Virginia Power's Proposed Legislation on Electric Generation Customer Choice and Competition - December 3, 1998
§ 56-253.1 Development of Effective Competition; Legislative Deregulation Oversight Committee
This section creates a special Legislative Deregulation Oversight Committee (LDOC) to monitor the move to retail competition. The LDOC is created effective July 1, 1999 and may recommend necessary actions to the General Assembly to ensure the development of an effective competitive market.
Additionally, a Customer Advisory Board (CAB), made up of representatives of all customer classes, is set up to monitor the transition. The CAB will assist the LDOC and periodically report to it. The CAB, appointed by the governor, is created effective July 1, 1999.
The section further calls for an LDOC study of the structure and appropriate levels of public support of consumer, environmental and educational programs that the transition to competition might make necessary. These recommendations will be submitted by the LDOC to the Assembly by December 1, 1999, for consideration by the legislature's 2000 session. The LDOC will also examine whether metering and billing services should become competitive in the future and whether additional procedures are needed for proper handling of customer complaints against suppliers and aggregators.
Regarding retail pilots, the legislation calls for such programs ordered or approved by the Commission to remain in effect until January 1, 2002, with the Commission submitting annual reports on such programs to the LDOC and the CAB beginning in 1999.
§ 56-253.2 Consumer Education
The section commits the state to setting up a program to ensure that all customers can make informed choices in the emerging competitive market. The State Corporation Commission will supervise the program. Independent non-profit and public groups, as well as appropriate public agencies, will participate in the program's delivery.
§ 56-253.3 Electric Generation Customer Choice and Competition Implementation Plan
The provision calls for each incumbent electric utility to submit to the SCC a plan for the implementation of retail competition. The plans must be submitted by January 1, 2000. Each utility plan must include a proposal to separate generation, transmission and distribution functions and unbundle charges for these services. Each plan must also include a phase-in of competition consistent with the timetables set in this legislation. The Commission will conduct public hearings on these plans.
§ 56-253.4 Schedule for Transition to Electric Generation Customer Choice and Competition; Commission Authority
Under the terms of this section, the SCC will approve, modify or deny each utility competition implementation plan by January 1, 2001. Each incumbent utility will also join an Independent System Operator (ISO) by January 1, 2001, and separate its generation function from its transmission and distribution functions beginning on January 1, 2002. As of that date, generation functions will be deregulated.
The section calls for the phase-in of competition from January 1, 2002 to January 1, 2004 in increments of one-third, with retail choice for all by the latter date. The SCC is given limited authority to delay the second and third increments of the phase-in schedule for up to one year due to concerns about reliability, action or inaction by the Federal Energy Regulatory Commission, or pending litigation before the Virginia Supreme Court.
Finally, the section orders the SCC to ensure that all suppliers and generators have nondiscriminatory access to transmission and distribution systems in Virginia at just and reasonable rates.
§ 56-253.5 Independent System Operators; Regional Power Exchange; Transmission and Distribution of Electric Energy
The section affirms the SCC's authority to approve the transfer of the ownership of transmission facilities in the Commonwealth from a utility to an ISO. As called for in House Bill 1172, one or more Regional Power Exchanges (RPXs) will be established by January 1, 2001; retail customers may purchase power through an RPX or directly from a supplier. The section also affirms the SCC's jurisdiction over transmission, to the extent not preempted by federal law.
Incumbent utilities will continue to be the exclusive providers of distribution services within their service territories under the restructured system, according to the bill.
§ 56-253.6 Regulation of Rates Subject to the Commission's Jurisdiction
The section deals with SCC regulation of rates during a Price Protection Period to begin on January 1, 2002. During this period, the Commission will be prohibited from conducting rate investigations except to determine the non-bypassable wires charge authorized by the legislation or in response to emergency petitions from utilities. Conditions for these emergency cases are already set forth in state law. The section also directs the SCC to determine by January 1, 2002 a fuel charge for each incumbent electric utility that will be applicable to customers who do not switch to a competitive generation supplier. These charges once set will remain in effect through the Price Protection Period and its possible extension.
§ 56-253.7 Licensing of Electric Generation Suppliers; Licensure of Aggregators; Permitting of Electric Generation Facilities; License Revocation or Suspension; Penalty; Authority of Commission
To protect the public interest, especially the interests of consumers, the section calls for SCC licensing of suppliers and aggregators, with the first licenses effective January 1, 2002. Aggregators may organize groups of retail customers, including small businesses and residential customers, to increase their buying power. Incumbent utilities will be issued a license without the need for submission of additional information. In other cases, entities seeking licenses must demonstrate financial responsibility and technical capability, comply with a code of conduct approved by the SCC, and comply with other provisions the Commission may deem necessary for protection of consumers and the environment, or for fair competition.
The legislation calls for the Commission to issue power generation permits to persons or entities who wish to construct and operate electric generating facilities. In granting a permit, the SCC will consider the facility's effect on service reliability and on the environment.
The bill directs the SCC to adopt rules and regulations prohibiting licensed suppliers, aggregators and generators from discriminating against consumers on the basis of race, religion, age, sex and other factors. The SCC is also instructed to enact safeguards against fraudulent, deceptive and unfair marketing and other business practices. Violations of licensing and permitting conditions may be punished by revocation, suspension, and the imposition of penalties of up to $50,000 per infraction.
§ 56-253.8 Non-bypassable Wires Charge or Credit
The section creates a non-bypassable wires charge, to be assessed on customers who leave their incumbent providers during the Price Protection Period, and on all customers beyond the end of that period. The charge, determined separately for each incumbent utility, will begin on January 1, 2002.
Cost recoverable under the non-bypassable wires charge include above-market costs of all power purchase contracts entered into by a utility as of January 1, 1999, as well as federally-mandated nuclear unit closing and decommissioning costs and costs associated with infrastructure for the transition to competition. A credit will be calculated and returned to customers if the power purchase contracts are below market. The above-market power purchase contract costs will be collected until the contracts expire, and the nuclear costs will be collected until the units are closed and decommissioned. The section prescribes formulas for the annual determination and true-up of the non-bypassable wires charge for each utility. Savings from the mitigation of power purchase contract costs are to be shared equally by a utility's customers and its stockholders.
§ 56-253.9 Supplier of Last Resort and Default Provider
The section calls for the incumbent utility to be the supplier of last resort for customers who are unable to obtain alternative suppliers or who are terminated by such suppliers. The incumbent must also provide emergency service to customers. These provisions are effective through the Price Protection Period and its possible extension.
Additionally, the section calls for the incumbent to be the default provider for all customers within its service territory who do not exercise the right to choose an alternative supplier. This provision is also effective through the Price Protection Period and its possible extension.
§ 56-253.10 Metering and Billing Services
The section makes clear that the incumbent utility shall continue to be the exclusive provider of metering and billing services to all customers within its distribution service territory. These provisions will be effective through the Price Protection Period and its extension.
The section also requires all retail bills to itemize generation, transmission and distribution charges, as well as the non-bypassable wires charge or credit, beginning January 1, 2002.
§ 56-253.11 Price Protection
The legislation establishes a Price Protection Period, beginning January 1, 2002 and ending January 1, 2007. During this period, a fixed retail rate will be available to all customers who remain with their incumbents or return to them. The generation, transmission and distribution components of this fixed rate will be set at the level of the utility's bundled generation, transmission and distribution rates as of January 1, 1999. The fuel cost component for each utility for the duration of the period shall be set by the Commission by January 1, 2002.
The Price Protection Period may be extended legislatively for two years beyond January 1, 2007, upon the recommendation of the LDOC.
§ 56-253.12 Transition Regulation
The section prohibits incumbent utilities from selling or transferring their generating facilities, except to affiliated interests, during the Price Protection Period or its extension without Commission approval. It also requires an incumbent utility to retain enough generating capacity to serve the retail customers to which it continues to supply electricity in its distribution service territory. This provision is also in effect during the Price Protection Period and its possible extension.
§ 56-253.13 Market Power; Attorney General; Commission
The section calls for a series of reviews to protect consumers against undue market power during the Price Protection Period and its possible extension. The Office of the Attorney General is directed to monitor the situation and identify practices that could restrain trade or decrease competition in violation of the Virginia Antitrust Act after the end of price protection. The Attorney General is directed to report annually to the LDOC and the Assembly, beginning in 2002 until the end of price protection, including any extension.
The Commission is also directed to monitor the market to determine the existence of factors that could impede the development of a truly competitive electric generation supply market in Virginia. The Commission is directed to report its findings annually to the LDOC and the Assembly beginning in 2002 until the end of price protection.