SECTION 56-579
Each step of the phase-in of customer choice must encompass a cross-section of customers that is representative of the overall customer mix to each utility's service territory.
DISCUSSION:
This language is offered as an alternative to the "big dogs eat first" approach that currently exists in SB688 as carried over.
To provide only one group the ability to negotiate power supply arrangements with third party suppliers, for instance large industrials, while other groups such as small commercial and residential customers remain obligated to purchase power from the utility, would be fundamentally unfair and possibly discriminatory. Moreover, such an arrangement would be violative, we believe, of one of the fundamental goals of restructuring, that is to provide electric rate relief to all consumers in the Commonwealth.
SECTION 56-584
Charges and fees related to the direct business relationship between an electric service provider and a customer, including but not limited to the interruption of service, disconnections, and rebates and credits, are deemed to involve customer service regulations and not the regulation of rates and charges pursuant to this section.
DISCUSSION:
One way in which low-income consumers are likely to face increased prices because of competition is through service providers who take specific elements of service that are provided as part of the overall package of service today, segregate those services out, and impose separate charges for the newly divided-up service. The additional charges resulting from this process can represent a significant increase in "rates" to customers even if base rates remain the same or decrease. Customers who are facing payment troubles, for example, can face significant increases in the monies which they owe to a utility if either the utility imposes new fees for these individual elements, or if the utility imposes increases in existing fees for certain elements of service other than those paid for through base rates.
The process is not new to consumers. Within the banking context, most consumers have experienced fees for ATM machines that were not previously imposed. Fees are charged if a person does not pay their credit card on time; fees are charged if a person does pay their credit card on time. With some banks, fees are charged to have a consumer's checks returned to them in their statement each month. The problem of such fees is exacerbated because, in a competitive industry, these fees need not be cost-based. Since bank deregulation in the 1980s, fees charged by banks have been skyrocketing. Recent newspaper headlines proclaim: "Banks Begin to See Gold in Bounced Checks." Reports state that non-sufficient funds (NSF) fees have risen from an average of $15.11 in 1990 to an average fee of $19.35 per check by 1993. The large banks are charging fees averaging 971% more than the processing costs. Researchers have estimated that banks earned in excess of $1 billion in 1994 from NSF fees alone. Of course, banks charge other fees as well.
One type of regulatory framework to address this issue was established for competitive cable television companies. Under the federal framework, local governments are barred from exercising ratemaking authority over the provision of cable television service when such service is provided in markets that are workably competitive. Local governments, however, were explicitly authorized to make and enforce "customer service requirements" by Section 632 of the Cable Act. The term "customer service requirements" was defined to mean "the direct business relationship between a cable operator and a subscriber," with specific references to the interruption of service, disconnections, and rebates and credits. The conclusion that these service fees fell within the regulated ambit of "service" rather than the unregulated ambit of "rates" has also been confirmed by the courts.
SECTION 56-584
1. The state corporation commission shall, in consultation with the Office of Attorney General, monitor on an ongoing basis the state of competition, as it exists and as it is likely to evolve. Not later than January 1, 2002 and annually thereafter, the department shall report its findings to the Legislative Transition Task Force of the General Assembly. This report shall contain the following:EXPLANATIONa. Information on electric prices, including (i) electricity spot price information for the previous calendar year, including but not limited to, the average regional monthly spot price; (ii) a determination of whether or not all customer classes are being adequately served by competitive energy markets; (iii) a determination of the competitiveness of energy markets, including a determination of whether or not the electric industry is providing consumers with the lowest prices possible within a restructured competitive retail marketplace. Said report shall identify any substantial fluctuation or pricing differences in the cost of electricity available to consumers, especially with respect to geographic regions and low and moderate income customers.b. Information on residential customer aggregation, especially with respect to low and moderate income customers, including (i) the number of residential customers purchasing electricity through aggregators, (ii) the barriers which impede the organization and operation of aggregators, and (iii) recommendations for encouraging and supporting the aggregation of small user customers.
c. Information on the pricing of electricity made available through a provider of last resort for residential customers, especially with respect to low and moderate income customers, including: (i) the average of all rates charged to customers taking service from the provider of last resort and for each sub-class within the provider of last resort. This report shall detail the status of pricing disparities between each sub-class of customers served by the provider of last resort and the same customer sub-class taking service in the voluntary market; pricing disparities between regions of the commonwealth; and pricing disparities between different distribution companies serving as provider of last resort.
d. Information on the customers taking service through a provider of last resort, especially with respect to low and moderate income customers, including: (i) the number of customers taking service from the provider of last resort relative to the total number of customers taking electric service in the commonwealth; (ii) the reasons why such customers are taking service from the provider of last resort; (iii) the type, level and quality of service made available to customers taking service through the provider of last resort; and (iv) whether alternative provider of last resort mechanisms exist to improve price and service to customers while promoting competitive retail choice.
The statutory section above creates reporting requirements for the transition years of competitive retail choice. The reporting requirements seek to document whether: (1) pricing volatility or other price impacts are affecting small user customers; (2) whether aggregation is occurring and, if not, how such aggregation might be promoted; and (3) whether the provider of last resort mechanism is providing equal levels of service at reasonable prices.
SECTION 56-584
At least annually, the commission shall compute the rate differential for electric service between residential and industrial customers by comparing the total average residential rate and the total average industrial rate, based on filings made by electric suppliers and electric distribution companies with the Federal Energy Regulatory Commission or the commission. The rate differential shall be the difference between the total average residential rate and the total average industrial rates, divided by the total average residential rate.If the commission determines that the rate differential for electric service between residential and industrial customers has increased to a percentage differential that is greater than the percentage differential in the calendar year 1990, the commission shall institute an investigatory proceeding in which the Office of Attorney General shall participate. Not more than ninety days after the official commencement of the proceeding, the commission shall issue written findings that identify the factors or circumstances that contributed to such increase in the rate differential.
As used in this subdivision, "total average residential rate" means the total residential revenues divided by total residential kilowatt hour sales, and "total average industrial rate" means the total industrial revenues divided by total industrial kilowatt hour sales.
Whenever the average of industrial class prices for a twelve-month period is less than that of residential class prices by a percentage that is greater than the percentage differential in the calendar year 1990, the distribution company will increase the access charge per kWh to all industrial customers by an amount equal to the difference between the average industrial price in the aforementioned twelve-month period and the average industrial price in that period had the price been the same percentage less than the average residential price that it was in 1990. The sums so collected shall be credited to the residential access charge as an equal amount per kWh in the subsequent twelve months.
DISCUSSION
A move to retail competition will likely result in an increasing price disparity between small and large users. This is not surprising. Basic economic theory tells us that when a firm faces two markets, one of which is competitive and one of which is not, the firm will tend to load costs on to the non-competitive market participants to maximize its revenue. It happened in telecommunications; it has happened in natural gas; and it is already happening in electricity. The cause of the increasing gap between industrial and residential prices is not so much a fly-up in rates (which is the "problem" that a price cap is designed to address) as it is the failure of competition to capture the benefits of competition for all customers. It will be disheartening and seem unfair to the citizens of the Commonwealth if, while industrials and large commercial customers reap considerable savings from deregulation, small and residential consumers are expected to be satisfied that, in the short run, their rates do not increase. In response to this problem in Connecticut, the legislature adopted a "cap the gap" measure in its 1998 electric retail choice legislation (HB-5005).
SECTION 56-589
No tariff filed pursuant to this section shall be available as a defense to consumer actions for discrimination, misrepresentation or unfair and deceptive practices brought against an electric service provider.
DISCUSSION:
This language is designed to create consumer protections against judicial holdings based on the "filed rate doctrine." In one telecommunications case in Illinois, a long distance telephone company promised prospective customers that for one year after signing up, they would pay nothing for a year of long distance phone calls anywhere in the world on Fridays, so long as certain minimum billings amounts were maintained for which customers did pay. After a time, however, the phone company changed its mind and began charging for its Friday calls, albeit at a 25% discount. The court, which ultimately approved the company's action, said that the phone company made the representation as to free Fridays "knowing the representation was false."
According to the court, federal jurisdiction over the long-distance carriers prevailed over any state consumer protection statute. The phone company in this case had filed papers with the Federal Communications Commission (FCC) saying that it was going to change its agreement. Thus, the court said, "whatever the salesman says and whatever is advertised, the consumer can learn the truth from the FCC." As a result, the court held that the phone company's agreement to provide free Friday service could not be enforced. Neither could the consumer obtain damages from the phone company for misrepresentation or fraud.
SECTION 56-589
Prohibited practices by electric public service companies(1) Any acts or practices committed by a public utility or other entity in providing, distributing, or marketing electric service using any deception, fraud, false pretense, misrepresentation, or any deceptive or unfair practices are declared unlawful.(2) Any violation of this section shall also be a violation of the Virginia Consumer Protection Act, Section 59.1-200, et seq.
DISCUSSION:
As electric service providers move into a deregulated world, the reasons for their exemption from the Virginia Consumer Protection Act evaporates. Traditional law provides for an exemption due to the close regulatory oversight by the state corporation commission. As that oversight gives way to a competitive environment, the providers of electric service should be made subject to the same consumer protection laws as are the competitive providers of any other consumers goods and services.
SECTION 56-589
It shall be unlawful for any electric service provider to discriminate against any person with respect to any aspect of a consumer transaction on the basis of race, color, creed, national origin, age, gender, religion, source of income, receipt of public benefits, family status, credit status, sexual orientation, disability, or geographic location.
DISCUSSION:
An electric service provider should have the obligation to make service available on a non-discriminatory basis. This duty of "non-discrimination" has two elements to it. First, the duty should adopt principles in line with traditional notions of consumer protection. Actions that have the effect of imposing adverse impacts on a residual class should be unlawful unless they are dictated by a business necessity. Second, the duty of non-discrimination must extend beyond those decisions by electric service providers that may be economically irrational. Reference to public policies prohibiting "redlining" in the housing, home lending, and insurance industries are helpful in defining the obligation to serve in this regard. In these industries, just because a decision to redline may be "rational" does not mean that it is lawful.
The proposed language above extends anti-discrimination language to "any aspect of the consumer transaction." This approach mirrors that of federal consumer protection statutes.
SECTION 56-589
Electric service is essential to the habitability and affordability of shelter and should be available to all customers. The policy of this Commonwealth is to prevent involuntary deterioration in current penetrations of electric service amongst those seeking service.
DISCUSSION:
There are really two things going on with this proposed addition. First, it explicitly states that the state recognizes electric service as essential. While this may perhaps seem to be meaningless puffery, such statements can be used in a variety of future ways. Such a statement, for example, would certainly help in future anti-discrimination enforcement actions. Second, this statement sets an objective measurement of how to determine whether electric restructuring is going awry and seeks to start putting some meat on the bones of a "universal service" doctrine. The intent of the legislature is to prevent involuntary deterioration in current penetrations of electric service amongst those seeking service. Penetration of electric service approaches 100 percent. Indeed, the electric industry stands alone in its achievement of complete success in service penetration levels. Given this achievement, public policy should declare that any deterioration in universal service will be unacceptable.
Frequently, statutory schemes (in any substantive area of the law) begin with statements of principle or declarations of intent. When this occurs, the policy declarations do not impose, unto themselves, enforceable obligations. Instead, such policy declarations represent a broad touchstone of intent, consistency with which is used as a measurement of the appropriateness of other specific actions or requirements, rather than a self-enforcing, self-actuating, requirement of law unto itself. The purpose of policy statements generally is to serve as a touchstone of intent as well as a declaration of aspiration. When facing specific narrower decisions not covered by law, therefore, the choice between alternatives can be made by reference to whether it will advance or impede a movement toward the intent and aspiration.
SECTION 56-590
1. Low-Income Rate Affordability and Energy Efficiency Funding.A low-income rate affordability program and a low-income energy efficiency program shall be created. The purpose of the rate affordability program is to reduce the cost of electricity for low-income Virginia consumers to a predetermined percentage of total household income. The purpose of the energy efficiency program is to reduce the consumption of electricity by low-income Virginia consumers through energy efficiency improvements.
a. Definitions. For purposes of this subsection,(i) "Commercial customers" include any business establishment not engaged in transportation or manufacturing or other types of industrial activity, but including school dormitories, hospitals and military barracks and other non-industrial and non-residential customers.b. Eligibility. Consumers living with a household income at or below one hundred fifty percent of the federal poverty level, as determined annually by the United States department of health and human services, shall be eligible to receive assistance under this section.(ii) "Commission" means the Virginia state corporation commission.
(iii) "Consumer" means low-income, end-use consumer.
(iv) "State LIHEAP agency" means the state agency responsible for administering fuel assistance funds provided through the federal Low-Income Home Energy Assistance Program or its successor.
(v) "State weatherization agency" means the state agency responsible for administering low-income weatherization funds through the federal Weatherization Assistance Program or its successor.
(vi) "Industrial customers" include manufacturing industries along with mining, construction, agriculture, fisheries and forestry.
(vii) "Residential customers" include all private residences, whether occupied or vacant, owned or rented, including single-family homes, multifamily housing units and mobile homes, but not including school dormitories, hospitals and military barracks.
c. Program Benefits.
(1) Rate Affordability Program. Agencies contracted to operate the program shall qualify each consumer for participation in the rate affordability program and shall notify the utility providing distribution service of the consumer's monthly fixed credit and the duration for which the fixed credit is authorized. The fixed credit shall be that amount necessary to reduce the consumer's total electric bill, based upon the prior year's billing amount, to an affordable percentage of income in accordance with rules adopted by the state LIHEAP agency. The affordable percentage of income shall be tiered to reflect the ratio of the consumer's household income to the federal poverty level, with greater assistance provided to those at lower poverty levels. A reasonable proportion of rate affordability benefits shall be reserved for crisis intervention assistance.d. The Legislative Transition Task Force, with input from the State Corporation Commission, shall establish a charge sufficient to fund a program budget equal to the sum of the rate affordability budget developed by the state LIHEAP agency pursuant to section (e) below plus the energy efficiency budget developed by the state weatherization agency pursuant to section (f) below, and shall recommend to the General Assembly, no later than December 1, 1999, legislation to establish said charge.Program benefits shall be distributed as a monthly fixed credit applied toward a consumer's distribution bill for provision of electricity. The company billing the end-use consumer shall subtract the amount of the credit from the amount of the consumer's bill each month. If the fixed credit exceeds the consumer's distribution bill, the excess shall be applied toward the cost of the consumer's competitive electric services. The distribution utility shall bill the appropriate operating agency for the sum of the total amount of fixed credits provided to the consumer and shall be reimbursed for all credited amounts. Only those credits that are authorized in accordance with this subsection shall be reimbursed.
(2) Energy Efficiency Program. Energy efficiency funding eligibility shall be prioritized based on largest kilowatt hours of annual use. Moneys allocated to the low-income energy efficiency program may be used for any of the following:
(a) Space heating as allowed pursuant to the federal weatherization assistance program.(b) Non-space heating as determined by the Virginia weatherization assistance program as necessary and appropriate to provide maximum comprehensive cost-effective energy efficiency treatment to low-income households.
(c) Health and safety corrections related to end use energy equipment for heating, cooling and domestic hot water, including adequate electrical service to equipment.
(d) Emergency repairs to space heating systems as determined appropriate by the Virginia weatherization assistance program.
All moneys collected pursuant to this charge shall be remitted to the Treasurer of the Commonwealth. The Treasurer shall make disbursements from this fund as appropriate. The unencumbered or unobligated moneys remaining at the end of any fiscal year from the appropriations made in subsection ___ shall not revert but shall be available for expenditure during subsequent fiscal years until expended for the purposes for which originally collected.
When determining the annual charge, the ratio of total dollars collected from each customer class to the total dollars collected by all classes shall be reasonably equal to the ratio of total kilowatthours of consumption for each customer class to the total kilowatthours of consumption for all classes.
e. Rate Affordability Program Administration and Budget.
(1) The state LIHEAP agency shall administer the rate affordability program. This administration may include contracting with a statewide third-party nonprofit agency or with local agencies to enroll low-income participants in the program, provide outreach and customer education, notify consumers and answer consumer inquiries, and keep records relating to the numbers of program participants and program expenditures.f. Energy Efficiency Program Administration and Budget.(2) The state LIHEAP agency shall develop a budget for the programs created in this subsection on an annual basis. The budget shall be based on participation rates from prior years and the level of credits necessary to maintain affordable energy burdens.
(3) The level of funding allocated for administration shall not exceed ten percent of the amounts allocated for the total rate affordability funding.
(1) The state weatherization agency shall administer the energy efficiency program. This administration shall include contracting with local agencies, enrolling low-income participants in the program, providing outreach and customer education, notifying consumers and answering consumer inquiries, and keeping records relating to the numbers of program participants and program expenditures.g. Each distribution utility shall report to the commission annually, the number of end-use accounts in its distribution service territory for the immediately preceding year.(2) The state weatherization agency shall develop a budget for the programs created in this subsection on an annual basis. Energy efficiency program expenditures shall be based on the level of funding necessary to deliver adequate energy efficiency as defined in sub-section (c)(2) above to participating households, provided that energy efficiency funding shall not exceed twenty-five percent of total low-income affordability funding.
(3) The level of funding allocated for administration shall not exceed ten percent of the amounts allocated for the total rate affordability funding.
h. Low-income rate affordability and energy efficiency assistance shall be distributed statewide without consideration of the source of revenues funding the rate affordability assistance program.
i. Every other year, the state LIHEAP agency shall do the following:
(1) evaluate the performance and effectiveness of the low-income affordability assistance program through use of an independent third party. Upon completion, the evaluation shall be submitted to the general assembly.(2) develop a low-income needs and resources plan for the state which shall include the following:
(a) a statewide assessment of the need for low-income rate affordability assistance and energy efficiency assistance;Upon completion, the plan shall be submitted to the general assembly.(b) an identification of the public and private resources available to meet the identified needs; and
(c) recommendations on how to coordinate the available resources to most effectively address the identified needs, taking into account the difference between short- and long-term effectiveness.
DISCUSSION
The above language sets forth the Council's rate affordability proposal. It imposes a charge that will fund both energy efficiency and rate discounts for low-income consumers. Responsibility for administering the rate affordability program is given to the state LIHEAP agency (i.e., the Department of Social Services). Responsibility for administering the energy efficiency program is given to the state weatherization agency (i.e., the Department of Housing & Community Development).
The Legislative Transition Task Force, with input from the State Corporation Commission, is given the responsibility for developing the mechanism for collecting the funds necessary to fund the rate affordability and energy efficiency programs. The budgets for each program are to be developed annually by the respective administering agencies. It is anticipated that the funding mechanism will involve either an accounts charge or a kWh charge. While a kWh charge would seem to be "fairest" means of collecting such funds, a meters charge would cushion the impact of the charge on large users, including large industrial users. Whatever the funding mechanism, the inter-class responsibility shall be reasonably equal to the proportion of that each class' consumption has to total consumption for all classes combined.
The Council's calculations show that a kWh charge of $0.000765/kWh would fund the rate affordability and energy efficiency programs. A monthly accounts charge as follows would generate the equivalent funds while maintaining the required inter-class ratios:
1. 80 cents for residential accounts.The two funding mechanisms above would generate functionally equivalent budgets. The Council expresses no preference between the two at this time.2. six dollars and 25 cents for commercial accounts.
3. Two hundred sixty dollars for industrial accounts with loads at or below ten megawatts.
4. Five hundred dollars for industrial accounts with loads above ten megawatts.
SECTION 56-590
By December 31, 2001, the Department of Social Services shall develop performance measurements for the attainment and maintenance of universal service and shall report on universal service to the General Assembly using those measurements.DISCUSSION:
The concept of performance measurement is increasingly being applied to both public and private programs today. Perhaps best known is the federal Government Performance and Results Act of 1993 (GPRA). GPRA was designed to address the same conceptual issues a competitive utility must address for its universal service programs: "to grapple[] with how to best improve effectiveness and service quality while limiting costs." GPRA was enacted in response to:
the need to shift the focus of government decisionmaking and accountability away from a preoccupation with the activities that are undertaken. . .to a focus on the results of those activities. . . The key concepts of this performance-based management are the need to define clear agency missions, set results-oriented goals, measure progress toward achievement of those goals, and use performance information to help make decisions and strengthen accountability.The transformation to performance-based management is not easy under GPRA. But the substantial difficulties which federal agencies will face are much the same that competitive utilities will face with their universal service programs. As the U.S. General Accounting Office (GAO) has observed, one goal of the statute for the federal government is to:
ensur(e) that agencies are managing to achieve results rather than just focusing on activities or processes. Many agencies have a difficult time moving from measuring program activities to establishing results-oriented goals and performance measures. The fundamental reason that this is so difficult is that, to manage on the basis of results, agencies must move beyond what they control--that is, their activities--to focus on what they merely influence--their results.In this observation, one could replace the word "agencies" with the word "utilities" (or even more specifically, "universal service programs") and the fundamental truth of the statement would still attend. This language fills each of these purposes.
NEW SECTION 56-XXX
1. Not later than January 1, 2000, the State Corporation Commission shall develop a comprehensive public education outreach program to educate customers about the implementation of retail competition among electric suppliers. The goals of the program shall be to maximize public information, minimize customer confusion and equip all customers to participate in a restructured generation market. The program shall include, but not be limited to: (1) The dissemination of information through mass media, interactive approaches and written materials with the goal of reaching every electric customer; (2) the conduct of public forums in different geographical areas of the state to foster public input and provide opportunities for an exchange of questions and answers; (3) utilization of communitybased organizations in developing messages and in devising and implementing education strategies; (4) targeted efforts to reach rural, low income, elderly, foreign language, disabled, ethnic minority and other traditionally underserved populations; and (5) periodic evaluations of the effectiveness of educational efforts. The commission shall assign one individual within the commission to coordinate the outreach program and oversee the education process. The commission shall begin to implement the outreach program not later than January 1, 1999.2. There shall be established a Consumer Education Advisory Council which shall advise the outreach program coordinator on the development and implementation of the outreach program until the termination of the standard offer under this act. Membership of the advisory council shall be established by the Commission not later than June 1, 1999, and shall include, but not be limited to, representatives of the Commission, the Office of Attorney General, the Department of Social Services, the Department of Housing and Community Development, the Department for Aging, the Department of Agriculture and Consumer Services, the Department of Environmental Quality, community and business organizations, consumer groups, including, but not limited to, a group that represents low-income customers, electric distribution companies and electric suppliers. The advisory council shall determine the information to be distributed to customers as part of the education effort such as customers' rights and obligations in a restructured environment, how customers can exercise their right to participate in retail access, the types of electric suppliers expected to be licensed including the possibility of load aggregation, electric generation services options that will be available, the environmental characteristics of different types of generation facilities and other information determined by the advisory council to be necessary for customers. The advisory council shall advise the outreach program coordinator on the methods of distributing information in accordance with subsection (a) of this section and the timing of such distribution. The advisory council shall meet on a regular basis and report to the outreach program coordinator as it deems appropriate until termination of the advisory council's role upon the termination of the standard offer under this act.
3. Not later than January 1, 2000, the Commission shall submit a report to the Legislative Transition Task Force of the General Assembly, outlining the scope of the education outreach program developed by the Commission and identifying the individual acting as outreach program coordinator and the membership of the advisory council.
4. The commission may retain a consultant to assist in developing and implementing the public education outreach program, provided the authorization to retain such consultant shall expire December 31, xxxx. The reasonable and proper expenses for retaining the consultant and implementing the outreach program shall be reimbursed through the Commission.
EXPLANATION
The importance of consumer education can hardly be overstated. The proposed language directs the commission to develop and implement a consumer education plan; to convene and utilize a consumer education advisory panel; and to utilize community-based organizations in developing messages and in devising and implementing education strategies. The legislation authorizes the commission to retain an education consultant to fulfill its obligations under the statute.
While we have not included language on a funding mechanism, a review of our proposal for low-income rate affordability and energy efficiency programs indicates that, if a wires charge of 1 mil per KWH was established, there would be sufficient monies generated to not only fund the low-income programs but also to fund the consumer education program and other environmental and utility worker programs.