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) 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 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

1. (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.