§ 56-578. Applicability; municipalities
Washington Gas believes all electricity customers should be able
to choose valued products and services from a full range of providers.
Power providers, including municipals, should be allowed to market
their generation capacity to all customers as long as their service
territory is open to competition.
§ 56-579. Schedule for Transition to Retail Competition;
Commission Authority.
Washington Gas offers these dates in the development of a timeline:
January 1, 1999 would begin enrollment for year one of the pilot
(10% of all customer classes) for service beginning May 1, 1999;
January 1, 2000 would begin enrollment for year two of the pilot
(20% of all customer classes) for service beginning May 1, 2000.
The beginning of year two of the pilot would coincide with the
time when the ISO and RPX should be fully functional. The pilot
startup (January 1999) should not be delayed because the ISO/RPX
are not in place (bilateral contracts could be used in lieu of
functioning ISO/RPX during the pilots) - data gathered during
the pilot should be used in developing the ISO/RPX. The formation
of the ISO/RPX should be subject to FERC approval. The General
Assembly should inform surrounding states through a resolution
that Virginia intends to have a fully functional ISO/RPX by a
date certain.
The SCC should be allowed to vary the time schedule set forth
in House Bill 1172 if required by a FERC ruling or inaction, or
a pending appeal before the Supreme Court of Virginia or the U.S.
appellate courts.
The SCC should conduct rate case(s) to establish base rates.
Utilities should be properly incented to reduce stranded costs
through the PBRs (Performance Based Rates) which use Commission
approved methods to split the benefits of certain realized efficiencies
between shareholders and ratepayers by amortizing stranded costs
on an a more accelerated basis than reflected in base rates.
As part of its proposed timeline, Washington Gas recommends the
unbundling of separate services on the bill as soon as practicable
to begin the customer education process.
Washington Gas believes that pilot programs offer a more constructive
approach to moving toward competition and serving customers' needs
and desires. For that reason, Washington Gas urges that retail
competition should commence independently of wholesale competition.
§ 56-580. Nondiscriminatory Access to Transmission
and Distribution Systems.
State legislation should require open access to both distribution and transmission systems. The SCC, ISO/RPX, and FERC should determine unfair discriminatory actions and administer appropriate remedies in their respective areas of responsibilities.
The transmission system shall continue to be regulated by the
appropriate state and federal entities.
Transmission import capability is a crucial component of the market
power discussion. With constrained import capacity the entity
that controls a large percentage of the native generation could
potentially exercise certain artificial price controls that could
virtually eliminate the economic incentives for new entrants.
Every effort to deal with the physical constraints and the financial
impact of them should be taken.
§ 56-581. Independent System Operator.
The ISO(s) should be formed through cooperative efforts between
utilities and state utility regulatory commissions within the
proposed borders of the ISO(s). Operation of the ISO should be
done by an appointed and independent Board of Directors, which
would also resolve disputes within the ISO. The FERC will approve
transmission tariffs.
The ISO should be responsible for coordinating with all those
entering the market and the appropriate incumbent utilities covering
such things as voltage stability, generation reserves and overall
generation and transmission upgrades & reliability.
§ 65-582. Regional Power Exchange.
Public interest standards should be taken into consideration during the formation of the RPX.
Bilateral contracts between suppliers and customers should be
allowed in the absence of a fully operational ISO/RPX (i.e. during
the transition period). Once the Virginia electric market is
fully competitive and the ISO/RPX is functional, sales could be
through the RPX, bilateral contracts or a combination of RPX sales
and bilateral contract sales.
§ 56-583. Transmission and Distribution of Electric
Energy.
Legislation should enable equal access to both the transmission
and distribution systems for the purchase and distribution of
competitive electricity.
The SCC should continue oversight over eminent domain. Additionally,
the SCC should maintain its authority over the siting of both
generation and transmission facilities, along with need and economic
aspects of the transmission facilities. It will not be necessary
for the SCC to oversee need and economic aspects of competitive
generation facilities.
Current service territories for distribution activities should be maintained.
§ 56-584. Regulation of Rates Subject to the Commission's
Jurisdiction.
The SCC should continue to regulate distribution system construction,
maintenance, safety, etc. and should assume regulation for provider
of last resort and default provider during the transition period
to total customer choice.
§ 56-585. Licensure of suppliers of Retail Electric energy; License Suspension or Revocation; Penalities.
The SCC should assume responsibility for licensing and requirements
for filing financial documents. The SCC should have the ability
to levy fines for noncompliance and misrepresentation. The licensing
fee could help pay for public service/education campaign.
§ 56-586. Suppliers of Last Resort [and Default Suppliers].
When addressing the issues related to subsidized services, load
balancing and the provision of emergency utility services, the
program requirements should be clearly defined and communicated
to providers and customers alike. These programs should exist
only until full competition is in place at which time market forces
should act to enhance reliability.
A. Provider of Last Resort - entity that provides a customer's
power supply if a contracted supplier fails to deliver service
as scheduled. This program should include the universal service
activity to provide power to consumers in special need categories.
1. The incumbent utility should act as the provider of last resort
with the opportunity to charge a non-bypassable wires charge to
cover its costs which include maintaining reasonable reserves
for such a possibility.
2. Suppliers that fail to fulfill their obligation to serve customers
should pay a penalty or premium to the provider of last resort
to cover their costs. This in combination with the wires charge
should not exceed the incremental cost of providing this service.
B. Default Provider - the electric retail supplier that serves
a customer that does not make a pro-active choice in selecting
their energy provider.
1. During the transition, which includes pilot programs, the utility
should provide this service.
2. Upon the onset of a fully competitive market, the default provider
or supplier should be determined through a competitive bid process.
§ 56-587. Voluntary Aggregation Permitted.
§ 56-588. Metering, Billing and Other Related Distribution
Services.
While it is clear that the generation of electricity is the focus
of the restructuring debate, it is equally clear that other services
both customer related and/or services ancillary to generation
could be offered on a competitive basis. All or some subset of
these services could be rebundled to suit the consumers' energy
needs. In fact, these electricity services could be packaged
with others related to natural gas, propane, and/or fuel oil to
create a total energy portfolio. Energy suppliers will offer
products and services such as retail real-time pricing, weatherproof
bills, and design build as part of a tailored package.
Washington Gas suggests the following customer related activities
could be considered for competitive services:
§ 56-589. Consumer Protections and Customer Services; Penalities.
No response requested at this time-issue before Consumer and Environmental
Education and Protection Task Force.
§ 56-590. Public Purpose Programs.
No response requested at this time-issue before Consumer and Environmental
Education and Protection Task Force.
§ 56-591. Transition Costs and Benefits.
No response requested at this time-issue before Stranded Costs
Task Force.
§ 56-592. Nonbypassable Wires Charges.
Washington Gas believes that utilities are entitled
to collect such stranded costs as long as they are determined
to have been prudently incurred.
Washington Gas proposes a competitively neutral non-bypassable surcharge on all distribution customers. The SCC may wish to consider certain mitigation measures, such as Performance-Base Ratemaking, that incent utilities to reduce potential stranded cost liability amounts.
It is important to note that in order for stranded
costs to be properly determined and recovered, Energy Service
Providers (ESPs) must provide accurate sales price information
to the Commission during the stranded investment recovery period.
While this may be objectionable to third parties, it is necessary
for the Commission to obtain reliable information on market prices
during the transition to competition.
It is fundamentally unfair to force investors to
absorb stranded costs that were made in an earlier and quite different
economic regime. The recommended surcharge for stranded costs
would be a wires charge and should be paid by all distribution
customers.
§ 56-593. Divestiture Not Required; Functional Separation
[and Other Corprate Relationships].
§ 56-594. Legislative Transition Task Force Established.
Market Power exists when one or more dominant entities control
the market through advantages gained in the non-competitive environment.
Market Power is typically segmented into two broad categories:
vertical and horizontal. Each of these presents
a unique set of concerns and could be mitigated utilizing distinctly
different techniques.
The first step in dealing with the market power issue is a complete
study that discloses the actual percentage of existing market
dominance, strategic location of "must run" plants,
and level of transmission constraints. The product of this analysis
should be a clear set of open access rules along with policies
that guide the transition to, and ultimate formation, of a truly
competitive market.
Vertical market power refers to the ability of existing electric
utilities to generate, transmit, and distribute electricity to
customers. Regulators, customers and competitors are concerned
that the presence of vertical market power could result in existing
electric utilities erecting barriers to market entry or shifting
costs and revenues among regulated monopoly services and competitive
services in ways that distort efficient market operation in a
restructured electric industry.
Possible solutions include:
b. Structural separation of generation operations from other utility services.
Horizontal Market Power refers to the possibility that a dominant
firm (or firms) could control production levels and manipulate
market prices in an anti-competitive manner within a market region.
This type of market power tends to increase as a firm's market
share of generation increases in relation to the size of the relevant
market.
An initial concern is the existing concentration of generating assets by just a few owners. These owners control an inordinate percentage of the native generation with very limited transmission import capability thus limiting a new supplier's ability to enter the market.