INDEPENDENT REGULATORY REVIEW COMMISSION Notice of Comments Issued [30 Pa.B. 2544] Section 5(g) of the Regulatory Review Act (71 P. S. § 745.5(g)) provides that the designated standing committees may issue comments within 20 days of the close of the public comment period, and the Independent Regulatory Review Commission (Commission) may issue comments within 10 days of the close of the committee comment period. The Commission comments are based upon the criteria contained in section 5a(h) and (i) of the Act (75 P. S. § 745.5a(h) and (i)).
The Commission has issued comments on the following proposed regulations. The agency must consider these comments in preparing the final-form regulation. The final-form regulations must be submitted by the dates indicated.
Final-Form Submission Reg. No. Agency/Title Issued Deadline 57-212 Pennsylvania Public Utility Commission
5/4/00 4/4/02 Reporting Requirements for Universal Service and Energy
Conservation Programs16-22 Department of State 5/4/00 4/3/02 Campaign Finance Forms 16A-577 State Board of
Accountancy
5/4/00 4/3/02 Commissions and Referral Fees Pennsylvania Public Utility Commission
Regulation No. 57-212Reporting Requirements for Universal Service and Energy Conservation Programs May 4, 2000
We submit for consideration the following objections and recommendations regarding this regulation. Subsections 5.1(h) and (i) of the Regulatory Review Act (71 P. S. § 745.5a(h) and (i)) list the criteria the Commission must use to determine if the regulation is in the public interest. The Pennsylvania Public Utility Commission (PUC) must respond to these comments when it submits the final-form regulation. If the final-form regulation is not delivered by April 4, 2002, the regulation will be deemed withdrawn.
1. Section 62.2. Definitions.--Consistency with statute; Clarity.
NGDC--Natural gas distribution company
The regulation defines an NGDC as: ''[T]he public utility providing facilities and related services for the jurisdictional distribution of natural gas to retail customers.'' This definition differs from the definition of this term in the Natural Gas Choice and Competition Act (act) (66 Pa.C.S. § 2202).
We object to a definition in the regulation which differs from the definition in the act. Instead, the PUC should reference the statutory definition in section 2202 of the act.
Universal service and energy conservation
The definition of this term is identical to the definition included in section 2202 of the act. The PUC should consider simply referencing the definition in the act, rather than repeating the definition.
CAP benefits
The definition of this term references ''CAP credits,'' which is not a defined term. For clarity, the PUC should define ''CAP credits'' in the final-form regulation.
Additionally, the definition references ''arrearage forgiveness.'' It is our understanding that arrearage forgiveness is not an element of every NGDC's CAP program. Consequently, the PUC should consider adding ''if applicable'' after ''arrearage forgiveness.''
CARES benefits
This definition references ''kinds of referrals.'' For clarity, the PUC should specify the types of referrals encompassed by this definition.
Confirmed low-income residential account
This term is defined as ''Accounts where the NGDC has obtained information that would reasonably place the customer in a low-income designation.'' (Emphasis added.) For improved clarity, the PUC should specify the type of ''information'' that would qualify a customer for a low-income designation.
Low-income customer
This definition applies to a ''customer whose household income is at or below 150% of the Federal poverty guidelines.'' In its comments, the Office of Consumer Advocate (OCA) asserts that ''gross'' should be inserted before ''household income'' to be consistent with how the Federal poverty level is determined. We agree. The PUC should consider making the revision suggested by OCA. Additionally, the PUC should clarify how gross household income is determined, including the impact of food stamps, housing subsidies and other benefit programs.
2. Section 62.3. Universal service and energy conservation program goals.--Charity.
Subsection (a)
This subsection states that the PUC ''will determine if the NGDC meets the goals of universal service and energy conservation programs.'' However, the regulation is silent on how and with what standards the PUC will make its determination. Will the PUC rely only on the independent evaluation required by section 62.6? Additionally, what consequences apply to an NGDC if the PUC determines it has not met the universal service and energy conservation program goals? We request the PUC address these issues when it submits the final-form regulation.
3. Section 62.4. Universal service and energy conservation plans.--Economic and fiscal impact; Reasonableness; Clarity.
Paragraph (1) Plan submission
Subsection (a)(1) requires each NGDC to submit an updated universal service and energy conservation plan every 3 years. How was the 3-year time frame determined?
Paragraphs (5) and (6) Plan evaluation
Subsection (a)(5) outlines what steps will be taken if the PUC rejects an NGDC's updated universal service and energy conservation plan. Subsection (a)(6) describes the timeline the PUC will follow in evaluating a plan.
The sequence of these two subsections is confusing. For increased clarity, the PUC should consider reversing the order of paragraphs (5) and (6) in the final-form regulation.
Subsection (b) Plan contents
This subsection outlines the contents of universal service and energy conservation plans. We have two concerns with these requirements.
One, paragraph (3) requires NGDCs to report ''[T]he projected needs assessment.'' The phrase ''needs assessment'' is vague. For clarity, the PUC should define the phrase in this paragraph.
Two, paragraph (8) requests ''[A]n explanation of any differences between the NGDC's approved plan and the implementation of that plan.'' Additionally, the PUC is requiring submission of a plan that addresses those differences. Is the PUC asking for a comparison between the proposed plan and previously approved plans? Additionally, what must be included in the plan that addresses the differences? Is the PUC requiring a second plan, in addition to the NGDC's universal service and energy conservation plan? The PUC should explain.
4. Section 62.5. Annual residential collection and universal service and energy conservation program reporting requirements.--Economic and fiscal impact; Reasonableness; Clarity.
Duplication of existing reporting requirements
Section 62.5 requires NGDCs to ''report annually to the Commission on the degree to which universal service and energy conservation programs within its service territory are available and appropriately funded.'' To that end, the PUC is requesting data from the NGDCs that contains information on programs and collections.
We understand that some of the data the PUC is requesting is already provided through existing reporting requirements, such as the Chapter 56.231 Report, and the CARES, CAP and Hardship Fund reporting requirements. If so, the PUC should eliminate existing reporting requirements, which duplicate requirements set forth in this proposed rulemaking.
Subsection (a)(1) Collection reporting
Subsection (a)(1) states that ''NGDCs should report on the calendar year prior to the reporting year.'' The word ''should'' denotes that submitting reports on the stated time period is optional. We understand it is not. Regulations contain mandates which have the full force and effect of law. Optional provisions should not be included in regulations. Therefore, the PUC should replace ''should'' with ''shall.''
Subsection (a)(1)(iv)--(xii) Residential customers
Subsection (a)(1)(iv)--(xii) requires NGDCs to report various aspects of residential customers, residential revenues and residential accounts on a month-by-month basis. The report is to be submitted annually, with information outlined month-by-month.
We understand that collecting and reporting this information in the format required by the PUC could pose a significant expense to the regulated community in terms of upgrading their computer accounting systems. The PUC should estimate the cost of these requirements to NGDCs, and explain how these costs will be recovered. Also, the PUC should explain how the benefits derived from these reports justify the associated costs.
Subsection (a)(2)(i)(B) Demographics
The term ''family'' is used to define the number of low-income customers that reside in the same house. Use of the term ''family'' is inconsistent with the definition of ''low-income customer'' in this proposed rulemaking, as well as the Federal poverty guidelines. Both use the term ''household.'' Therefore, for consistency, the PUC should replace ''family'' with ''household.''
Subsection (a)(2)(ii)(A)(I) LIURP reporting data
Subsection (a)(2)(ii)(A)(I) simply states that LIURP reporting data is due to the PUC by April 30. The PUC should clarify whether that information is required on an annual basis for the preceding year.
Subsections (a)(2)(ii)(A)(II) and (a)(2)(ii)(D)(II)
We have two concerns regarding this subsection. First, the phrases ''production data'' in subsection (a)(2)(ii)(A)(II) and ''special contributions'' in subsection (a)(2)(ii)(D)(II) are unclear. For clarity, the PUC should consider defining these terms in this subsection, or in section 62.2. Definitions.
Second, subsection (a)(2)(ii)(A)(I) requires LIURP reporting data be submitted to the PUC by April 30 of each year. By contrast, subsection (a)(2)(ii)(A)(II) requires ''[A]ctual production and spending data for the recently completed program year and projections for the current year'' to be submitted annually by April 1 of each year. Why are these two reports not submitted concurrently?
5. Section 62.6. Evaluation reporting requirements.--Reasonableness; Need; Clarity.
Subsection (a) Independent third-party evaluator
Subsection (a) states, ''[E]ach NGDC shall have an independent third party conduct an impact evaluation of its universal service. . . .'' The term ''independent third party'' is unclear. The PUC should define this term in either this section, or section 62.2 (relating to definitions).
Subsection (b) Time period for review
This subsection requires evaluation reports ''at no more than 6 year intervals.'' We request the PUC explain how the 6-year time frame was determined and why it is a reasonable maximum time period between evaluations.
Subsection (c) Independent evaluation
According to this subsection, ''[T]o ensure an independent evaluation, neither the NGDC nor the Commission shall exercise control over the content or recommendations contained in the independent evaluation report.'' If the PUC does not specify the basic components to be included in the evaluation report, how can the PUC ensure a valid assessment of universal service and energy conservation programs?
It does not appear that specifying the general areas to be assessed would compromise the third-party evaluator's independence. Unless the PUC specifies the minimum content, evaluations among NGDCs could vary widely with regard to the subject areas. Further, without general requirements for evaluation content from the PUC, how will the PUC be able to determine if NGDCs are meeting the goals of universal service and energy conservation programs? The PUC should consider including general content requirements in the final-form regulation, or strike the phrase ''content or'' in the final-form regulation.
Subsection (d) Redundancy
This subsection requires the impact evaluation to be conducted by an independent third-party evaluator. However, the same provision is contained in subsection (a). Consequently, subsection (d) is unnecessary and should be deleted.
6. Section 62.7. NGDCs with less than 100,000 residential accounts.--Clarity.
Subsection (a) Applicability
This subsection exempts NGDCs with fewer than 100,000 residential accounts from the reporting requirements in sections 54.74--54.76. These sections' references, however, are a typographical error. The PUC should revise this subsection to state that these NGDCs are exempt from the reporting requirements in sections 62.4--62.6 of the proposed regulation.
7. Waiver of survey requirements.--Clarity.
In the preamble, the PUC states that it reserves the right to waive the requirements of this regulation upon petition by an affected party under 52 Pa. Code § 5.43 (relating to petitions for issuance, amendment, waiver or repeal of regulations). However, waivers are not addressed in the proposed regulation. The PUC should consider adding a section which cross-references the requirements for petitioning for a waiver in section 5.43.
Department of State Regulation No. 16-22 Campaign Finance Forms May 4, 2000
We submit for consideration the following objections and recommendations regarding this regulation. Each objection or recommendation includes a reference to the criteria in the Regulatory Review Act (71 P. S. § 745.5a(h) and (i)) which has not been met. The Department of State (Department) must respond to these Comments when it submits the final-form regulation. If the final-form regulation is not delivered by April 3, 2002, the regulation will be deemed withdrawn.
1. Section 177.9. Official forms.--Clarity.
The subsection (a) amendments would change the references to the titles of Forms DSEB-502 and DSEB-503, and add references to Forms DSEB-504 and DSEB-505. Although six forms are now named in section 177.9, only two are explained or referenced in other sections.
For example, the requirements associated with Campaign Financial Reports (Form DSEB 502) are explained in sections 177.1 (General) and 177.2 (Form and content of reports). Other forms referred to under section 177.9 are not similarly explained or cross-referenced to other provisions. This lack of guidance will be magnified when the forms themselves will no longer be available for reference as part of the regulation.
To address this problem, the final-form regulation should be amended to clarify who has to file and what must be filed under each of the forms listed under section 177.9(a). For those forms for which filing requirements already exist, appropriate cross-references should be made between section 177.9 and those relevant sections. For forms for which there are no accompanying filing requirements, a general description of the information should be provided. If that information is added to sections other than section 177.9, cross-references should also be made between those other sections and section 177.9.
2. Section 177.1. General.--Clarity.
We note that there is a typographical error in section 177.1(f) (General). Because subsection (f) applies to the need to file independent expenditure reports, the reference to filing Campaign Financial Report Form on DSEB 502 should be changed to refer to Independent Expenditure Reports on Form DSEB 505.
State Board of Accountancy Regulation No. 16A-557 Commissions and Referral Fees May 4, 2000
We submit for consideration the following objections and recommendations regarding this regulation. Subsections 5.1(h) and (i) of the Regulatory Review Act (71 P. S. § 745.5a(h) and (i)) list the criteria the Commission must use to determine if the regulation is in the public interest. The State Board of Accountancy (Board) must respond to these Comments when it submits the final-form regulation. If the final-form regulation is not delivered by April 3, 2002, the regulation will be deemed withdrawn.
1. Section 11.24(b) Notification to Board.--Need; Clarity.
This subsection requires a licensee ''who receives or intends to receive commissions'' to report that fact on the biennial renewal form filed with the Board. The Preamble indicates that the Board will monitor licensees for compliance. The Board should explain the need for this monitoring and how it will be implemented. Additionally, the Board should clarify what is meant by the phrase ''intends to receive commissions.''
2. Subsection (c) Cooperation with peer reviewer.--Reasonableness; Clarity.
This subsection states that a licensee, who receives commissions and is subject to peer review, will ''furnish peer reviewers with the necessary documentation.'' What is included in the phrase ''necessary documentation''? If it is ''workpapers'' under subsection (f), then this subsection should cross-reference subsection (f). If not, the Board should detail what is meant by ''necessary documentation'' in the final-form regulation.
3. Subsection (d) Related licensure/registration.--Reasonableness; Clarity.
This subsection provides that a licensee should acquire and maintain ''any license or registration required by another governmental or regulatory body for the purpose of receiving commissions.'' In discussing this subsection, the Preamble refers to registering with the National Association of Securities Dealers (NASD). The NASD is not a ''governmental or regulatory body.'' The Board should explain the intent of this subsection, include examples of the appropriate licensure or registration required by a regulatory body. The Board should also make revisions to match its intent concerning registration with private standard-setting bodies such as NASD.
4. Subsection (f) Workpapers.--Reasonableness; Clarity.
This subsection requires a licensee to maintain workpapers that document discussions with clients on investment strategies. We have two concerns with this provision. First, there is no indication of how long these records should be retained. Since failure to comply could lead to disciplinary action, a specific time period is necessary. Second, justification for the expense of retention and storage of documents is required. The Board should review and explain the need for retaining these documents. If retention is necessary, then the Board should consider setting a retention period that is consistent with other workpaper retention requirements with which licensees must comply.
5. Subsection (g) Attest clients.--Legislative intent; Policy issue that requires legislative review; Fiscal impact; Consistency with statute; Reasonableness; Need; Clarity.
This subsection extends the statutory prohibition to ''an individual or entity that can exercise significant influence over the operating, financial or accounting policies of the client.'' However, the statutory prohibition in subsection 12(p)(1) of the CPA Law (63 P. S. § 9.12(p)(1)) states:
(1) A licensee in public practice shall not for a commission recommend or refer to a client any product or service, or for a commission recommend or refer any product or service to be supplied by a client, or receive a commission when the licensee or the licensee's firm also performs for that client any of the following:
(i) An audit or review of a financial statement.
* * * * * (iii) An examination of prospective financial information. . . . [Emphasis added]
''Client'' in this subsection of the CPA Law is also referred to as ''attest client'' in the regulation. We have five objections to subsection (g) of the proposed regulation.
First, extending the statutory prohibition on commissions beyond a ''client'' to ''an individual or entity that can exercise significant influence'' over a client, is inconsistent with the intent of the General Assembly. In its comments, the House Professional Licensure Committee questioned whether there is statutory authority to expand the scope of this section to parties other than clients, regardless of whether these parties are in a position to exercise significant influence over clients. The House Committee's comments clearly indicate that the legislative intent was to limit this prohibition to transactions involving attest clients.
Second, given the legislative intent, any expansion of the prohibition is a policy matter requiring legislative review. Section 3(a)(11) of the CPA Law (63 P. S. § 9.3(a)(11)) allows the Board to establish rules of professional conduct. This provision may justify the Board's position. However, before the Board exercises its discretion in this manner, it should seek clarification from the General Assembly.
Third, this provision is likely to have a negative fiscal impact that will adversely affect competition in this Commonwealth. Numerous commentators, including the Pennsylvania Institute of Certified Public Accountants, have expressed concerns over the negative fiscal impact on current business practices that will occur.
Specifically, this provision could:
* Curtail or limit the current practice and ability of licensees to serve various clients; and
* Place Pennsylvania licensees at a competitive disadvantage with accountants licensed in other states that do not have the same restrictions as this proposed regulation.
Currently, Maryland, New Jersey and Ohio, allow licensed accountants to receive commissions and place no restrictions on situations involving parties with significant influence over attest clients. If the Board does not delete this provision, it should respond to these concerns.
Fourth, the Board's intent is unclear by including subsection 12(p)(1)(ii) of the CPA Law as an exception to the commission prohibition for situations involving parties with ''significant influence.'' This subsection of the CPA Law already establishes an exception. Why is it included in the regulation? Subsection 12(p)(1)(ii) of the CPA Law reads:
A compilation of a financial statement when the licensee expects, or reasonably might expect, that a third party will use the financial statement and the licensee's compilation report does not disclose a lack of independence.
The statutory exception applies if there is a disclosure of a lack of independence. Rather than mirror the statutory exception, the regulation expands the exception to include situations when there is no disclosure. It is our understanding that this was not the Board's intent. If so, the exception clause in the regulation should be deleted.
Fifth, subsection (g) is ambiguous in that it appears to have unlimited application. It states that the term significant influence ''includes'' three situations. The use of the word ''includes'' indicates that the definition of ''significant influence'' is not limited to just the three situations. Hence, the three situations do not provide a complete list or definition for the term ''significant influence.'' The term could refer to a number of different parties that may be connected to a client. If the term ''significant influence'' is retained in the final-form regulation, a definition must be added.
JOHN R. MCGINLEY, Jr.,
Chairperson[Pa.B. Doc. No. 00-855. Filed for public inspection May 19, 2000, 9:00 a.m.]
