Public Benefits Charges

1. As part of implementing electric utility restructuring in Virginia, should the General Assembly establish any rate subsidy and/or energy efficiency assistance programs for low-income households?

Energy assistance for low income customers is both necessary and desirable. If Virginia establishes such programs, then adequate funding mechanisms must be established.

2. How should any such program(s) be structured in terms of eligibility?

The State should determine eligibility requirements.

3. How should any such program(s) be funded?

Energy-based public purpose programs are no different than other state welfare programs that are funded through the tax system and should be funded similarly. If Virginia decides to develop and fund such programs through electric utility service, then they should be funded through a non-bypassable, competitively neutral charge on all utility consumers.

4. How should any such program(s) be administered?

The appropriate state agencies should administer such programs.

5. Are there any programs that could or should serve as an alternative or supplement to any such programs? If so, describe.

Allegheny Power participates in several low-income energy assistance programs in Virginia that could serve as alternatives or supplements to any state-sponsored program. (1) Virginia Tape Exchange Program, which is federally funded assistance program administered by the state, (2) Community Energy Fund, which is a voluntary assistance fund supported by Allegheny Power and its customers, and (3) Weatherization Residential Assistance Program, which is a voluntary company-sponsored energy conservation program.

6. Please identify any other issue(s) falling under this topic you believe are important, and provide comments on that issue.

Any state-sponsored low income programs should be subject to periodic review and analysis to determine program impact and efficiency. This would involve administrative reporting requirements and implementing proper data evaluation methods.

Consumer Education

7. What should be the general purpose of any consumer education program preceding and accompanying Virginia's transition to retail competition?

A consumer education program should aim to provide all Virginia residents with information they need to participate in and benefit from the changes taking place within the electric industry. Consumers need to fully understand the issues and procedures involved in customer choice, as well of their rights and responsibilities in a retail electric market. Consumer education materials should be timely, broad-based in content, accessible to all consumers, and completely non-promotional and unbiased.

8. When should these programs be conducted?

Consumer education initiatives should coincide with the implementation of customer choice in the state. It is important that efforts not be started too early, which could waste valuable resources. It is equally important to ensure that education efforts do not start too late in the process. Consumers will need adequate time to fully evaluate the issues and their involvement. A consumer education program should be presented in phases and should continue throughout the evolution to a competitive marketplace. This will help ensure that all customers have information available to them to understand and participate in the changing marketplace.

9. Who, if anyone, should have regulatory oversight over such programs?

The SCC should review and oversee consumer education efforts on retail electric competition. However, local electric utilities should have the obligation to present objective materials that inform and educate consumers about electricity choice. By providing regulatory oversight of consumer education programs, the SCC can help to ensure that all Virginia citizens have access to appropriate information about customer choice and competition.

10. Which state regulatory agencies, if any, should participate in this program, and in what capacity?

While other state agencies may with to be involved, the SCC should have the ultimate responsibility for and oversight of consumer education programs.

11. How should such programs be funded?

Consumer education costs are one category of transition costs that will arise as part of the state electricity restructuring process. Because utilities will incur costs for consumer education as a necessary service to customers, these costs must be fully recoverable through a surcharge on customers' bills.

12. Should any long-term consumer education program be established, to continue after the transition to retail competition is completed? If so, describe its scope, oversight and funding.

Consumer education efforts must be evaluated as the transition to retail competition progresses. It is the responsibility of the SCC, utilities, and others involved in developing the education programs to ensure that consumers' needs are being met during this critical period. If the education programs are refined and adjusted throughout the transition period, there should be no need for education to continue beyond that point.

13. Please identify any other issue(s) falling under this topic you believe are important, and provide comments on that issue.

Consumer education must focus squarely on informing and educating, while presenting objective and non-promotional information to consumers. Consumer education materials can be developed through collaborative process involving utilities, consumer groups and the SCC. Marketing initiatives must be kept separate from and must not be disguised as or included in any consumer education materials. Any consumer education program must be designed to inform all Virginians about choice in a clear manner that can be easily understood by a variety of audiences.

Customer Aggregation

14. Should customer aggregation be permitted in Virginia in conjunction with restructuring?

Yes. Customers will benefit from their ability to combine their generation requirements with other customers in a retail choice environment, thereby increasing their market power. Aggregation will take many forms. For example, aggregation will automatically occur as a result of customers contracting for service with a generation supplier because any company acting as a retail generation supplier also serves as an aggregator. Third party aggregators may assist customers in obtaining the best service for their individual needs either by directly contracting for energy supplies on customer's behalf or by facilitating the interaction between customers and suppliers.

15. Should aggregators be subject to mandatory licensing by any regulatory authority, or be required to furnish evidence of financial soundness?

All generation suppliers should be subject to mandatory licensing. Third party aggregators should be subject to mandatory licensing if they act as agents to procure generation services for customers. If an aggregator is nothing more than a consultant or facilitator assisting groups of customers in obtaining competitive electricity supplies and the customers ultimately contract for generation service with generation suppliers, then they will have protection under the supplier licensing function.

16. Should aggregators be subject to any other requirements? If so, describe them.

Yes. An aggregator who is not licensed as a generation supplier should not be permitted to contract with customers as a generation provider, but rather be limited to facilitating customers' procurement of generation services as part of a larger aggregated load. In this instance, customers would still contract with the generation supplier for the actual generation supply.

17. Should localities (counties, cities or towns) be permitted to aggregate their residential load?

Yes. There is no reason why localities should not be permitted to provide the same service to its customers that an independent third party aggregator could provide.

18. Should localities be permitted to aggregate their residential load on an "opt out" basis?

No, residential customers should only be aggregated with other customers within a locality on an "opt in" basis. The "opt out" basis forces the customer to act even when they prefer to stay with their current generation supplier. This is the equivalent of government slamming and should not be allowed. The "opt in" option is more consistent with offering customers choice of electric suppliers.

19. Should localities be permitted to form inter-locality aggregates?

Yes. There is no reason why localities should not be permitted to combine their customers with other localities into an even larger aggregated group. This would increase their market power and enable them to obtain lower rates for their customers.

20. Should localities be permitted to aggregate load with private entities outside their territorial jurisdiction?

Yes. Localities should be permitted to combine their loads with private aggregators to form an even larger group.

21. Should localities be permitted to aggregate load with private entities or localities outside of Virginia?

If an aggregator is only assisting the customers with the selection of a generation supplier, there should be no reason why its customers have to be in the same state. Of course, an aggregator could not aggregate loads in states where customer choice was not available. The availability of transmission to serve those loads and/or the need to cross multiple service territories to access contracted generation sources may complicate inter-state aggregation of load, as will differing schedules for implementing customer choice between states.

22. Please identify any other issue(s) falling under this topic you believe are important, and provide comments on that issue.

As presently envisioned, aggregators will only be offering generation services to customers. To the extent aggregation of customer load occurs across different utilities' territories, including across state boundaries, the delivered price of electricity to customers in each service territory will vary with the cost of associated transmission and distribution services.

Consumer protection

23. Should electric service providers and aggregators be required to disclose standard information in their marketing materials, and in their proposals and contracts for service? If so, what basic information should be provided?

All marketing, proposal and contract materials should comply with the applicable Consumer Protection Act and any other applicable laws. Standard contract law and commercial practices will dictate the basic terms of the proposal/contract (such as the names of the parties, what is being sold, the price, termination terms, default terms, etc.). To the extent the market or current laws do not address problems, the SCC should be empowered to address customer protection issues.

It is quite difficult to fit required terms into a 15-second television spot, and people expect to see more detail in a contract or proposal than in an ad. Therefore, it is reasonable to require more terms for a contract or proposal than for marketing materials. However, the more standard information that is required, the more complicated and difficult to understand the marketing material or contract becomes. Further, requiring standardized information may stifle innovation. For instance, there may be a desire on the part of a supplier to offer service on the basis of a flat fee per month. If there is a requirement that offers be disclosed only on the basis of kilowatt hours so that customers can readily compare offers, a flat fee per month offer may not be possible.

Requiring "labels," which disclose such things as the origin of the power and the types of fuel sources, will also complicate the development of the market and may be impossible to comply with as suppliers typically will obtain energy from sources that differ from day to day, even hour to hour. To the extent suppliers wish to voluntarily disclose such information as part of their marketing efforts, they should be required to comply with any applicable truth in labeling laws.

24. Should any kinds of marketing practices by electric service providers or aggregators be specifically prohibited? If so, what practices should be barred?

Marketing practices by electric service providers or aggregators should largely be governed by the provisions of the applicable Consumer Protection Act in Virginia and other applicable laws and regulations, just as the practices of any other commercial entity are governed. Certain practices that are becoming problems in the recently restructured telecommunication industry, such as slamming and cramming, should be barred.

25. Should Virginia restructuring legislation establish limits on the size of utility service deposits that may be required by electric service providers and aggregators? If so, what limits should be established?

No. Electric service providers and aggregators should be permitted to collect deposits in an amount sufficient to protect them from losses to which they are exposed due to any notice periods that may be required before customers may be terminated for non-payment. While the SCC will set any limits for deposits by local distribution companies, the market should be permitted to establish deposit limits for electric service providers and aggregators. The market will minimize the deposit to consumers, because, all else being equal, customers will most likely choose the provider or aggregator with the lowest deposit requirement. An unregulated supplier and aggregator may also have other ways to cover the risk of loss from non-payment, so that deposits may be minimized.

26. What kinds of standard information should electric bills contain after restructuring? If so, what information should each bill be required to provide?

We should not repeat our experience in telecommunications deregulation, which has resulted in customers receiving eleven pages of bill each month. If the local distribution company is responsible for billing the customer for all services, including those provided by generation suppliers, information need not be repeated and bills should remain much as they are today, although some existing services will be unbundled and stated separately on the bill. (Standard information currently provided on Allegheny Power bills to residential customers includes customer name, customer account number, billing address, service address, applicable rate schedule, meter readings, date of meter readings, notation if the bill is estimated, applicable surcharges and taxes, total amount due, due date, late pay date and charge, and where to make payment.)

27. Should Virginians be given any statutory rights to cancel utility service contracts with electric service providers or aggregators within a specified number of days following acceptance? If so, what special rights of rescission or cancellation should be provided in statute?

If current laws (such as those governing door to door sales or telephone solicitations) do not already provide customers with the right to cancel within a specified number of days, sufficient statutory or regulatory rights should be provided. The number of days required will depend on how customer enrollment is eventually handled. For instance, under one scenario, the customer may choose a provider by contacting the supplier, who will contact the local distribution company to implement the customer's choice. The local distribution company will then confirm the choice with the customer (to, among other things, minimize slamming and cramming). In this scenario, the customer should have the right to rescind up until a certain amount of time after he receives the confirmation. This process may take more time than a process whereby the customer contacts both the supplier and local distribution company directly (i.e., the customer alone is responsible for seeing his choice is implemented). If a statutory provision is necessary and desirable, it should provide for a minimum number of days equal to that in similarly applicable laws (door to door sales, for instance), with this minimum being amendable by regulation to some greater number of days to reflect the restructure of the industry.

28. Should Virginians be given any statutory protection against unauthorized switching of electric service providers, or "slamming?" If so, what anti-slamming protections should be adopted?

Customers should be protected by a flat prohibition against unauthorized provision of electric services (to protect against slamming, cramming, and other unforeseen practices).

29. Should Virginians be given any statutory protection against any electric service provider or aggregator telemarketing practices? If so, what?

The protections of existing telemarketing practices laws and regulations and/or the Consumer Protection Act already in effect should suffice.

30. Should consumers be furnished assistance by any state regulatory agencies in resolving complaints against electric service providers or aggregators? If so, which agencies should be involved, and what should their responsibilities include?

If the SCC is granted power to establish customer protections by regulation, the power to resolve complaints should be included. If not, existing consumer protection laws should be relied upon to handle complaints.

31. Please identify any other issue(s) falling under this topic you believe are important, and provide comments on that issue.

Allegheny Power's responses in this section have focused on the needs of residential and small commercial customers only. Generally speaking, sophisticated large commercial and industrial customers will not need the same level of protection as residential and small commercial customers. Large commercial and industrial customers not only have a level of expertise in energy services equal to energy providers, but they also have readily available technical and legal advice, as well as greater bargaining power than residential and small commercial customers.

The necessary customer protections will depend on how the industry is structured and customer protection requirements may need to be revisited as the process evolves. Issues will arise (or disappear) depending on how matters as practical as enrollment and termination and as philosophical as how much the market will be relied upon to regulate itself are resolved. For example, who will be responsible for billing and collection and payment disbursement? What will happen to the customer who is terminated by the supplier or aggregator, and what sort of notices will be required from whom to carry out termination? Practically every step of the process is still open for discussion. How each step is implemented will determine whether and what kind of customer protections are necessary. The role of the unregulated marketplace is also important. As suppliers and aggregators vie for customers, customer service will become more important and the need for customer protections by law or regulation may decline. For these reasons, reliance on prescriptive legislation should be minimal. The SCC should be empowered to deal with consumer protection issues that the evolving marketplace does not. Those individuals with expertise in the electric industry can examine the issues more completely and respond more quickly to practices that develop or disappear in the marketplace.

Environmental Protection

32. Should Virginia restructuring legislation in any way promote or encourage the use of renewable energy in the generation of electricity? If so, how?

Virginia restructuring legislation does not need to promote or encourage the use of renewable energy. In particular, there should be no minimum renewable energy portfolio requirement for energy providers in Virginia. Energy providers will develop renewable power based on an evaluation of its cost effectiveness compared to other power supply options. If the intent of restructuring is to minimize the cost of energy to the customer, requiring energy providers to develop uneconomical renewable power is not in the customer's best interest. Virginia should allow the free market to decide the economics of the supplier's generation mix.

33. Should Virginia restructuring legislation in any way address air quality, directly or indirectly? If so, in what way?

Virginia restructuring legislation does not need to address air quality. A competitive electric industry should have minimal impact upon the environment as compared to the continuation of a regulated electric industry. On a national/regional scale, the 1990 Clean Air Act Amendments are addressing the emissions of sulfur and nitrogen oxides. On a local scale, existing and future power plants are subject to state enforced emission limits for criteria pollutants to assure compliance with the National Ambient Air Quality Standards to protect public health and welfare. In any event, there is existing statutory authority available to both the VA Department of Environmental Quality (DEQ) and the federal EPA to address all present and future air quality concerns. Further involvement by the Virginia legislature is unwarranted and would be a duplication of effort.

34. Should Virginia restructuring legislation require electric service providers or aggregators to disclose generation fuels? If so, how should this requirement be implemented and administered?

Virginia restructuring legislation should not require the disclosure of generation fuels. In particular, there should be no requirement for environmental product labeling. The reporting of emissions or emission impacts associated with a discrete block of power generation would be difficult, if not impossible to achieve. More importantly, screening of suppliers based on actual emissions would not provide for market-based compliance systems such as EPA's Title IV SO² allowance program. A similar program for NO_x emissions is to be implemented in the Eastern U.S. beginning in 2003. Use of emission allowance programs to achieve overall regional compliance prevents any equitable method to judge the relative cleanliness of individual suppliers. Such comparisons are also meaningless due to the inherent differences of emissions and environmental impacts from the various fuel sources such as coal, oil, natural gas, hydro, nuclear, and various renewables. All utility sources have individual emission rate limits that are determined on a source specific basis to ensure compliance with the National Ambient Air Quality Standards established to protect human health and welfare. If two sources with different emissions are in compliance with their respective emission rate limits, and both have an adequate number of emission allowances in-hand to cover emissions, why should Virginia impose any artificial restraints to limit market access?

35. Please identify any other issue(s) falling under this topic you believe are important, and provide comments on that issue.

Efforts to interject environmental issues into electric restructuring will result in further complicating an already complicated process. Environmental laws and proposals should be considered on their own merits by the appropriate state and federal agencies.

Energy Efficiency

36. Should Virginia restructuring legislation in any way promote or encourage energy conservation or energy efficiency, e.g., encouraging installation of energy efficient equipment or energy efficiency monitoring equipment? If so, what incentives should the legislation include?

With the introduction of competition into electricity supply, all sources of energy, including the conservation of resources, should compete on a level playing field in response to market forces. Many private companies offer these services and many products are available in the marketplace today. However, if Virginia chooses to promote or encourage energy conservation and energy efficiency practices within the state, there are several ways to accomplish this, including tax incentives to encourage specific technologies or the development of a competitively neutral funding mechanism for state-supported programs. The advantage of tax incentives is that they can be targeted at those consumers who can benefit most from conservation and efficiency benefits and is a more market-oriented approach. A non-bypassable wires charge would be imposed on all consumers, while only some would utilize and benefit from the resulting state-supported programs.

37. Should Virginia restructuring legislation establish a public benefits charge for the purpose of encouraging research and development in the areas of energy conservation and efficiency? If so, how should it be assessed and administered?

Energy research and development activities are already funded to a significant degree by national institutions including the U.S. Department of Energy, the National Renewable Energy Laboratory, and the Electric Power Research Institute and significant information is available from them. In a competitive market, market participants will also have incentives to offer new and improved products. Virginia should take advantage of the resources that existing institutions and the market place can provide rather than asking customers to fund duplicative activities at the state level.

38. Please identify any other issue(s) falling under this topic you believe are important, and provide comments on that issue.

No comment.

Electric Utility Worker Protection

39. Should Virginia's electric utility workers be given any statutory protections in conjunction with the transition to a retail competition? If so, what protections should be provided, and through what mechanism?

Workers should not be given any statutory protections in conjunction with the implementation of retail competition in Virginia beyond those that already exist for all workers. Utilities that will have to compete with out-of-state utilities and unregulated competitors should not be saddled with additional, state-imposed costs. If Virginia does impose such obligations on utilities, then it must also develop adequate funding mechanisms to fully compensate utilities that incur those costs.

40. If any statutory protections for utility workers result in additional costs or expense, how should they be funded?

Any additional costs resulting from statutory protections for utility workers should be treated as transition costs incurred in moving to a competitive environment. These and other transition costs must be borne by existing utility customers via a competitively neutral, non-bypassable wires charge.

41. Should providers of electric energy in a restructured market be required to maintain minimum staffing levels for purposes of reliability? If so, who should determine these levels, and what standards should be applied in doing so?

Electricity providers should not be required to maintain minimum staffing levels in a competitive marketplace. However, all suppliers should be held accountable for maintaining an acceptable level of reliability for the services that they render.

42. Should the purchaser of any generation unit or station sold after restructuring be required to (i) hire or continue the employment of such unit or station's employees, and (ii) furnish such employees the same wages, working conditions and benefits and terms and conditions of employment that were in effect prior to the sale?

If statutory requirements concerning employment issues are placed on the purchaser of a generation unit or station, then the value of such stations will be impacted, reducing the price that can be obtained in the marketplace. Therefore, such requirements should be kept to a minimum. To the extent that companies voluntarily work to develop such requirements as part of the normal negotiating process involved in the sales of such facilities, this should be allowed.

43. Should new entrants into Virginia's electricity market following restructuring be required to comply with any requirements concerning the qualifications of their electrical workers with regard to quality, safety and reliability of service? If so, who would establish such requirements.

New entrants into Virginia's electricity market should be required to maintain qualified workers with respect to reliability of service. New entrants must comply with any and all applicable business and operating standards that utilities follow today, including the National Electrical Safety Code, North American Electric Reliability Council and Regional Reliability Council rules, and utility interconnection requirements.

44. Should Virginia, in conjunction with restructuring, establish mandatory training and skill standards for all electrical workers responsible for systems and equipment that affect system reliability and safety?

As long as market entrants correspond to established rules and codes discussed in Question 43, no additional standards should be necessary. To the extent that the state develops new standards, they must apply equally to all market participants.

45. Please identify any other issue(s) falling under this topic you believe are important, and provide comments on that issue.

All interested parties, including electric utility industries, new market entrants, trade unions, and other interested parties, should work together to ensure that all workers in the electric industry are properly and safely trained in accordance with existing utility practices and standards.