A bill

TO AMEND THE SOUTH CAROLINA CODE OF LAWs BY AMENDING SECTION 58-37-10, RELATING TO DEFINiTIONS, SO AS TO PROVIDE FOR "DEMAND-SIDE MANAGEMENT PROGRAMs", "COST-EFFECTIVE", AND "DEMAND-SIDE MANAGEMENT PILOT PROGRAMS"; by amending SECTION 58-37-20, RELATING TO THE ADOPTION OF PROCEDURES ENCOURAGING ENERGY EFFICIENCY AND CONSERVATION, SO AS TO REQUIRE THE PUBLIC SERVICE COMMISSION TO ADOPT PROCEDURES TO REQUIRE ELECTRICAL UTILITIES AND ENCOURAGE GAS UTILiTIES TO PLAN FOR AND INVEST IN ALL COST-EFFECTIVE ENERGY EFFICIENCY AND DEMAND-SIDE RESOURCES AND TO REQUIRE THE COMMISSION TO REVIEW ANNUAL REPORTS FROM THE UTILITIES; by AMENDing SECTION 58-37-30, RELATING TO REPORTS ON DEMAND-SIDE ACTIVITIES OF GAS AND ELECTRIC UTILITIES, SO AS TO MAKE TECHNICAL CHANGES; AND TO REQUIRE THE OFFICE OF REGULATORY STAFF TO STUDY POTENTIAL COSTS AND BENEFITS OF ESTABLISHING A THIRD-PARTY ADMINISTRATOR FOR ENERGY EFFICIENCY AND OTHER DEMAND-SIDE MANAGEMENT PROGRAMS, AND TO PROVIDE CERTAIN REQUIREMENTS FOR THIS STUDY.

Be it enacted by the General Assembly of the State of South Carolina:

SECTION 1.  Section 58-37-10 of the S.C. Code is amended to read:

    Section 58-37-10.  As used in this chapter unless the context clearly requires otherwise:

    (1) "Demand-side activity management program" means a program conducted or proposed by a producer, supplier, or distributor of energy for the reduction or more efficient use of energy requirements of the producer's, supplier's, or distributor's customers, through measures including, but not limited to, conservation and energy efficiency, load management, cogeneration, and renewable energy technologies.

    (2) "Integrated resource plan" means a plan which contains the demand and energy forecast for at least a fifteen-year period, contains the supplier's or producer's program for meeting the requirements shown in its forecast in an economic and reliable manner, including both demand-side and supply-side options, with a brief description and summary cost-benefit analysis, if available, of each option which was considered, including those not selected, sets forth the supplier's or producer's assumptions and conclusions with respect to the effect of the plan on the cost and reliability of energy service, and describes the external environmental and economic consequences of the plan to the extent practicable.  For electrical utilities subject to the jurisdiction of the South Carolina Public Service Commission, this definition must be interpreted in a manner consistent with the integrated resource planning process requirements pursuant to Section 58-37-40 and any process adopted by the commission.  For electric cooperatives subject to the regulations of the Rural Electrification Administration, this definition must be interpreted in a manner consistent with any integrated resource planning process prescribed by Rural Electrification Administration regulations.

    (3) "Cost-effective" means that the net present value of benefits of a program or portfolio exceeds the net present value of the costs of the program or portfolio, as determined by at least two of the following tests:

       (a) the Utility Cost Test, which is also referred to as the Program Administrator Test;

       (b) the Total Resource Cost Test;

       (c) the Participant Cost Test; and

       (d) the Ratepayer Impact Measure Test. In calculating cost-effectiveness, a utility must use standard utility practice for determining the percentage of customers that would or would not have adopted a measure without any incentive allowed under this article to install and utilize the technology as part of the associated demand-side management program. The utility must designate the expected useful life of the measure and evaluate the costs and benefits of the measures over their useful lives in the program application based on industry accepted standards.

    (4) "Demand-side management pilot program" means a demand-side management program that is of limited scope, cost, and duration and that is intended to determine whether a new or substantially revised program or technology would be cost-effective.

SECTION 2.  Section 58-37-20 of the S.C. Code is amended to read:

    Section 58-37-20.  (A) The General Assembly finds and declares that expanding utility investment in and customer access to demand-side management programs to the maximum extent possible will result in more efficient use of existing resources, promote lower energy bills, protect the public health and safety, and stimulate economic development and employment, and is therefore in the public interest.

    (B) The South Carolina Public Service Commission may must adopt procedures that encourage require electrical utilities and encourage public utilities providing gas services subject to the jurisdiction of the commission to plan for and invest in all available energy efficiency and demand-side resources that are in cost-effective energy efficient technologies and energy conservation programs.  If adopted, These procedures must:  provide incentives and cost recovery for energy suppliers and distributors who invest in energy supply and end-use technologies that are cost-effective, environmentally acceptable, and reduce energy consumption or system or local coincident peak demand;  allow energy suppliers and distributors to recover costs and obtain a reasonable rate of return on their investment in qualified demand-side management programs sufficient to make these programs at least as financially attractive as construction of new generating facilities;  require the Public Service Commission to establish rates and charges that ensure that the net income of an electrical or gas utility regulated by the commission after implementation of specific cost-effective energy conservation measures is at least as high as the net income would have been if the energy conservation measures had not been implemented.  For purposes of this section only, the term "demand-side activity" means a program conducted by an electrical utility or public utility providing gas services for the reduction or more efficient use of energy requirements of the utility or its customers including, but not limited to, utility transmission and distribution system efficiency, customer conservation and efficiency, load management, cogeneration, and renewable energy technologies.

    (C) Each investor-owned electrical utility must submit an annual report to the commission describing the demand-side management programs implemented by the electrical utility in the previous year. The report must document the following:

       (1) achieved savings levels from the utility's portfolio of programs in the prior year, reported as a percentage of the utility's total annual sales;

       (2) program expenditures, including incentive payments;

       (3) peak demand and energy savings impacts and the techniques used to estimate those impacts;

       (4) avoided costs and the techniques used to estimate those costs;

       (5) the estimated cost-effectiveness of the demand-side management programs;

       (6) the net economic benefits of the demand-side management programs;

       (7) the number of customers eligible to opt out of the utility's demand-side management programs, the percentage of those customers that opted out in the previous year, and the annual sales associated with those opted out customers; and

       (8) any other information required by the commission.

    (D) To ensure prudent investments by an electrical utility in energy efficiency and demand response, as compared to potential investments in generation, transmission, distribution, and other supply related utility equipment and resources, the commission must review each investor-owned electrical utility's portfolio of demand-side management programs on at least a triennial basis to align with the review of each utility's integrated resource plan pursuant to Section 58-37-40. The commission is authorized to order modifications to a utility's demand-side management portfolio, including program budgets, if it determines that doing so is in the public interest. In evaluating a utility's portfolio of demand-side management programs to assure reasonableness, promotion of the public interest, and consistency with the objectives of Sections 58-27-845 and 58-37-20(A), the commission must ensure that:

       (1) the utility has demonstrated that it is pursuing all available and cost-effective energy efficiency and demand-side resources;

       (2) the utility's portfolio of demand-side management programs gives all classes of customers an opportunity to participate and gives due regard to the urgent need for demand-side management programs that serve the needs of low-income customers; and

       (3) utility demand-side management programs are cost-effective, except that:

           (a) demand-side management programs targeted to low-income customers need not be cost-effective if a utility's portfolio of demand-side management programs is cost effective as a whole;

           (b) the commission may waive cost-effectiveness considerations for resilient energy resource programs targeting critical facilities; and

           (c) the commission may approve demand-side management pilot programs that it determines are in the public interest.

SECTION 3.  Section 58-37-30 of the S.C. Code is amended to read:

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