Task Force on Consumer, Environment and EducationOctober 6, 1998, Richmond
The task force convened its third meeting to review environmental, energy efficiency and consumer protection issues. Its first two meetings covered public benefits charges related to electricity services for low-income households, consumer education, and customer aggregation.
The task force received presentations and submissions from consumer groups, environmental organizations, and companies or organizations offering renewable energy, energy efficiency and weatherization services. Additionally, the task force took up the issue of utility worker protection in the transition to retail competition.
EnvironmentAccording to the Southern Environmental Law Center, electrical generation has an enormous negative impact on the environment. The center said that electrical generation contributes nearly two-thirds of the sulfur dioxide and one-third of the nitrogen oxides, carbon dioxides and mercury emitted in the country. In Virginia, generation-related emissions are taking a heavy toll in the Shenandoah National Park on air quality, streams and trees. Additionally, nitrogen pollution from the air is contributing to the decline of the Chesapeake Bay. The center said that numerous violations of federal health standards for ozone smog across the state this year have exposed thousands of Virginians to health risks associated with air pollution levels.
The most commonly suggested options for improving the environment during restructuring are (i) emissions standards, (ii) renewables standards and (iii) environmental disclosure rules. Emissions standards would require all electricity suppliers to verify their fuels and emissions rates. If a supplier did not meet a predetermined standard, it would not be allowed to sell its power in Virginia. A renewables standard would require that a specified percentage of each generation provider's generation sources produce power through the use of renewable energy. Environmental disclosures would require all energy providers to disclose generation fuels and emissions rates to customers and prospective customers.
The Virginia State Corporation Commission's (SCC) staff believes that emissions standards would be difficult to monitor and enforce. Renewables standards would also be difficult to monitor, and—since Virginia has not imposed this requirement on electric utilities to date—SCC staff's view is that the transition to competition may not be an appropriate time to begin such a requirement. Environmental disclosures, while attractive, present the challenge of accumulating and verifying meaningful information. SCC staff noted, in particular, that this may not be useful information for power marketers that frequently change their resource supply.
The Southern Environmental Law Center, on the other hand, supports environmental disclosures, stating that such information could reduce the advantage a competitive market might otherwise bestow on older, dirtier plants—subject to less stringent federal emissions standards than those applicable to newer plants and thus operated at comparably lower costs—in a competitive market. The center also urged the task force to join Pennsylvania and other states in seeking Congressional amendments to federal clean air laws to eliminate emissions-reductions exemptions currently enjoyed by these older power plants. The AARP joined the center in supporting environmental disclosures.
The SCC staff and the Southern Environmental Law Center did agree, however, that so-called "green power" marketers (who charge a premium for energy said to be obtained from environmentally friendly generation sources) should have their claims concerning fuel use and emissions rates monitored and verified to prevent fraud. The SCC believes that the SCC or some other agency should have oversight responsibilities for such monitoring.
Energy Efficiency and ConservationThe SCC staff noted that the efforts of electric utilities to use energy efficiently fall into two broad categories: conservation programs and load management programs. Conservation involves reducing usage; load management focuses on shifts in usage to allow generating units to be used more efficiently. Collectively, conservation and load management are referred to as "demand side management," or DSM, programs A principal measure of such programs' effectiveness is expenses utilities avoid by reducing the need for new generation facilities.
SCC staff observed that DSM programs have become less attractive to utilities for many reasons, including (i) the reduced costs of new gas-fired generation proportionately reducing utility savings otherwise associated with not building new generation (avoided costs), (ii) reduced planning horizons, making utilities reluctant to commit capital unless absolutely necessary (DSM programs require lengthy payback periods), and (iii) downward pressure on power prices, which eliminates some DSM programs as a consequence.DSM Programs
The Southern Environmental Law Center, however, believes that DSM programs are imperative. Utilities' current focus on short-term prices has resulted in a marked de-emphasis of DSM and renewables, a center representative said, citing Virginia Power's DSM projections as a case in point. The amount of DSM-related summer peak reductions the company projects out to the year 2010 has dropped from 1477 megawatts to 151 megawatts.
The center urges the implementation of a public benefits charge to fund both DSM programs and renewable technology programs. The center views a public benefits charge-funded DSM and renewables program as a means of ensuring that energy efficiency and renewables are not lost during Virginia's transition to retail competition. The AARP also expressed broad support for an affordable, cost-effective and efficient program to ensure energy conservation and environmental protection.
The SCC staff, however, does not support a DSM program-related systems benefit charge at this time. SCC staff recommends that Virginia wait to see what competition brings to the energy services market. With appropriate price signals, DSM programs may flourish. Additionally, innovation in a competitive market could bring new energy efficiency products into the market without government promotion or intervention, SCC staff said.
Energy conservation for many low-income households in Virginia has been realized through services provided by the Weatherization Assistance Program, or WAP. The president of the Association of Energy Conservation Professionals (a trade association representing contractors who provide weatherization services on behalf of WAP) told the task force that the 20-year old program earns its keep and merits additional state-based funding (needed due to declines in federal Department of Energy funding). He recommended the imposition of a public benefits charge to fund energy efficiency programs generally and the WAP program in particular. The Virginia Council Against Poverty also expressed its support for public benefits charges that would benefit weatherization programs such as WAP and other energy efficiency programs.Weatherization
VMH, Inc., believes that Virginia should undertake several actions to encourage energy efficiency in conjunction with restructuring. These actions include unbundling electricity pricing, increasing the state building efficiency codes, and establishing portfolio standards. This organization also supports implementing emissions reductions credits for energy efficiency.Other Strategies
Energy Consultants, Inc., a Virginia Beach-headquartered company marketing computerized energy demand control equipment, told the task force that its equipment reduces energy consumption in businesses and in larger homes with high levels of electricity usage. The company is representative of new energy services companies entering the energy market. Energy Consultants' computerized demand controller "smooths out" demand patterns placed on power companies, a company representative said, with minimal inconvenience to customers using the equipment.
The key to Energy Consultants' presence in the market is an SCC-approved Schedule 1S, which separates the charge for electricity into two parts. One charge is for the kilowatt hours consumed; the other charge is for the peak demand placed on power company during the month. Energy Consultants believes this technology benefits both the customer and environment.
Representatives of the solar energy industry appeared before the task force to give this industry visibility in Virginia's restructuring study and to urge the adoption of restructuring legislation providing due emphasis on solar energy—part of a global renewables market showing 50 percent annual growth in recent years.Solar Energy
A representative of Solarex (a business unit of Amoco/Enron Solar) reminded task force members that Virginia is already playing a role in the development of solar energy. Solarex's new Toano, Virginia, solar electric module factory is in production, thanks to a statutory incentive grant program. Additionally, another solar facility in Cape Charles, Virginia, is producing solar electric roof shingles, incorporating cells and modules produced by Solarex.
Solarex emphasized the aggressive steps taken in other Eastern states to promote renewables, including the passage of legislation in New York and Massachusetts establishing net metering and tax credits linked to the purchase of rooftop solar applications. Solarex's representative urged the Virginia General Assembly's adoption of (i) one or more policy goals for renewable energy and (ii) designation within its restructuring legislation of the entity responsible for the development and advocacy of steps to implement renewable energy policy goals. An American Solar Energy Society representative also appeared before the task force to urge restructuring legislation supportive of the solar industry.
Ogden Energy Group, which owns and operates two waste-to-energy facilities in Northern Virginia, also weighed in on the renewables issue. Ogden owns two facilities, in Alexandria and Lorton, which convert nearly 4,000 tons of trash per day into 100 MW of electricity—enough to power 100,000 homes, according to the company's representative. The company's electricity is currently sold to Virginia Power pursuant to federal PURPA legislation.Waste-to-Energy
Ogden believes that the General Assembly should include language in its restructuring bill calling for a renewables portfolio standard or similar mechanism. Ogden urged that any such standard include waste-to-energy, or WTE, in its definition of renewables. Ogden emphasized the dual social purpose of WTE and that while WTE facilities generate clean, renewable energy, their primary focus is to safely dispose of municipal solid waste. Policies that fail to recognize this, the company said, may have the unintended consequence of transferring the cost of electricity restructuring from large industrial users to residential ratepayers through their garbage bills. The company representative noted that WTE emissions are slightly higher than natural gas but much lower than coal or oil.
Consumer ProtectionSCC staff stated that the ultimate measure of consumer protection is to ensure that consumers are not made worse off by making the transition from regulation to retail competition. As they have emphasized before the joint subcommittee and other task forces, the SCC staff stated that the most critical consumer protection issue is the potential for market power abuse by investor-owned utilities; that is, the power of an incumbent (based on owning all the transmission and generation facilities within its service territory) to charge monopoly prices for electric services.
To counter possible market power abuse, the SCC recommends the following remedies until a determination is made that competition has developed sufficiently to replace regulatory protections: (i) extended rate caps for incumbent utility customers who do not choose an alternative supplier and (ii) retention of regulatory control over generation assets. Additional SCC staff-recommended consumer protection measures include (i) universal service protections offered through providers of last resort and (ii) licensing/registration of competitive energy providers to ensure financial viability and technical capability.
The SCC also recommends standards of conduct to address market practices, consumer complaint resolution, billing and collection, and disconnections and late fees. Since not all consumer protections necessary in a competitive market can be anticipated at this time, staff recommends flexibility in developing standards of conduct and consumer protection measures.
The Virginia Citizens Consumer Council (VCCC) joined the SCC staff in urging consumer protection against rate shocks. The VCCC recommends indexing residential rate reductions to large customer rate reductions. According to the VCCC, this "cap the gap" provision is part of Connecticut's restructuring law. The VCCC also believes that the SCC's authority to cap rates should remain in place until there is a finding that the electricity market is effectively competitive and that the rates are the same or lower than rates set by traditional rate-of-return regulation. The VCCC also believes that rates should be capped at least as long as stranded costs are being collected from customers.
The VCCC also advocates restructuring legislation establishing fair marketing and sales practices applicable to all participants in Virginia's electricity market. For starters, the VCCC said, all such market participants should either be made subject to (i) the current provisions of the Virginia Consumer Protection Act (VCPA) or (ii) VCPA-style protections incorporated into restructuring legislation. Under current law, public service companies are exempted from the VCPA's provisions. The VCCC and the AARP advocated protections against abusive marketing practices and urged legislation addressing transaction safeguards, customer service standards, privacy protection, nondiscrimination, and post-purchase remedies.
The Virginia Farm Bureau Federation urged the task force members to take into consideration the unique circumstances and needs of Virginia's farming communities. As a general proposition, the bureau requested that no restructuring plan proceed without making every effort to minimize negative impacts on farms and rural areas. Farmers and rural businesses need reliable, steady sources of power—particularly for greenhouses with timed watering systems and air circulators and milk cooling tank refrigeration systems. Emergency power, according to the bureau, should not be priced above the customer's contracted price. The bureau expressed support for rural electric cooperatives, opposing any plan to convert rural electric cooperatives into investor-owned or private power systems.
Utility Worker ProtectionA representative of the International Brotherhood of Electrical Workers (IBEW), a labor union representing utility workers employed by Virginia's electric utilities, asked the task force to also examine the issues related to utility worker qualifications and retention in the transition to restructuring. The task force agreed to incorporate these issues in its report to the joint subcommittee, offering stakeholders and participants an opportunity to comment on issues raised by the IBEW, including the possibility of a systems benefits charge to help in the retraining or outplacement of displaced utility workers.
Future Task Force ActivityIn preparing to present a report of its activities and findings to the full joint subcommittee, the task force asked staff to prepare a series of policy position questions related to seven areas addressed by the task force: public benefits charges related to electricity services for low-income households, consumer education, customer aggregation, environment, energy efficiency, consumer protection, and utility worker protection.
Stakeholders and other interested parties have been asked to respond to these questions for the purpose of preparing a comparison table, or matrix, outlining the parties' positions on key questions falling under these seven topics. This matrix, together with a staff summary of the key areas of agreement and disagreement evident in the matrix, will be reviewed by the task force at its next meeting on October 27. Once approved, these documents will comprise the report of the task force to be presented to the joint subcommittee at its November 10 meeting in Reston.
The Honorable Kenneth R. Plum, Co-Chairman
The Honorable Jerrauld C. Jones, Co-Chairman
Legislative Services contact: Arlen Bolstad