Good morning, Mr. Chairman and members of the Task Force.
I am Bill Thomas, of the law firm of Hazel & Thomas, and I represent Virginia Power. I'd like to commend the State Corporation Commission and its staff for their very thorough and comprehensive study of prospects for competition in metering and billing. The report will serve as a solid foundation for further exploration of competition in these two key services.
Let me note at the outset that metering and billing are two different issues, presenting different technological and business challenges. The pros and cons of opening both services to the forces of competition must be explored separately. Competitive metering, for example, raises significant technological issues. And competitive billing's impact on consumers, as well as on utilities' business processes, should be thoroughly examined.
But there's no doubt that both services should eventually be competitive. Opening both services to competition has the potential to produce additional benefits for consumers.
But before these functions become competitive, Virginia Power believes several issues must be carefully considered. Two of the most important include the timing of competition and the means the Commonwealth will use to open these two functions to choice.
Missteps on either topic could hamper Virginia's move toward a vigorous and competitive retail market for the supply of electricity.
Survey after survey has found that most consumers support competition in the supply of electricity. But the enthusiasm for customer choice shouldn't mask the fact that the introduction of a competitive supply market will present significant challenges for consumers and generate many questions.
Launching either competitive metering and billing at the same time or even close to the same time as competitive supply could lead to customer confusion and inject needless complexity in the transition to consumer choice. By overloading the customer, this could damage public confidence in the entire restructuring process. And a high level of consumer confidence is vital if a truly competitive marketplace for the supply of electricity is to emerge.
It's worth noting that many states including Delaware, Maryland, Massachusetts, New Jersey, Nevada and Pennsylvania have decided that competitive metering should be delayed until customers have a chance to get used to choice in supply.
Rushing the move to competition in metering and billing also could cause several other problems.
Opening other services to competition simultaneously with the beginning of retail choice in supply would greatly complicate consumer education efforts. The education programs would have to focus on several different services instead of concentrating on the most important part of electric utility restructuring, competitive supply.
Later this year the Task Force will receive the State Corporation Commission's proposal for a comprehensive education program to help consumers select their suppliers. Let's give this program a chance to work without loading it down from the outset with metering and billing lessons for consumers.
Competition in these services will present significant business and technological challenges for distribution companies, suppliers and other players in the competitive marketplace. These problems aren't insurmountable. But they will be harder to solve if utilities and other stakeholders have to deal with the arrival of competition in all three areas metering, billing and supply at once, or even within a short time frame.
For example, there's the problem of reliable data exchange. The Virginia Electronic Data Transfer Working Group, an ongoing collaborative effort, has demonstrated that there are very complex requirements for the exchange of data required for successful competitive services.
Once some of these technological issues have been dealt with, metering and billing competition can be phased in just as competition in the supply of electricity soon will be phased in, as called for in Senate Bill 1269 the Virginia Electric Utility Restructuring Act. As yet, however, these issues haven't been dealt with. And if they aren't handled properly, they have the potential to damage the restructuring process and frustrate competitive suppliers even to the point of driving them from Virginia and limiting customer choice.
The Task Force and the Assembly should also carefully consider the means through which the billing and metering markets are opened to competition in the Commonwealth.
Substituting choice for monopoly in the provision of any service related to electricity is a major policy decision. That decision should be made by the policy-making arm of government the General Assembly.
The Restructuring Act recognized that the decision to launch retail supply competition was one that should be made by the legislature. As you know, the law creates a schedule for the phase-in of retail choice in this market. Regulators are given some flexibility in determining the timing but the law leaves no doubt that all customers will have choice within a few years.
And it's clear that the ultimate decision a policy decision to open other services such as metering and billing to competition rests with the Assembly
With these factors in mind, we'd like to suggest a proposal that would bring metering and billing competition to the Commonwealth in a careful, well-planned manner. This proposal recognizes the Assembly's right to set policy on this issue and also recognizes the essential expertise the Commission will bring to the subject.
Our proposal has the following elements:
It's worth noting that the working groups may be able to obtain valuable information on competitive metering and billing by comparing two retail pilots soon to be launched in the Commonwealth.
American Electric Power has proposed a pilot which opens metering and billing to competition, along with the supply of electricity. Virginia Power's proposed pilot does not call for competitive metering and billing.
If the pilots proceed as proposed, the Task Force and the Commission could take advantage of these programs and use them to compare consumer reactions. The pilots should provide us with some reliable findings on whether customers think competition in all three areas at the very outset of restructuring is a good idea or whether they'd prefer to master the art of picking their suppliers first, with competition in other areas coming later.
No one doubts these services ultimately will be opened to competition. No one doubts that this move to retail competition has the potential to bring additional benefits to customers. Time and again, the deregulation of a previously monopolistic service has produced both lower prices and innovative products.
But opening any of these services to competition will bring major changes for all of the Commonwealth's consumers - from homeowners to large industries. The decision to make such major changes is properly vested in the Assembly.
And timing is critical. We can't afford to rush the opening of competition in either metering or billing. The arrival of retail supply choice will be challenging enough for many consumers. Inaugurating competition in other areas at the same time could significantly complicate the task these consumers face
Both metering and billing also present other significant challenges, both from business and technology standpoints, that require careful and separate study.
We think the process we've just outlined will help Virginia continue down the right path when it comes to electric utility restructuring. The plan will take advantage of the expertise of the commission and the insight of a wide variety of stakeholders. And it also recognizes the policy making function of the Assembly.
We've done restructuring right in Virginia so far. And Virginia Power has no doubt that you and your colleagues in the Assembly will continue that track record. I'll be happy to answer any questions.