JULY 23, 1998
§56-XX1. Short title
As used in this chapter:
"Aggregate rates" or "bundled rates" means
the rates as traditionally formulated by, and approved by the
State Corporation Commission for, electric utilities to reflect
the total of costs incurred by such utilities in performing the
functions of generation, transmission, and distribution in furnishing
electrical service to retail customers.
"Nonbypassable wires charge" means a charge that (i) is to be paid by a retail customer located in the geographic area that is the service territory of an electric utility on January 1, 2002, and (ii) represents that customer’s share of the costs recoverable by an electric utility as provided in this chapter.
"Regulatory assets" means previously deferred, generation-related costs incurred by a regulated electric utility in providing electric energy. "Regulatory assets" represent the effect of actions of a regulator, regardless of their classification in financial statements, and therefore include items such as (i) the cumulative effects upon taxes of the differences between recorded depreciation and generally accepted methods of depreciating property for tax purposes, and (ii) the asset or obligation associated with the prior service cost component of pensions and other post-employment benefits costs.
"Transition-related costs" or "transition costs" means (i) costs, including any net reduction in revenues or increase in costs, associated with the establishment and conduct of a pilot program, (ii) costs associated with the development, acquisition and installation of utility infrastructure necessary to the implementation of a competitive market, such as an independent system operator or similar organization, and (iii) that increment of value, if any, which represents the impairment of a utility’s generation assets anticipated by the utility to result from the establishment of a competitive retail market for electricity within the Commonwealth.
"Unbundled rates" means the separation, by traditional cost-of-service ratesetting methodologies employed by utilities and the State Corporation Commission, of bundled rates into generation, transmission, and distribution components.
§56-XX2. Transition to retail competition
A. Contingent upon the full and successful establishment of an independent system operator on or after January 1, 2001, a period of transition shall begin on January 1, 2002 pursuant to the establishment of a functioning retail market for electricity beginning on January 1, 2005. Electric utilities which upon the commencement of the transition period serve retail customers within the Commonwealth will prepare during such transition period for the onset of retail competition in accordance with the parameters set forth in Subsection B of this Section. Further, during such period of transition, any customer of an electric utility may, through access to the energy delivery systems of that utility and/or the independent system operator, choose to purchase generation services from one or more alternative suppliers, subject to the provisions of Subsection C hereof.
B. Except as provided in §56-XX3, electric utilities which
on January 1, 2001, provide retail electric service to customers
within the Commonwealth shall, during the above-defined transition
period, prepare for the implementation of competition within the
constraints imposed by the capping of their retail rates for the
duration of such period. To establish such capped rates to be
in effect during the transition period, utilities shall make timely
application to the State Corporation Commission for (i) the unbundling
of their then effective rates into transmission, distribution,
and generation components or, (ii) at their discretion, an increase
or decrease in their aggregate, or bundled, rate and revenue levels,
which would be effective on and after January 1, 2002; any such
request for an overall rate increase or decrease shall also be
accompanied by a request for approval for the unbundling of the
rates thereby approved. Absent the filing of a timely application
by the utility which includes, in addition to the request to unbundle
rates, a request for an increase or decrease in the aggregate
rate levels being charged, and in the revenues being received,
by the utility, the presumption shall be that the capped rates
and components to be placed into effect on January 1, 2002 will
produce revenues sufficient to provide the utility with the reasonable
opportunity to recover any generation-related regulatory assets
or transition-related costs that may be recorded on its books
prior to and during the period. Such rates shall be capped, and
exempt from regulatory review for the duration of the transition
period, with the limited exceptions defined by Subsection D of
this section.
Except as provided in
§56-XX3, no provision shall be made for generation-related
regulatory asset or transition cost recovery following the onset
of competition on January 1, 2005.
In acting on a utility’s
request to increase, and unbundle rates preparatory to the transition
period, the Commission shall employ its traditionally-used rate
making principles and rules, and, further, give due recognition
to the added risks associated with capping rates for a long period,
and to the intent of this section which is to provide the opportunity
for regulatory asset and transition cost recovery in a manner
consistent with the public interest.
C. Any customer of an electric utility may choose to purchase
generation services from one or more alternative suppliers during
the transition period, subject to the condition that such customer
pay to such electric utility a competitive transition charge established
in accord with this Subsection.
The State Corporation Commission shall, by January 1, 2001, adopt
guidelines for its determination of competitive transition charges
to be paid to incumbent electric utilities by those of their retail
customers who choose, and who are authorized by this section to
choose, to take generation service from an alternative supplier
prior to January 1, 2005. Such competitive transition charge
shall reflect the difference between (i) the revenue which the
incumbent electric utility could otherwise expect to receive from
the customer during the transition period, and (ii) the revenue
which would be produced for the utility by application of an average
market rate for the generation service which would otherwise have
been purchased from the utility by such customer. The Commission
shall, upon application by the utility and by no later than the
date after which any customer may choose an alternative supplier,
establish a competitive transition charge level for such electric
utility for periods as may be prescribed by the Commission.
D. During the transition period, a utility may seek approval from the Commission for an adjustment in its capped rate for limited circumstances. Such circumstances will be limited so as to include only (i) recovery of the costs associated with the utility’s compliance with environmental regulations to the extent that such costs are incurred during the transition period and were not expressly provided for by the rates which were effective for the utility on January 1, 2002; (ii) increases or decreases in expenses associated with any new tax laws which may be enacted at the state or federal level; and (iii) the ability of a utility to seek from the Commission approval of an increase in rates when such utility’s financial integrity is impaired. Upon application by the utility for approval, the Commission shall make a finding as to the reasonableness of the actions giving rise to, and the accuracy of, the utility’s cost increases, and approve a level of increase in the utility’s capped rates accordingly.
§56-XX3. Nonbypassable Wires Charge
A. To the extent that an electric utility, serving retail customers
within the Commonwealth upon commencement of the transition period,
incurs costs associated with (i) the establishment of an independent
system operator, (ii) the establishment of a regional competitive
marketplace for generation services, or (iii) public purpose programs
required by legislative or regulatory mandate, such costs shall
be recoverable by that electric utility through a non-bypassable
wires charge, applicable both during and following the transition
period, as provided in §56-XX4. The nonbypassable wires
charge, if applicable during the transition period, shall be applied
as an additional charge above the capped rates provided in §56-XX2.