Chair Eric Blank convened the Public Utilities Commission's deliberative meeting to address rules for the Grid Modernization Adjustment Clause, asking advisory staff to walk commissioners through the utility's eligibility proposals for new distribution cost recovery.

Advisory staff Ian Fetters summarized PESCO's filing, saying the company seeks recovery of distribution costs in 2026through the GMAC and grouped those costs into four buckets: (1) 2024and 2025 distribution activities currently in the Transmission Cost Adjustment's distribution component (TCAD); (2) equipment to advance distribution activities (EADA); (3) Type 1 distribution activities the company characterizes as advancing statutory goals; and (4) Type 2 activities that would be subject to discretionary, performance-conditioned recovery.

Fetters told the panel the company calculated a roughly $46.2 million annual revenue requirement tied to 2024and 2025 distribution activities that it proposed to roll into the GMAC. Staff opposed rolling those TCAD dollars into the GMAC but commissioners concluded the choice is largely procedural because the TCAD tariff resets to zero once those amounts are folded into base rates. "I'd say there's a 3-0 vote, finding that the GMAC is the appropriate place for this spending, but we recognize ... flexibility depending on procedural and administrative necessities," Chair Blank said when he directed staff to draft the order.

Commissioners also agreed that virtual power plant (VPP) administrative costs are recoverable through the GMAC consistent with Senate Bill 24218, and they directed that the equipment-to-advance-distribution-activities (EADA) revenue requirement currently in the TCAD should be moved into the GMAC as well. Ian Fetters told commissioners the EADA revenue requirement is modest (about $5.4 million currently) and that rolling it into the GMAC would primarily change its accounting location rather than its ultimate cost to customers.

At the same time, commissioners unanimously rejected PESCO's proposed mechanical application of a performance-based framework for Type 2 costs. The company's proposal would have included all Type 2 investments at 100% projected value in the November advice-letter filing and then clawed back a portion after the fact if the company failed to meet performance screens. Commissioner Gellman said the statute's language is permissive for Type 2 recovery and that the commission should link recovery to demonstrated performance rather than advance prospective payment with later clawbacks. Commissioners emphasized they would use the discretion under Section 7(b)(3) of the grid modernization statute to require a more deliberate, transparent process for any performance-based accelerated recovery.

Commissioners instructed staff to develop a follow-up process (proposed as a June 1, 2026 filing with a notice-and-comment period before the November advice-letter filing) to set the appropriate performance screens and the level of any allowable accelerated recovery. That process will also address how much Type 2 spending, if any, may be eligible for accelerated recovery for 2027 and 2028, and whether a capped or project-specific approach to GMAC-eligible capital is preferable.

The commissioners did not adopt numeric caps in the meeting; they asked advisors to return with precise drafting options for the final order. They also said 2026 Type 2 spending would not receive accelerated GMAC recovery absent clear, pre-existing performance criteria.

Ending: The commission left open a path for the company to obtain GMAC recovery for additional distribution investment, but only after the utility demonstrates improved performance under screens the commission will set through a short, targeted process. The drafting of precise revenue caps, timelines and the mechanics of any accelerated recovery was delegated to staff for the final order.