) The State Treasurer, without appropriation, must make distributions immediately after January 15, April 15, July 15, and October 15 of each year, up to maximum aggregate distributions of $500,000 for the distributions made in the 4 quarters beginning with the April distribution and ending with the January distribution, from the Municipal Economic Development Fund to each city, village, or incorporated town that has within its boundaries an incinerator that: (1) uses or, on the effective date of Public Act 90-813, used municipal waste as its primary fuel to generate electricity; (2) was determined by the Illinois Commerce Commission to qualify as a qualified solid waste energy facility prior to the effective date of Public Act 89-448; and (3) commenced operation prior to January 1, 1998. Total distributions in the aggregate to all qualified cities, villages, and incorporated towns in the 4 quarters beginning with the April distribution and ending with the January distribution shall not exceed $500,000. The amount of each distribution shall be determined pro rata based on the population of the city, village, or incorporated town compared to the total population of all cities, villages, and incorporated towns eligible to receive a distribution. Distributions received by a city, village, or incorporated town must be held in a separate account and may be used only to promote and enhance industrial, commercial, residential, service, transportation, and recreational activities and facilities within its boundaries, thereby enhancing the employment opportunities, public health and general welfare, and economic development within the community, including administrative expenditures exclusively to further these activities. These funds, however, shall not be used by the city, village, or incorporated town, directly or indirectly, to purchase, lease, operate, or in any way subsidize the operation of any incinerator, and these funds shall not be paid, directly or indirectly, by the city, village, or incorporated town to the owner, operator, lessee, shareholder, or bondholder of any incinerator. Moreover, these funds shall not be used to pay attorneys fees in any litigation relating to the validity of Public Act 89-448. Nothing in this Section prevents a city, village, or incorporated town from using other corporate funds for any legitimate purpose. For purposes of this subsection, the term "municipal waste" has the meaning ascribed to it in Section 3.290 of the Environmental Protection Act.

(k) If maximum aggregate distributions of $500,000 under subsection (j) have been made after the January distribution from the Municipal Economic Development Fund, then the balance in the Fund shall be refunded to the qualified solid waste energy facilities that made payments that were deposited into the Fund during the previous 12-month period. The refunds shall be prorated based upon the facility's payments in relation to total payments for that 12-month period.

(l) Beginning January 1, 2000, and each January 1 thereafter, each city, village, or incorporated town that received distributions from the Municipal Economic Development Fund, continued to hold any of those distributions, or made expenditures from those distributions during the immediately preceding year shall submit to a financial and compliance and program audit of those distributions performed by the Auditor General at no cost to the city, village, or incorporated town that received the distributions. The audit should be completed by June 30 or as soon thereafter as possible. The audit shall be submitted to the State Treasurer and those officers enumerated in Section 3-14 of the Illinois State Auditing Act. If the Auditor General finds that distributions have been expended in violation of this Section, the Auditor General shall refer the matter to the Attorney General. The Attorney General may recover, in a civil action, 3 times the amount of any distributions illegally expended. For purposes of this subsection, the terms "financial audit," "compliance audit", and "program audit" have the meanings ascribed to them in Sections 1-13 and 1-15 of the Illinois State Auditing Act.

(m) All QSWEFs are subject to the authority of the Illinois Commerce Commission as provided in Article V of the Public Utilities Act.

(n) The Commission shall have the authority, after notice and hearing held on complaint or the Commission's own motion:

(1) to suspend or revoke the right to subsection (c) incentive payments for a violation of this Section or of any Commission order, decision, or rule concerning QSWEFs;

(2) to suspend or revoke an entity's status as a QSWEF; or

(3) to impose penalties under Section 5-202.

(o) Failure of a QSWEF to make subsection (d) reimbursement payments to the State does not relieve the QSWEF of its obligation to make such payments.

In the event that a QSWEF ceases to operate prior to the end of its subsection (c) contract with an electric utility, the QSWEF is nevertheless obligated to reimburse the State as set forth in subsection (d) for all tax credits granted to the utility for generation purchased from the QSWEF. In the event of such a default, the full amount of the reimbursement obligation will become due and owing.

In the event that a QSWEF fails to make reimbursement payments at any time after the term of its subsection (c) contract concludes, the State may take action to collect the full amounts owed under this Section. In the event of such a default, the full amount of the reimbursement obligation will become due and owing.

(p) For the purposes of enforcement of this Section, the Commission or its duly authorized agents or employees shall have full and complete access to all books, records, studies, and reports of a QSWEF related to this Section. If a QSWEF fails to allow the Commission or its duly authorized agents or employees full and complete access to all books, records, studies, and reports of the QSWEF, then, pursuant to an investigation based upon its own motion or a petition, the Commission shall suspend the incentive payment prescribed by subsection (c). If the incentive payment is suspended pursuant to this subsection, then it can only be reinstated by an Order of the Illinois Commerce Commission that finds that a QSWEF is in compliance with the requirements of this subsection.

(q) Each QSWEF shall file, no later than the first business day of February of each calendar year, a sworn affidavit with the Commission's Chief Clerk that expressly affirms or denies their compliance with this Section, all applicable Commission rules governing QSWEF status and Qualifying Facility status under federal law, and all Orders of the Commission governing QSWEF status.

Failure to meet this filing requirement within 15 days of the required filing date shall result in the automatic suspension of the incentive payment prescribed by subsection (c). The requirements of the sworn affidavit may be set forth in an electric utility's tariff approved by the Commission or in the Commission's rules. If the subsection (c) incentive payment is suspended pursuant to this subsection, then it can only be reinstated by an Order of the Illinois Commerce Commission that finds that a QSWEF is in compliance with the requirements of this subsection.

If the Commission, based upon an investigation of its own motion or by petition, finds that the sworn affidavit filed pursuant to this subsection is not supported by fact, then the Commission shall automatically suspend the incentive payment prescribed by subsection (c). If the incentive payment is suspended pursuant to this subsection, then it can only be reinstated by an Order of the Illinois Commerce Commission that finds that a QSWEF is in compliance with the requirements of this subsection.

(Source: P.A. 91-901, eff. 1-1-01; 92-435, eff. 8-17-01; 92-574, eff. 6-26-02.)

Section 99. Effective date. This Act takes effect upon becoming law.