January 18, 1999
Allegheny Power Proposed Amendments
To Proposed Virginia Deregulation Bill
SJR Subcommittee January 13, 1999 Version
1. Amendments to §56-580, page 3, lines 22-25.
§56-580. Nondiscriminatory access to transmission
and distribution system.
All distributors shall have the obligation to connect
any retail customer located within its service territory to those
facilities of the distributor that are used for delivery of retail
electric energy, subject to existing Commission rules and regulations
and approved tariff provisions relating to connection of service.
Explanatory Note: The proposed amendment clarifies
that the obligation to connect is restricted to connection under
the terms and conditions of established rules which protect the
public, existing ratepayers, and utility shareholders against
connecting under unsafe conditions and conditions which impose
an undue cost burden on others.
2. Amendments to §56-593, page 13, line 18 and
at the end of line 24:
§56-593. Divestiture, functional separation,
deregulation of generation, and other corporate relationships.
The Commission shall not order any incumbent electric
utility, nor shall it require any such utility to divest itself
of any generation, transmission or distribution assets pursuant
to any provision of this chapter.
B.1. The Commission shall, however, direct the functional
separation of generation, retail transmission and distribution
of all incumbent electric utilities in connection with the provisions
of this chapter to be competed by January 1, 2002. Except as
otherwise regulated pursuant to this chapter, any assets used
in connection with the generation of electricity shall, upon the
commencement of customer choice, no longer be considered utility
assets subject to the regulation of the Commission under any provisions
of law not contained in this chapter.
Explanatory Note: The proposed changes to this
subsection clarify that, upon the start of customer choice in
1/1/02, generation assets are no longer regulated utility assets
subject to Commission regulation under other provisions of existing
law, including §56-1, relating to corporations acting as
public service companies generally; §56-88, Utility Transfers
Act, relating to transfer of utility assets; §56- 232, relating
to regulation of heat, light power, and other utility companies,
generally; and 56-234.3, relating to certification of need for
new generation facilities.
3. Amendments to § 56-593.C, page 14, lines
3-12:
The Commission shall promulgate rules and regulates regulations to carry out the provisions of this section, which rules and regulations shall include provisions:
Prohibiting cost-shifting or cross-subsidies between functionally separate units;
Prohibiting functionally separate units from engaging in anticompetitive behavior or self-dealing;
Prohibiting affiliated entities from engaging in discriminatory behavior towards nonaffiliiated units; and
Establishing codes of conduct detailing permissible
relations between functionally separate units.
An appropriate code of conduct between the incumbent electric utility and any affiliate providing electricity supply and related competitive services in the Commonwealth; and
Access on a non-discriminatory basis by electric
suppliers and customers to transmission and distribution systems
owned by or controlled by the incumbent electric utility.
Explanatory Note: This amendment is intended to
clarify the intent of the Subcommittee that cross-subsidies and
discriminatory behavior by incumbent utilities be prevented in
a competitive marketplace. Concerns over discriminatory behavior
towards nonaffiliated entities can be addressed through the codes
of conduct and by the nondiscriminatory access provisions proposed
above. The current language could result in codes of conduct
and other restrictions involving activities between unregulated
affiliates anywhere in the country. Existing state law gives
the Commission the power to address cost-shifting between a regulated
utility in Virginia and its affiliates through its jurisdiction
over the regulated utility, not the affiliate.
4. Amendments to §56-593.D, page 14, lines
23-27 and page 15, lines 1-12:
Neither a covered entity (defined in SCC draft proposal)
nor an affiliate thereof may be a party to a covered transaction
(defined in SCC draft proposal) without the prior approval of
the Commission. Any such person proposing to be a party to such
transaction shall file an application with the Commission. The
Commission shall approve or disapprove such transaction within
sixty days after the filing of a completed application; however,
the sixty day period may be extended by Commission order for a
period not to exceed an additional 120 days. The application
shall be deemed approved if the commission fails to act within
such initial or extended period. The Commission shall approve
such application if it finds, after notice and opportunity for
hearing, that the transaction will comply with the requirements
of subsection E, and may, as a part of its approval, establish
such conditions or limitations on such transaction as it finds
necessary to ensure compliance with subsection E.
A transaction described in subsection D of this section shall not:
Substantially lessen competition among the actual or prospective providers of noncompetitive electric service or of a service which is, or is likely to become, a competitive electric service; or
Jeopardize or impair the safety or reliability of
electric service in the Commonwealth, or the provision of any
noncompetitive electric service at just and reasonable rates.
Explanatory Note: This subsection is deleted
in its entirety.
Under the current language, any transactions affecting
the control of an affiliate which provides products, services,
or other forms of service essential to the provision of electric
service or involving the assets, or products and services produced
by such assets are subject to review in Virginia, even where there
is no effect on the services provided to the Virginia public service
company.
Current Virginia law provides for review of agreements
with affiliates relating to the provision of utility services
in Virginia and transfer of Virginia utility assets, under Title
6 of the Code of Virginia, Chapters 4 and 5. The proposed language
would extend Commission authority to transactions affecting the
control or transfer of assets of affiliates of a public service
company regardless of where they are located. Transactions potentially
subject to review include parent-to-affiliate or affiliate-to-affiliate
transactions not involving the regulated public service company.
Present law has served Virginia well. The Commonwealth has the
power to review agreements between the Virginia public service
company and its affiliates to guard against cross-subsidization
and ensure the costs associated with the transaction are fairly
allocated. Current law also subjects transfers of utility assets
in Virginia to state review. Any concerns regarding the ability
of a generation supplier and/or default supplier to provide generation
services can be addressed by the Commission through supplier licensure
requirements. No further control is necessary.
5. Amendments to §56-593.F, page 15, lines
13-21:
Nothing in this chapter shall be deemed to abrogate
or modify the Commission's authority under Chapter 5 (56-88 et
seq.) of this title. However, any person subject to the requirements
of subsection D that is also subject to the requirements of Chapter
5 (§ 56-88 et seq.) of Title 56 may, in the discretion of
the Commission, be exempted from compliance with some or all of
the requirements of said Chapter 5 of Title 56.
Explanatory Note: This subsection is deleted
in its entirety.
The current language expressly retains Commission
authority over deregulated functions. This amendment, in conjunction
with amendments to §56-593.B would remove generation from
Commission regulation. The second sentence refers to potentially
duplicative approvals required under the "covered transactions"
provisions of Subsection D and under the Utility Transfers Act.
We propose elsewhere that the "covered transactions"
provisions be deleted in their entirety.
6. Amendments to §56-593.1, page 15, lines 22-27:
§ 56-593.1 Application of antitrust laws.
Nothing in this chapter shall be construed to exempt
or immunize from punishment or prosecution, conduct violative
of federal antitrust laws, or the antitrust laws of this Commonwealth.
Explanatory Note: This subsection is deleted
in its entirety.
The current language would eliminate the state-action
shield for utilities in the Commonwealth providing regulated services
such as transmission and distribution. Incumbent utilities will
continue to be required to provide regulated, noncompetitive service
under this chapter and cannot be obligated to provide these services
while being subject to anti-trust laws. Once generation is deregulated,
suppliers of such services will automatically be subject to application
of antitrust laws. (This amendment is consistent with and corresponds
to §56.593.B, line 24)
7. Amendments to § 56-579.1.C, page 17, lines
11-17.
C. 1. The Commission may, by order, annually extend
any capped rate authorized under this section beyond January 1,
2005, in any incumbent utility's service territory if the Commission
determines that effective competition for the sale of electric
generation services does not exist within such service territory.
2. The Commission shall report any capped
rate extension orders made pursuant to this section and the reasons
therefor, to the Legislative transition Task Force within 30 days
of any such order.
Explanatory Note: This subsection is deleted
in its entirety.
As currently stated, the Commission can extend
a rate cap indefinitely, without relationship to costs or market
conditions. This is inconsistent with the default service provisions
contained in 56-586 A., which allow for the SCC to establish default
service providers after the commencement of full customer choice.
It is also recognized that there is no need for a rate cap once
default service is in place. Legislative drafting group discussions
indicated general agreement that the end of the rate cap period,
which is scheduled to end 1/1/05, should match up with the beginning
of default service. This amendment is consistent with this understanding.