I. Purpose: To highlight parts of AEP submittal, and respond to submittals of others in a very few critical areas.
II. With respect to structure,
• AEP advocates a phased approach (not to be confused with phase-in of customer eligibility for choice) to the transition to competition.III. We do advocate development of an ISO and RPX and, at this time, are comfortable with the 1/1/2001 dates established for their being operational.• could fit within framework approved via HB1172, with some adjustments of dates desirable• An initial 1-2 year "unbundling" period wherein• utilities would seek and receive approval from the SCC of the unbundling of their rates into generation, transmission and distribution components• Following the "unbundling" period, a 4-5 year transition period during which a utility's rate for generation service would be fixed.• including development of a distribution tariff (all customers, regardless of their service delivery voltage, would take distribution service; a non-bypassable wires charge on such service would provide the mechanism for recovery of some costs.)
• at a level within which the utility would be expected to recover "transition-related costs"; such costs were defined in AEP's submittal of legislative language to the stranded costs and Related Issues Task Force to include:• Referring to some of the "target" dates set forth in HB1172• pilot program net costs• infrastructure development costs (necessary for a functioning market)
• asset impairment value (regulatory and plant assets), or stranded costs.
• ISO and RPX in place 1/1/2001• Our plan does provide for choice during the transition period, subject to the customer paying a competitive transition charge which would keep the utility whole with respect to transition period revenue.• transition period beginning 1/1/2002
• these may be reasonable dates, with the 1/1/2002 date being compatible with the end-date for AEP's unbundling period and beginning-date for its transition period; 1/1/2004 date for the commencement of retail competition, would allow only two full years for transition and thus is not compatible with our approach.
• (Our pilot program is, at the present time, expected to begin in mid-to-late 1999 and extend for two years until.)
• a 4-5 year transition period would, at the minimum, place the beginning date for full competition at 1/1/2006.
• open access to the delivery network would be available during this period.
• there are transmission constraints which would affect a Virginia market in a west-to-east direction.IV. We commented, as did others, on the needed licensure of suppliers of generation by the SCC, and briefly about "default," "last resort" or "back stop" providers.• does create market power concerns, and likelihood of "must run" generating units on the eastern side of that interface.• while AEP and others have advocated a "cost of service" basis for pricing generation from such "must run" units... their existence (1) would shrink the market available for all generators and (2) logically would cost consumers, creating undue advantages and disadvantages for consumers and sellers.
• such constraints should be mitigated before retail competition begins on a full scale basis, and this can occur during a transition period of the length we advocate.
• "last resort" or "back stop" providers are those who would be expected to supply customers when and if their chosen supplier failed to meet its commitment.V. Some Virginia stakeholders have suggested that there should be no tie between the commencement of competition in Virginia and commencement in other states served by the ISO and RPX.• several parties have suggested that the "incumbent utility" or "distribution service provider" be assigned this role, with cost recovery spread to customers via a non-bypassable wires charge.
• this is important an issue that requires much consideration and is dependent upon resolution of other issues; for example...
• if we have an RPX, the distribution provider will presumably rely only on the market.• "last resort" would potentially have to have substantial capacity.
• quantity of such capacity will be dependent upon security of supply, generation installation lead times, structure of the market, ability to disconnect customers whose supply has failed, etc.
• issue affects reliability for all customers.
• on this basis there is the potential for creating a Virginia market to which suppliers in other states would have access (subject to transmission constraints), with no reciprocal ability for Virginia suppliers to market to customers in those states. (The multi-state ISO delivery mechanism will be in place in 2001.)• again, an issue deserving careful consideration.