SB 1269

Legislative Transition Task Force of the Virginia Electric Utility Restructuring Act

November 9, 1999, Richmond

In its fifth meeting the task force heard proposals for amendments to the Virginia Electric Utility Restructuring Act for the 2000 legislative session. The task force examined several other issues, including utility worker certification, statutory incentives for renewable energy in other states, and adequacy of current low-income energy assistance programs, and heard updates on the work of the Consumer Advisory Board and on the State Corporation Commission's (SCC) implementation of the Restructuring Act.

Consumer Advisory Board Update

The Consumer Advisory Board met on November 4 to discuss the issue of energy assistance programs for low-income households and received a report from the Department of Social Services on the agency's implementation of the federal Low-Income Home Energy Assistance Program (LIHEAP). Additionally, the board heard from staff on current programs in the state as well as the need for those programs, and the results of a stakeholder questionnaire circulated to determine areas of consensus (if any) on implementation of an assistance program.

Board members discussed whether they were in agreement on any part of this issue. The board wished to respond to Senator Norment's request at the September task force meeting for any proposals for amendments to the Restructuring Act. After much discussion, the board agreed that it still has concerns regarding these issues and intends to bring forward a recommendation at a future meeting.

SCC Implementation of the Restructuring Act

The Task Force heard an update on the SCC's progress in implementing the Restructuring Act in a number of areas. The commission held a workshop on net energy metering for a diverse group of stakeholders. The program is supposed to be available July 1, 2000, and the SCC expects rules to be released in early December. The SCC is preparing to hear electric utility rate cases prior to the commencement of restructuring and has issued proposed procedures for public comments, which are due December 21, 1999.

The hearing on Virginia Power's pilot program has been held and is now before the commissioners for decision. The AEP hearing was held on November 9 and will go through the same decision-making process. The SCC does not have an estimated date for decisions on these pilot projects. The commission is hard at work on the Consumer Education Report and expects to circulate it to the Consumer Advisory Board within 10 days so members may comment on the report by the next task force meeting.

Utility Worker Certification

The deputy secretary of Commerce and Trade spoke to the task force on the issue of worker certification. Today, reliability is the responsibility of utilities. In a restructured market, reliability will be addressed by the marketplace. Restructuring will not bring total deregulation; there are still regulatory controls over utilities, and OSHA will still govern worker safety. Therefore, licensing and certification requirements for utility workers will not be necessary, according to the deputy secretary.

When questioned on the measures the SCC has for ensuring reliability in electricity distribution, a commission representative stated that in allocating assets in the functional separation of generation, transmission and distribution, the SCC can assess reliability in making its determination. The commission also has regulatory authority over distribution rates, and in regulating these, the SCC reviews quality and service. Finally, the commission does have the authority to revoke distribution rights if service is inadequate and the provider has made no cure.

Renewable Energy Programs in Other States

Responding to a question from the September task force meeting, staff presented a description of renewable energy programs in all 50 states. There are 14 categories of programs to encourage and promote the use of renewable energy sources. In states that have restructured the electricity industry, some programs have been created or modified, but many are continuations of existing programs.

Many states provide loan programs and grant programs to producers of renewable energy. Loan programs may include interest rate subsidies, and grants are sometimes based on outputs. In the area of tax relief, several states provide either income tax credits, property tax relief (to include total or partial exemptions or valuation of systems at conventional levels), sales tax relief on purchases of renewable energy, or a combination of these. A number of states have industrial recruitment incentives for manufacturers, and three states have demand-side management for renewables.

Other types of programs include renewable portfolio standards, research and outreach programs, and solar and/or wind easements. Some states have construction policies that require renewable energy sources to be used in new buildings if the additional costs would pay for themselves through energy savings over time. Restructuring has caused the development of disclosure requirements as well as the application of systems benefits charges to fund programs. Finally, the most common renewable energy program is net metering, which many states had prior to electric utility restructuring.

Proposals for Amendments to the Restructuring Act

SCC Recommendations
The SCC identified five major areas for recommending change to the Restructuring Act. The commission met with stakeholders prior to the task force meeting to discuss the issues, and the SCC recommendations provided are the result of that process.
  1. In the area of metering and billing, the SCC believes that competition for these services is very important and recommends adding a section to the Restructuring Act that would give the commission authority to make metering and billing services competitive, based on specific criteria. The SCC recommends including metering and billing in the act's provisions that address licensing, codes of conduct, functional separation, and default service.
  2. Regarding aggregation, the SCC recommends that municipal and state aggregators be exempted from licensure requirements under the act. In questioning whether an aggregator made up of two or more municipalities should be licensed, the task force recommended that the SCC consider adding language to give the commission authority to establish parameters of aggregation contracts between two or more municipalities. The commission will continue to examine that issue.
  3. Proposed changes addressing net metering include adding SCC authority to shorten the net metering period to less than 12 months if necessary to facilitate customer choice. The commission also recommends modifying the consumption tax provision of 58.1-2900 to deduct the kilowatt hours generated by consumers and fed back to the grid from the amount of kilowatt hours supplied to those consumers.
  4. The SCC recommendations concerning covered transactions are still under active commission discussion. The commission recommends modifying the definition of covered entity to ensure that incumbent electric utilities remain covered entities even after they provide default service. The commission also recommends including covered entities' facilities in the definition of covered transaction, so that a covered transaction is not limited to a change in control of the entire entity.
  5. Finally, the commission recommended some technical clarifications in the areas of consumers, wires charges, and rate caps.
Other Stakeholder Recommendations

Energy Assistance Programs for Low-Income Families

In the task force's August meeting, staff was asked to identify the amount of assistance currently available to meet energy needs of low-income families, as well as identify the amount of need not met by these programs. Staff circulated a questionnaire among energy providers, social services agencies, and local charitable organizations, and presented the results.

The survey responses identified an estimated $34,087,052 spent in the past year on low-income energy assistance programs (LIHEAP). These funds are an aggregate of $29,723,648 spent on LIHEAP and $2,359,942 in non-LIHEAP funds spent on weatherization, voluntary utility programs (which yielded $1,946,961 this past year), an estimated $359,437 provided by the federal Emergency Food and Shelter Program, and $41,314 from local energy assistance and private charitable programs. However, these funding amounts are not an accurate total of the amount of assistance in Virginia. Certain programs provide energy assistance but do not keep records of the funds spent solely on energy assistance. Also, many small programs are too numerous to identify.

Staff cited several problems with identifying unmet need in the Commonwealth. For most programs, a mechanism does not exist for collecting and reporting data regarding the number of low-income households who do not receive assistance with their energy needs or the amount of additional assistance that would have been allocated if additional resources had been available. Information provided in program applications does not include the amount of the applicant's energy expenses, so the percentage of income spent on energy and the extent to which households' energy burdens are reduced by program benefits cannot be determined. Different programs have different eligibility criteria, and if the population intended to be served cannot be identified statewide, the amount of the population that is not served or underserved cannot be identified either. Finally, a lack of consensus regarding the amount of energy a household needs and the portion of that need that should be met by assistance programs exacerbates the difficulty in determining any unmet need.

The Weatherization Assistance Program does keep a waiting list of approximately 3,600 people who need weatherization services. The average cost of conducting those services is $2,032, so it is possible to estimate the amount of unmet need in Virginia at $7.3 million. LIHEAP crisis assistance programs are available to applicants on a first-come, first-served basis through March 15 or until funds run out, whichever is earlier. In two of the last five years, program funds have not run out, and the unused funds have been used for cooling assistance programs, so one may estimate that need for crisis assistance has been met for these years.

The LIHEAP fuel assistance program is the largest program in the Commonwealth. The federal Department of Health and Human Services estimates that in fiscal year 1995, 346,245 households were eligible for LIHEAP fuel assistance. If that number remained constant through 1999, and 84,068 households received LIHEAP fuel assistance, then approximately 24 percent of eligible households participated in the program. The National Consumer Law Center estimates that participation levels average less than 40 percent of those eligible. In Virginia, participation at a 40 percent level would encompass 138,400 households, or 50,000 more households than received benefits last year.

Another approach to determining unmet need is to examine the amount of benefit provided to low-income families. The average amount of benefit level has fallen from $262 in 1992 (not adjusted for inflation) to $231 in 1999.

One may also examine the effect of benefits on household energy burden in trying to determine the amount of unmet need. Low-income households generally spend less money than median-income households on energy, but spend a greater than average percentage of their income. The National Consumer Law Center's 1992 data show that LIHEAP benefits reduced low-income households' energy burden between 5.2 and 6.2 percent. Their post-LIHEAP-benefit energy burden was still five times that of median-income households. However, the reduction in energy burden for Virginia's LIHEAP recipients was 20 percent greater than the national average reduction.

Future Activities

At its next meeting in Richmond on December 8, the task force will receive the SCC's report on a consumer education program and will continue to review stakeholder proposals for changes to the Restructuring Act.

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