Mr. Chairman, members of the Legislative Transition Task Force:
As I believe your ultimate decision regarding competition in the provision of metering, billing and ancillary services is one of the most important you will make this year, I would like to take a few minutes to put that decision in proper perspective.
We would all agree that when competition comes in about two years (January 1, 2002), it must be truly effective competition for Virginians to benefit. That must be the goal: effective competition. While that clearly is the goal, there are actually two alternatives available to the Commonwealth; your decision in this and other instances will determine which alternative you will provide to Virginians.
One alternative is a non-regulatory system where the generation price of electricity is determined, in theory, by competition, but where, in fact, there is no effective competition. Under this alternative, such price is actually set by an unregulated monopoly, the incumbent utility.
The second alternative is a non-regulatory system where all suppliers have the opportunity to compete fairly and fully... without any advantage to any supplier such as the incumbent utility... where the generation price is set by effective competition in an open and free market place.
These are the two alternatives: price set by an unregulated monopoly or by effective competition. Your decisions will decide which of these alternatives will be in place by 2002. How you structure the electric industry through each of your decisions now will decide if Virginia will have prices set by an unregulated monopoly or by effective competition in the future.
So, I would suggest you ask yourself with each decision you make this year, whether that decision will lead to prices being set by an unregulated monopoly incumbent or by effective competition. Simply put, this is the context of your decision as to whether you will allow competition as it relates to metering, billing and ancillary services.
When you made the policy decision earlier this year to restructure the electric industry, you set the goal of effective competition in Virginia and you wisely asked the SCC to give you its best judgment on what should be allowed with respect to metering and billing. The SCC has now stated to you in their report as follows:
"The Commission's evaluations in this report find that competition in metering and billing services can bring more benefits to consumers than the provisions of these services by a monopoly; and, conversely, that the continued provision of these services by a monopoly can impede the development of electricity competition that the General Assembly has mandated."
In addition to that clear conclusion from their study, the SCC has now provided you its recommendation as follows:
"Because of the Rapid Changes in the Metering and Billing Businesses, the Implementation of Competition Will Be More Likely to Succeed if the Commission Has the Ability to Authorize Metering and Billing Competition on a Timely Basis in Response to Evolving Facts."
ALERT would respectfully suggest that you should follow the guidance of experts at the SCC that you have tasked to implement your policy decision.
The SCC report goes on to point out a number of ways that metering and billing impacts your business and residential electricity consumers...and how the state's approach to metering and billing impacts the ability and the willingness of electric suppliers to compete in Virginia (After all, suppliers will not choose to compete in a state where they feel others may have an advantage). Non-competitive metering and billing will impact both suppliers and consumers, and thus the goal of effective competition.
The report also illustrates a number of metering and billing practices that could help consumers in a system of effective competition...and how non-competitive metering and billing could hurt Virginia consumers.
Finally, the report recognizes that the metering and billing issues are complex, diverse and fast-changing. Without using these exact words, the clear message of the report is that the issue is too complex to be addressed by blanket statutory permission or a blanket statutory prohibition of competitive metering and billing.
Bottom line, the report says that competition and metering and billing is good for Virginia consumers, but it must be done based on facts and market situations that may vary in time, area and users.
To state the obvious, you have three choices on this issue: (i) to suggest statutory language that allows competition for metering and billing; (ii) to suggest statutory language that prohibits competitive metering and billing; or (iii) to authorize the SCC determine the if, when and how to have competition for metering, billing and ancillary services. To further state the obvious, ALERT would recommend the latter choice.
If you prohibit all competition in metering and billing, here is a likely consequence. A Virginia consumer wants to secure his electricity from a particular generation supplier because he has determined that the services to be provided and the price to be charged are in the best interest of his company or his family...and yet the metering and the billing for that same electricity will be under the control of the incumbent utility/distribution company. The consumer and the supplier may want a certain type of metering...may want a certain type of billing...but it is the incumbent utility/distribution company that will decide if and how such services will be provided. It simply does not make sense. Virginia consumers should have the right to determine the source of their electricity generation and the metering and billing associated with purchasing such electricity. Companies considering entering the Virginia generation market should have the right to supply meters and to bill such consumers.
Let me further illustrate the problem. Company A has certain electricity needs that it has determined after careful analysis. Those needs relate to the amount of electricity, when it is needed, its costs, how it is measured (metering) and how it is billed (billing). Under a truly competitive situation, different suppliers (including the incumbent utility) will set forth proposals that address those needs. They will compete in all respects, with the consumer choosing the supplier best able to meet its total needs.
If competition is not allowed, the incumbent utility/distribution company will have a monopoly over the metering and billing functions. Other electricity suppliers will have no real opportunity to compete because the incumbent utility/distribution company controls what type of metering/billing will be provided. Thus, electricity suppliers will not compete... and there will be no effective competition.
How do you believe potential suppliers will react if the bill for the electricity they sell in Virginia will be sent...not by them as the seller of that electricity...but by their incumbent utility/distribution company competitor? How do you believe potential suppliers will react if their incumbent utility/distribution company competitor is reading the meters for the customers to whom the potential supplier sells electricity? How do you believe the potential suppliers will react if all of the information on the electricity they sell to their customers, they may fear, may be available to their incumbent utility/distribution company competitor...even if there are code of conduct provisions in place? Simply put, the potential suppliers will not come.
It is understandable that an incumbent utility/distribution company would want the right of sole control over metering and billing in a "competitive" environment. Think about it. The consumer has those needs mentioned above, including specific requirements for metering and billing, and you as the incumbent utility/distribution company have the sole control over what can be provided and that influences the cost of that product. You definitely have an advantage...an advantage that will preclude other suppliers from competing effectively in the Commonwealth.
As it is difficult to outright oppose giving the SCC the authority to determine the if, when and how of competition, incumbent utility may say that it should retain the sole control over those items for a few years because it would simply be too confusing for consumers. I suggest that is not valid. Any confusion would arise from the consumer buying his electricity from a supplier, but having the bill sent by the incumbent utility with whom he had chosen not to do business.
If, however, there is any opportunity for confusion, that can best be addressed through an appropriate competitive program as established by the SCC... not by denying all Virginians the opportunity for effective competition.
Let me supplement my remarks in one respect. Simply put, time is of the essence. The determination of the "if, when and how" of competitive metering and billing needs to be made as soon as possible... next year... 2000... at the latest. To do otherwise will not allow the SCC, the industry and potential suppliers to be in the position to have competitive metering and billing in place by 2002 when competition is to commence.
To delay this decision until the 2001 Session, as some may later suggest, simply assures a competitive advantage to the incumbent utility/distribution company to the detriment of potential suppliers, your electricity consumer constituents and the goal of effective competition.
This is not a difficult decision from a legislative perspective. Please allow... at the 2000 Session... the SCC to proceed with a determination on the competitive metering and billing so we can have prices set by effective competition in 2002 and not by an unregulated monopoly.
Thank you very much.