The commission shall require each electric corporation that purchases electricity from an energy business as defined in subdivision (c) of section three hundred one-i of the tax law (1) that is a co-generation facility, as such term is defined in subdivision two-a of section two of this chapter, or (2) that is a qualifying facility, as such term is defined by section two hundred one of the Public Utility Regulatory Policies Act of 1978 ( Public Law 95-617 ) 1 that is a co-generation facility, or (3) that has executed or will execute a contract for the sale of electricity through negotiation with an electric corporation or an auction conducted by an electric corporation pursuant to a competitive bidding plan approved by the commission, to pay, in addition to payments made for such purchased electricity under a contract with such electric corporation, (i) an amount equal to the tax imposed under article thirteen-A of the tax law 2 with respect to each Mcf of natural gas used to generate such electricity and (ii) with respect to contracts for the sale of electricity and/or steam executed prior to January first, two thousand, any sales and compensating use taxes imposed on natural gas used in the production of electricity and/or steam by or pursuant to the authority of section eleven hundred seven or subdivision (a) of section twelve hundred ten of the tax law , unless such sales and compensating use taxes imposed are otherwise accounted for in the payments the electric corporation makes under that contract; provided, however, that any such amount paid by such electric corporation shall be recovered through a fuel adjustment mechanism authorized by the commission; provided, further, that such amount shall not be recovered from charges for residential use provided by such electric corporation.
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