TO: SJR 91 Structure and Transition Task Force

FROM: Robert G. Goldsmith, President

Judith R. Mason, Executive Director

Virginia Council Against Poverty

RE: Restructuring Plan Narrative

DATE: June 29, 1998

The Virginia Council Against Poverty is concerned with the impact that industry restructuring will have on residential consumers, especially those who are of low income.

The outline provided by staff for this paper specifically requests no response relative to Sections 56-589 (Consumer protections and customer services) and 56-590 (Public purpose programs). While the Council understands that the discussion of specifics related to these issues will be taken up by the Consumer and Environmental Education and Protection Task Force, we also believe that the vision of the restructured industry provided by the Structure and Transition Task Force must include a basic commitment to strong consumer and environmental protections, comprehensive consumer education, and public benefits programs to assist the most vulnerable of Virginia's citizens. This commitment from the Structure and Transition Task Force will then set the stage for the more detailed discussions of the Consumer and Environmental Education and Protection Task Force.

The Virginia Council Against Poverty offers the following brief discussion around the outline of structure and transition. We do not lay claim to the extensive nuts and bolts knowledge of other stakeholders. We simply provide our concerns and ideas for your consideration.

Section 56-578. Additional units of local government should be encouraged to enter competition as aggregators for residents of their localities.

Section 56-579. Residential and small business consumers must be first--either first under a phased in competition or along with all other customer classes in concurrent commencement of competition. Industrials and large commercial customers must not be allowed to go first under a phased-in schedule of competition.

Although HB 1172 as passed set dates for the move from regulation to competition, if true competition cannot be achieved by those dates (due to issues of market power, transmission constraints, etc.), the State Corporation Commission should have the authority to alter the schedule, and to preserve regulation until competition becomes effective (if, in fact, it does).

Section 56-584. All aspects of distribution, including metering, billing, connection and collection, should continue to be regulated.

Section 56-585. In order to assure minimum standards of quality and dependability of service, all generating companies which desire to do business in the Commonwealth must be licensed and bonded.

Section 56-586. The "default supplier" and the "supplier of last resort" are separate concepts and should not necessarily be the same entity.

The arbitrary assumption that the incumbent utility will be the default supplier will seriously impact the balance of market share in favor of the incumbent utility. While the incumbent may be the only utility capable of acting as default supplier during transition, this status gives the incumbent a competitive advantage, and a process of competitive bid and/or random assignment to select the default provider(s) must be established as quickly as possible.

Rates for the supplier of last resort should be regulated, in order to assure that customers who have no choice in their supplier maintain continuous service at rates that are not higher than rates of consumers who do have choice.

Section 56-587. The development of public and/or non-profit aggregators to enable groups of residential and other small consumers to negotiate for generation supply should be encouraged. Regulations should be written to enable these aggregators to compete effectively with industrials and large commercial customers.

Section 56-589. Electric suppliers must be subject to current consumer protection laws. Strong consumer protection and comprehensive consumer education for residential and small business consumers must be a part of the move from regulated industry to a competitive market. Consumer education must not be limited to promotional materials developed by the Electric Service Providers (utilities et al). Special consumer education efforts must be targeted to "at risk" and vulnerable populations--the poor, the elderly, the disabled. Consumer education should be conducted by groups experienced in working with these populations.

Section 56-590. All consumers regardless of class should pay a non-bypassable universal service charge to establish a fund to include conservation, education and utility assistance for low-income consumers.

Section 56-592. Residential and small business consumers should not pay a disproportionate share of any pro rata surcharges for stranded cost recovery, public benefits programs, etc.

Section 56-593. The State Corporation Commission should reserve the authority to mandate divestiture if such is required to address the market power issue and bring about true competition.

Unless the market power issue is addressed and the problem solved, true competition in Virginia's electric utility industry will not occur. Incumbent utilities are in the position to assert market power, thus blocking new utility suppliers from entering the market. Summary determination that incumbent utilities will assume the position of default supplier/supplier of last resort strengthens this position and undermines competition. Regulation must remain in place until such time as the General Assembly and the SCC determine that competition has been effective.