SB 1269

Legislative Transition Task Force of the Virginia Electric Utility Restructuring Act

August 16, 1999, Richmond

The Legislative Transition Task Force met for the third time to examine four issues delegated to it by § 56-595: utility worker protection during the transition to retail competition, energy assistance programs for low-income households, energy efficiency programs, and renewable energy programs. The task force also heard an update on the Consumer Advisory Board and on the SCC's implementation of the Virginia Electric Utility Restructuring Act.

Consumer Advisory Board Update

Delegate Plum, liaison between the task force and the Consumer Advisory Board, reported that the CAB now has its full membership of 17. The members represent a range of electricity consumer interests, from the general public to small business owners to large corporations.

SCC Implementation of the Act

The SCC gave an update on its progress in implementing the Restructuring Act in a number of areas. The commission filed comments on August 16 with the Federal Energy Regulatory Commission (FERC) rulemaking proceedings regarding rules for regional transmission organizations (RTOs). The SCC supports the development of RTOs, and urged the FERC to require true independent operators for RTOs, to give RTOs system reliability planning responsibility and to establish complaint resolution and rules enforcement mechanisms. In its comments, the SCC also cited the complementary roles of state and federal regulation and reminded the FERC of state law not inconsistent with the Federal Power Act.

The commission is reviewing a hearing examiner's report regarding interim rules for pilot programs. Hearings on proposed pilot programs begin September 8 for Virginia Power and November 9 for AEP. The Electronic Data Transfer working group is developing EDI standards for retail choice. The development, testing and implementation of EDI standards will occur in phases, but the working group wants as much of the effort as possible to be complete on the first day of retail choice implementation. The SCC is also preparing its report on the potential for competitive metering and billing services and will provide it to the task force by the September 1 deadline.

The commission recently mailed a questionnaire to Virginia stakeholders to identify potential technical or logistical barriers to the integration of net energy metering into electricity distribution. The questionnaire addressed advantages and disadvantages, additional electrical relays and protective devices required for installation, safety and performance standards in addition to those currently required by law, and other issues regarding net energy metering implementation. Finally, the commission is working with various outside resources to develop an education program for consumers during the period of transition to competitive generation. The Restructuring Act requires the commission to report its findings and recommendations on or before December 1, 1999, and the commission expects to meet that deadline.

Worker Protection

The Restructuring Act directs the task force to examine electric utility worker protection during the transition to retail competition. The SJR 91 joint subcommittee, through its Consumer, Environment and Education Task Force, heard comments last year regarding the protection of Virginia's electric utility workers in the context of restructuring.

The International Brotherhood of Electrical Workers (IBEW) appeared several times last year to recommend statutory language concerning: minimum staffing levels for reliability; continuing utility worker employment at generation units; protecting generation unit employees' terms and conditions of employment; worker qualifications; quality, safety and reliability standards for new market entrants; and mandatory training and skill standards for all electrical workers. The Consensus Group said last year that programs offering education, retraining and outplacement services should be established to assist electric utility employees directly affected by the implementation of competition in the generation and supply of electric energy.

States adopting restructuring laws have considered a number of issues relating to the protection of electric utility workers who may be displaced with the implementation of competition. These protective measures include: requiring utilities to provide retraining and education of displaced employees; severance and reemployment packages; continuation of employees' licenses and health insurance benefits; and protection of employee jobs in the event of a merger or acquisition of the utility.

Stakeholder Positions on Worker Protection
A representative of the IBEW expressed his concerns for Virginia's electricity workforce. Workload is increasing due to added customer base and layoffs of other electric utility employees, as well as structural changes at generation units to increase efficiency and reliability. The onset of competition will result in the closing of some generation units, with the loss of jobs caused by statutory and regulatory changes affecting a utility's business decisions. A brief summary of program elements established by other states was combined with statistical data showing the number of jobs lost nationwide due to plant closings and/or mergers after restructuring.

A senior vice president of Virginia Power urged the task force and CAB to assist utility workers displaced due to restructuring by providing education and retraining services through state programs. Virginia Power also emphasized new market entrants' workforce training to ensure safety at utility plants.

AEP called the attention of the task force to AEP's comments from last year regarding worker protection and the other issues presented. AEP feels the SCC should be handling the issue of worker protection and asked the task force to look at the following criteria: (i) Does development of competition in the generation services market, combined with regulation of transportation and distribution, truly require substantial change in existing public policy to expand programs addressing these issues? (ii) If so, how should programs be implemented to be most efficient and effective in meeting these needs? (iii) Do adequate regulations exist for programs to address these issues? (iv) Do the proposals to fund programs through nonbypassable wires charges recognize that the utility's current rate structure, which is capped during the period provided by the act, does not now provide for their payment? In response to a question about worker staffing standards for generation, AEP indicated that it does have standards that are developed through federal and state regulations as well as collective bargaining agreements.

The Direct Current Electrical Association recommended that Virginia implement a certification program for plant operators under the National Institute for the Uniform Licensing of Power Engineers (NIULPE) and expressed the belief that the NIULPE program would provide plants with safe and efficient operators.

Energy Assistance Programs

The Consumer, Environment and Education Task Force under SJR 91 examined the issue of assistance programs for low-income households. Currently, a number of utilities have voluntary programs, such as Virginia Power's EnergyShare and AEP Virginia's Neighbor-to-Neighbor, to provide emergency energy assistance to low-income households in need.

The majority of states with restructuring legislation have considered low-income assistance in the context of restructuring, and have either addressed the issue by statute or have appointed study committees to review potential methods for implementing such programs. Some states have set statutory funding amounts to cover the cost of these programs; others have required system benefits charges to be imposed, based on kilowatt-hour usage. Some of these states have set a statutory rate; others require the state regulatory authority to determine the amount of the charge. A handful of states have left the entire administration of the assistance programs, including funding, to the appropriate regulatory authorities. Two states are in the same position as Virginia: they have passed a restructuring act but are still studying the issue of low-income assistance and have not yet determined how to address the issue.

Staff briefed the task force on a number of features of various low-income assistance programs of other states, including: (i) allowing municipal utilities and cooperatives to opt out of funding requirements for a universal service program, with customers of those utilities not eligible to receive benefits under the program; (ii) allowing utilities to receive credits for their costs in implementing these programs; (iii) crediting excess funding at the end of each year back to consumers, or (iv) requiring excess funds, interest earned and penalties assessed utilities to be placed in a fund.

Current Assistance Programs
The deputy secretary of commerce and trade provided the task force with an overview of the current state programs for energy assistance. The Low Income Home Energy Assistance Program (LIHEAP), which is federally funded, provides bill payment assistance, crisis assistance (e.g., purchasing fuel or space heaters in winter) and cooling assistance (e.g., paying for electricity to operate air conditioning). In recent years, between $20-26 million was provided in aid under this program. There are no excess funds at the end of each year; the demand exceeds funding availability. The program is administered by the Department of Social Services, which attempts to coordinate among state, local and private industry programs to determine need and allocate resources. Congress is currently considering legislation that would require states to provide a 25 percent match of federal funding for the LIHEAP program.

The other state-administered energy assistance program is the Weatherization Assistance Program (WAP). This program, administered by the Virginia Department of Housing and Community Development and operated through a network of weatherization providers, provides equipment and services to make homes of lower income families more energy efficient, to minimize energy consumption and therefore household expenses. Up to 15 percent of LIHEAP funds are set aside for WAP. Funding has ranged between $4.9 and $6.6 million in recent years.

Stakeholder Comments
Current programs are administered by a variety of agencies, which may hinder some Virginians from receiving the assistance they need. A single point of contact would be more efficient and helpful to Virginians in need, according to Virginia Power. Programs generally assist households on an emergency basis and only during the heating season. Funding is at risk, and must be shared by both LIHEAP and WAP. While private programs are successful and do help many families, a statutory program would help citizens with their utility bills and consumption. The Restructuring Act would benefit from a statement of state policy endorsing a right of access to affordable basic energy services.

The Virginia Poverty Law Center's representative stated that most states implementing restructuring have provided for programs in their statutes because they recognize the need to protect all consumers' access to affordable electricity. The VPLC recommends that electric utilities be required to provide discounted transmission rates for low-income consumers, with the costs of such discounts included in the rates charged to all other consumers. The goal should be that no low-income customers should pay more than six percent of their income for electric utility usage.

The AARP expressed support for a statutory year-round universal service policy to assist low-income families with energy resources. Eligibility could be determined by federal poverty guidelines, and assistance should be provided as a credit on the utility bill, rather than a cash payment. Funding could be provided by a charge per kilowatt hour levied on electric suppliers or a portion of revenue from the "special regulatory tax rate" as alternatives to the nonbypassable wires charge. AARP recommends that, at a minimum, the task force should introduce legislation ensuring universal service and authorizing the SCC to create a program to assist low-income households with their energy service and designate a funding source.

Virginia Council Against Poverty (VACAP) urged the task force to add low-income energy assistance programs to the Restructuring Act. The decline in federal funding for programs and the increase in state programs around the country may lead to the demise of the LIHEAP program. VACAP urged Virginia to join the mainstream of states with restructuring legislation and provide for low-income Virginians' access to electricity.

Members of the task force asked for data regarding the extent of assistance provided by government and private sector programs to low-income families in meeting their energy needs, and to quantify the extent to which these current programs fail to meet the need for such assistance.

Energy Efficiency and Renewable Energy Programs

Two types of energy efficiency programs were addressed by the task force: weatherization and demand side management. Weatherization assistance for low-income families arguably fits into either low-income assistance or energy efficiency, because the results of such programs help low-income families reduce waste of energy resources and thus reduce utility bills.

Efforts to promote electric utility energy efficiency fall into two broad categories: conservation programs and load management programs, which are collectively referred to as demand side management (DSM) programs. Conservation involves reducing usage, while load management allows generating units to be used more efficiently by shifting usage patterns. The reduced costs of new gas-fired generation, shortened planning horizons and declining power prices have led to the elimination of some DSM programs.

Sixteen of the 20 states with restructuring legislation have established funding for energy efficiency and/or conservation programs through a "system benefit charge" or similar mechanism. Several of these specifically provide that a portion of the revenue generated from a line charge for low-income assistance programs is to be used for energy efficiency programs for low-income families, or weatherization. Some states have adopted provisions imposing systems benefit charges, wire charges, or similar fees to fund energy efficiency, conservation, and/or demand side management programs.

Advocates of renewable energy have argued that retail competition for generation (with its emphasis on price) may extend the operation of older, less efficient power plants entitled to emit at higher levels under federal clean air laws. Restructuring legislation enacted in many other states has attempted to encourage the use of renewable energy sources by (i) instituting wires charges to fund renewable energy initiatives, (ii) adopting a renewable portfolio standard, or (iii) requiring a disclosure of information regarding the type, emissions, price volatility, or other aspects about generation sources. A renewables portfolio standard, requiring a fixed percentage of generation offered for sale to be generated from renewable sources, may counter these effects. A second policy favored by advocates of renewable energy is a systems benefit charge used for research and development of renewables technologies, incentives for implementing renewables, and consumer education. A third proposal to increase the use of renewables is to require electricity suppliers to disclose data about their generation sources, which could possibly reduce the competitive advantage of operating older, dirtier plants at lower costs due to less stringent emissions limitations. The Restructuring Act, at § 56-592, requires the SCC to establish billing information standards and standards for marketing information that requires suppliers and aggregators to disclose, to the extent feasible, fuel mix and emissions data on at least an annual basis.

Stakeholder Positions
The deputy general counsel for the SCC presented arguments for and against energy efficiency programs. One concern about implementing such programs is that they would actually increase the short-term costs of electricity and defeat one purpose of implementing competition--to make electricity cheaper. Arguments in support of these programs include the concerns that without such programs, resources face (i) external environmental costs not reflected in fossil fuel costs, (ii) retail transaction costs such as marketing associated with sales of energy efficiency services, (iii) limited access to financing capital, and (iv) institutional barriers such as unfamiliarity with renewable energy by major industry participants. Supporting these programs could provide long-term economic benefits and societal benefits. Investments in energy efficiency and renewables can serve the purpose of the Restructuring Act; that is, to provide for diverse suppliers of varied electric products with competitive prices and numerous substitutes for reliability.

The DCEA also addressed energy efficiency programs in Virginia, indicating that they should be designed to give citizens and plant owners greater control over power generation, protection from power interruptions and more energy information about equipment used for on-site energy production. The DCEA recommended requiring all inverters and transformers to display their coefficient of energy conversion and loss of energy so that producers and consumers can make informed energy decisions, including the option to use solar and fuel cell energy sources. The DCEA also recommended that electric power lines be buried underground, because above-ground lines are overloaded, inefficient and hazardous.

VACAP shared Virginia Power's concern that funding may severely limit weatherization programs, with the demand for such programs already exceeding the resources available. The current program is not advertised or promoted and the demand still far outweighs available funding. VACAP recommended state-sponsored programs for weatherization at increased funding levels and replacement of inefficient appliances and lighting for low-income families to reduce electricity consumption and therefore electric bills.

The Association of Energy Conservation Professionals provided the task force with statistical information about weatherization programs nationwide. There is currently a three-month to five-year waiting list for weatherization. Nationally, only 16 percent of eligible homes have been weatherized. Weatherization increases disposable income by making energy more affordable; affordability is not always an issue of rates. Weatherization tries to identify underlying causes of energy hardship rather than simply provide crisis assistance to those in need.

The Southern Environmental Law Center also expressed support for energy efficiency programs, particularly for low-income consumers and to help curb environmental pollution. Weatherization has generally cut customers' energy use by about 25 percent. Energy efficiency is the most cost effective way to decrease air emissions under restructuring. Investments in energy efficiency also help foster development of clean industries and help create jobs.

The Virginia Tech Center for Energy and the Global Environment (CEAGE) supports energy efficiency programs in the Commonwealth. The types of public benefits programs the task force could and should consider are (i) cost-sharing of research and development; (ii) rebates of incremental first costs; (iii) performance- and production-based financial incentives; (iv) outreach activities such as technical assistance, training and education; and (v) deployment of energy efficiency and renewables technologies in schools. Funding of these programs has achieved least-cost delivery of energy services and reduction of pollutants as well as equitable distribution of benefits to consumers of all classes.

The SCC expressed support for renewable energy portfolio standards, which require retail electricity suppliers to purchase or generate electricity from renewable resources in an amount equal to a specified percentage of its total retail sales. Several other states have adopted these portfolio standards and also allow for "trading" of portfolio standards credits, meaning utilities may pay others to produce the renewable energy. The SCC is willing to work with the task force to determine how the encouragement of renewable energy sources can be implemented in the Commonwealth.

Virginia Power urged the task force to continue exploring funding and incentives for renewable energy initiatives. SELC and CEAGE also support state funding for renewable energy programs and incentives. Both BP-Solarex and MDV-SEIA recommend that the Commonwealth develop a public benefits fund to pay for expansion of solar manufacturing incentives.

Future Task Force Activities

The task force has asked the Consumer Advisory Board to look at the issues of low-income assistance and energy efficiency and renewables and provide recommendations on those issues. The task force has asked for information regarding what the current law in Virginia says about renewables in addition to the information requested about low-income asssistance.

The task force will hold its next meeting in Richmond on September 20, beginning at 10 a.m. This meeting's agenda will include the SCC's report on metering and billing and a discussion of reliability issues.

The Honorable Thomas K. Norment, Jr., Chairman
Legislative Services contact: C. Maureen Stinger