SJR 91

Task Force on Structure and Transition

September 11, 1998, Richmond

The task force met to review drafts of its report to the Joint Subcommittee Studying Electric Utility Restructuring summarizing key restructuring and transition issues, and the positions of stakeholders and interested parties concerning them. Task force staff presented a matrix summarizing the issues and parties' positions, plus an executive summary of key areas of agreement and disagreement on important restructuring issues evident in the staff matrix. The task force members and interested parties then met in a roundtable format to review the reports and to continue the debate over key areas of policy disagreement. The reports covered a broad range of issues, including commencement dates for retail competition, default providers, the role of the SCC in ISO development, and market power.

Commencement of Retail Competition

A key issue generating much debate is the kick-off date for retail competition. Some parties, including the Alliance for Lower Electricity Rates Today (ALERT) and the Virginia Committee for Fair Utility Rates, both coalitions of large industrial and commercial electricity customers, favor an aggressive approach, with ALERT favoring full retail competition by 2001 (with industrial customers going first) and the committee by 2002. However, the AARP and the Virginia Citizens Consumer Council (VCCC), in comments submitted following the meeting, said that no service should be made competitive until effective competition for that service exists in the market. Virginia's investor-owned electric utilities generally favor transition periods, culminating in full retail competition for generation services by 2004–2006.

Default Providers and Suppliers of Last Resort

One critical issue concerns the assignment of electricity customers to generation suppliers when, following the advent of retail competition, (i) customers fail or neglect to choose a generation supplier or (ii) customers are unable to obtain generation services. Suppliers for each of these categories are called "default providers" and "suppliers of last resort," respectively. A related category of necessary post-restructuring service is emergency services, to be provided to customers when their generation supplier fails to deliver on electrical load commitment.

Nearly all of the parties believe that incumbent utilities should furnish both of these services—and emergency services—in their current distribution service territories. However, others (including the Southern Environmental Law Center and the AARP) believe that these services should be bid competitively. The Virginia Center Against Poverty and Washington Gas support a third position in which default services would be bid competitively following the transition to retail competition.

Role of the SCC in ISO Development

The parties agree that regional independent system operators (ISOs) will be necessary to operate a regional transmission grid in a restructured market. Currently, all of Virginia's investor-owned utilities are participating in the formation of ISOs before the Federal Energy Regulatory Commission (FERC). A continuing topic of discussion has been the role of the Virginia State Corporation Commission (SCC) in determining when a Virginia utility may participate in an ISO and what role the SCC should play thereafter.

ALERT and the Virginia Committee for Fair Utility Rates believe that the SCC should continue to have oversight and enforcement authority over utilities' ISO involvement. ALERT, for example, believes that any change in structure or operation of an ISO should trigger an SCC review to determine whether continued participation by Virginia utilities is appropriate. On the other hand, Virginia Power, Allegheny and Consolidated Natural Gas (CNG) think that once Virginia's utilities are ISO members, further concerns about ISO participation should be directed by the SCC to FERC.

Market Power

Incumbent utility market power following restructuring is an issue of continuing discussion and concern. The cooperatives and municipal power suppliers, in particular, have voiced strong concerns about potential market power resulting from west-to-east transmission constraints.

ALERT and the investor-owned utilities believe, in general, that market forces (the construction of merchant plants, in particular) will ultimately resolve market power associated with transmission constraints. Additionally, AEP-Virginia advocates transmission line construction in its service territory as a means of alleviating some existing constraints.

However, the electric cooperatives contend that must-run generation in transmission-constrained areas should be regulated and priced by the SCC on a cost-of-service basis until any such constraint is eliminated. AEP-Virginia, Allegheny, and CNG concur. Virginia Power, on the other hand, believes that pricing of must-run units should be addressed by FERC, which can establish a rate based on cost and a reasonable return.

Summary Available

The issues discussed above are just a few of the issues that the task force will review in its report to the joint subcommittee on September 23 in Roanoke. The staff matrix and executive summary (identifying and discussing these key issues) are posted on the joint subcommittee's web site at

The Honorable Thomas K. Norment, Jr., Co-Chairman
The Honorable Clifton A. Woodrum, Co-Chairman
Legislative Services contact: Arlen Bolstad