(2) A COMPETITIVE TRANSITION CHARGE, OR OTHER APPROPRIATE
MECHANISM THAT THE COMMISSION DETERMINES, MAY BE INCLUDED FOR
CUSTOMERS WHO ACCESS THE TRANSMISSION OR DISTRIBUTION SYSTEM OF THE
ELECTRIC COMPANY IN WHOSE DISTRIBUTION TERRITORY THE CUSTOMER IS
LOCATED. THE COSTS AUTHORIZED BY THE COMMISSION TO BE RECOVERED SHALL
BE ALLOCATED TO CUSTOMER CLASSES IN A MANNER THAT, AS NEARLY AS
REASONABLY POSSIBLE, DOES NOT EXCEED THE COST OF PROVIDING THE SERVICE
TO THOSE CLASSES OF CUSTOMERS, AVOIDING WHERE REASONABLY POSSIBLE ANY
INTERCLASS OR INTRACLASS CROSS SUBSIDY.

(3) (I) THE COMPETITIVE TRANSITION CHARGE MAYBE INCLUDED ON
BILLS TO CUSTOMERS FOR A PERIOD DETERMINED BY THE COMMISSION.

(II) THE COMMISSION MAY ESTABLISH RECOVERY PERIODS OF
DIFFERENT LENGTHS FOR EACH ELECTRIC COMPANY AND FOR DIFFERENT
CATEGORIES OF TRANSITION COSTS.

(4) A COMPETITIVE TRANSITION CHARGE, OR OTHER APPROPRIATE
MECHANISM DETERMINED BY THE COMMISSION, MAY NOT APPLY TO ANY ON-SITE
GENERATED ELECTRICITY TO THE EXTENT OF:

(1) THE EXISTING FACILITIES' INSTALLED GENERATING CAPACITY
AS OF JANUARY 1, 1999;

(II) THE GENERATING CAPACITY OF AN EXISTING FACILITY TO BE
INSTALLED UNDER A LEGALLY BINDING CONTRACT:

1. EXECUTED ON OR BEFORE JANUARY 1, 1999; OR

2. EXECUTED ON OR BEFORE SEPTEMBER 29, 1999, IF THE
COMMISSION, ON A CASE BY CASE REVIEW OF THE EVIDENCE, DETERMINES THAT
NEGOTIATIONS IN GOOD FAITH CONCERNING THE CONTRACT WERE ONGOING AS OF
JANUARY 1, 1999; OR

(III) FOR A FACILITY WITH A CAPACITY OF 500 KILOWATTS OR LESS:

1. THE FIRST 80 MEGAWATTS OF THE AGGREGATE
STATEWIDE GENERATING CAPACITY OF ON-SITE GENERATING FACILITIES;

2. THE GENERATING CAPACITY OF THE FACILITY IF THE

FACILITY:

A. IS INSTALLED BETWEEN JANUARY 1, 2000 AND DECEMBER

31, 2003;

B. DERIVES ELECTRICITY FROM FUEL CELLS,
PHOTOVOLTAICS, WIND MACHINES, OR MICROTURBINES; AND

C. HAS AN ENERGY CONVERSION EFFICIENCY GREATER

THAN 40%; OR

3. THE GENERATING CAPACITY OF THE FACILITY IF THE