SB 0781 Establishes retail electric customer choice
LR Number:2451S.02I Fiscal Note:2451-02
Committee:Commerce and Environment
Last Action:03/07/00 - Hearing Conducted S Commerce & Environment Committee- Journal page:
Effective Date:August 28, 2000
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Current Bill Summary

SB 781 - RETAIL ELECTRIC SERVICE CUSTOMER CHOICE - This act provides that retail electric generation services shall be provided in a competitive market. The Public Service Commission shall determine the commencement date after which all retail electric consumers, except those in areas exempted by the act, shall be permitted to choose their supplier or suppliers of electric generation services. The commencement date shall be the later of January 1, 2004, or the date that the Commission determines that all provisions of the act which must be implemented prior to commencement are implemented. Retail service options shall include: service from a Competitive Electricity Provider (CEP) under a standard offer; an individually negotiated bilateral contract with an CEP; purchase through a market aggregator who will negotiate directly with a CEP on behalf of the consumer; or purchase from an incumbent electric utility as a default provider or as the supplier of last resort.

LICENSURE OF COMPETITIVE ELECTRICITY PROVIDERS - All CEPs shall obtain and hold a license from the Commission in order to do business in the state. The act contains licensing requirements which include: proof of financial and operational fitness; an agreement to collect and remit applicable state and local sales and use taxes and local business taxes; an agreement to report certain customer data; a requirement to sell at least a certain fraction of power to residential customers; and a requirement that the rates to a customer shall not exceed the standard offer of the local distribution utility (LDU) providing service to such customer. The act provides for the review and approval of license applications. A license shall be valid for five years and may be renewed. The Commission may suspend or revoke a license for failure to meet one or more requirements of a license.

MUNICIPAL AND COOPERATIVE OPT IN - Municipally-owned utilities and rural electric cooperatives may elect to participate in retail competition. Exclusive generation service rights shall no longer apply to those municipally owned utilities and rural electric cooperatives which elect to participate in retail competition. The Commission shall not have rate authority over municipal and coop transmission and distribution service.

Municipalities may elect to participate by vote of the governing body or upon approval by voters of a proposal to participate. Municipal utilities shall provide open access in competitive annexed regions at same unbundled rates established for municipal customers who do not have choice. Municipal utilities competing in the city only shall provide open access at same unbundled rates established for customers who do not have choice. Retail choice shall continue in an area annexed by a municipality not participating in retail competition.

Cooperatives may elect to participate upon a vote of the Board of Directors. Competing cooperatives shall notify the Commission, and competition shall begin for such cooperatives 30 days following such notice. Non-competing cooperatives shall not sell generation in territories served by another utility when competition starts, except as allowed under current law, unless the Commission determines it to be in the public interest.

SEPARATION OF ASSETS/MARKET POWER - Existing electric utilities which provide generation and other services shall functionally separate the competitive and non-competitive services on or before 6 months prior to the commencement date, except that competing municipal utilities and cooperatives shall functionally separate prior to the date they begin to compete. Local Distribution Utilities (LDUs) and other companies may own transmission facilities. Affiliates of electric utilities may own electric generation assets and may sell generation directly to a retail consumer.

The Commission shall continue to investigate the development of competition and the degree of concentration of market power and shall implement remedies to promote a competitive market. The Commission shall investigate the impact of mergers and other disposition of assets which may affect development of retail competition. The Commission shall monitor the market to ensure non-utility generators do not exceed 20% market share in a destination market, and to ensure that, after five years of retail choice, at least 75% of load in an incumbent's service territory can be served by generation not owned by the utility or its affiliate.

In case of merger, acquisition or creation of new company, successor shall recognize and bargain with union representing employees of incumbent utility and refrain from making unilateral changes to terms and condition of employment. Any successor employer shall remain bound to collective bargaining agreements as permitted by federal law.

ACCESS TO TRANSMISSION AND DISTRIBUTION FACILITIES - All Missouri electric utilities shall provide access to their transmission and distribution facilities, ancillary services and other available services to any buyer or seller on a nondiscriminatory and comparable basis. The Commission shall ensure that no CEP has an unfair advantage in offering access to and pricing transmission and distribution services. The Commission shall establish, by rule, standards of conduct governing the relationships among the various business functions conducted by electric utilities. The LDU shall have an obligation to connect and provide delivery of electric service to all retail consumers within its current retail service territory on nondiscriminatory terms and conditions.

RELIABILITY - The state, the Commission and utilities shall work with the FERC and other entities to establish Regional Transmission Organizations (RTOs) or their equivalents to operated the transmission system. Each electric utility shall join an RTO by July 1, 2002, or file a plan with the Commission to provide for independent operation of its transmission system in a manner which provides open access and ensures reliability. The act specifies certain requirements for an RTO. All competitive electricity providers shall provide proof of adequate capacity reserve to the ISO or purchase such services from the RTO. Generation plant shall be subject to PSC jurisdiction with regard to safety.

RATES FOR TRANSMISSION AND DISTRIBUTION - The Commission shall establish just and reasonable rates for unbundled local distribution services. Each electric utility shall file unbundled service tariffs to provide services to all eligible purchasers on a nondiscriminatory basis. The Commission shall have jurisdiction over all aspects of transmission rates and services not subject to the exclusive jurisdiction of the FERC. The Commission may establish performance-based or incentive rate mechanisms and rate caps on electric services as part of the rate-making process to encourage mitigation of transition costs.

UNBUNDLED BILLS AND CONSUMER PROTECTION - The Commission shall adopt rules requiring the separation of charges for generation, distribution and transmission services, transition costs and taxes on retail customer bills. The Commission shall adopt rules regulating billing, complaints, billing disputes and change of service or provider. The Commission shall, prior to the commencement date, carry out an educational program to inform customers regarding changes in provision of service and requirements regarding disclosure of information by sellers and to help customers make informed choices. The Commission shall establish standards by which CEPs may claim to offer generation from renewable sources or "green power".

TRANSITION OR "STRANDED" COSTS - Each utility shall file a transition plan within 6 months of effective date. The Commission shall approve a plan for each utility within nine months of the filing date or filing deadline, whichever is earlier. Electric utilities shall be given a reasonable opportunity to recover from retail consumers the portion of verifiable net competitive transition costs (CTCs) that the Commission determines is eligible for recovery. Excess earnings shall not be used to reduce CTC's after commencement of competition, but may be applied at any time prior to commencement. The recovery of CTCs shall be through a nonbypassable, nondiscriminatory, appropriately structured competitive transition adjustment (CTA) that is fair to all retail consumers, limited in duration and consistent with the promotion of fully competitive markets, and unless otherwise determined by the Commission, shall be through a fixed per kilowatt hour charge on all sales. Charges to recover transition costs shall only apply to consumers within an electric utility's former retail service territory.

Transition plans shall establish the CTC, CTA and transition period. The transition period shall not exceed nine years and CTAs shall only apply during the transition period. The CTA shall be adjusted so that default customer's total rates are capped for five years at rates when competition starts. Default customers shall receive the same transmission and distribution rates as customers who choose another generation provider.

Net transition costs shall not include transmission and distribution assets and shall be reconciled to actual electricity market conditions from time to time. Transition costs may include adjustments approved by the Commission for certain unforeseen, required expenditures.

Costs arising from prudently-incurred power purchase contracts or associated with any renegotiation of the contracts shall be eligible for recovery in transition cost recovery charges. Transition cost charges shall not be recoverable for changes in usage occurring in the normal course of business. Electric utilities shall have the duty to take all reasonable measures to mitigate transition costs according to a process established in the act.

STATEWIDE POOL/CHOICE OF PROVIDER - Distribution utilities serving default customers and those acting as provider of last resort shall buy generation at lowest available price. The act establishes a statewide pool as an optional means to help LDUs serve default customers and serve as the provider of last resort for electric generation services in areas with retail choice. The statewide pool shall be governed by a Board of Directors which shall be appointed by the Commission and shall consist of at least nine and no more than fifteen members. Each member of the Board shall meet all membership requirements established by the Commission and shall not have a substantial financial interest in electric generation, transmission or distribution service.

CEPs shall provide customer lists to LDUs. LDUs shall provide load forecasts for entire load served. The statewide pool shall arrange to purchase generation for the load not served by CEPs. The statewide pool shall be terminated 5 years following commencement of competition, if the pool serves less than ten percent of residential customers unless the Commission determines the pool will still be needed.

The Commission shall set a date for choice of CEP. Customers not choosing another provider shall default to the LDU. After that date, customers may switch provider. A switching fee may be charged for customers who switch after a short time from one provider to another. LDUs may recover necessary costs through a service charge. The Commission may set conditions to discourage excessive switching.

TAXATION - This act makes changes to the provisions enacted in Senate Bill 627 from the 1998 legislative session, which required sellers of electricity and gas to be certified by the Commission and to file agreements which the sellers entered into, with either the distributor or political subdivision, for the payment of all gross receipt taxes or franchise fees owed. This act clarifies that the sales at issue will be deemed to be local sales even if title passes outside the state, and that a retail consumer will not be considered a seller. Electric and gas corporations shall file tariffs to comply with the act.

The act also extends the same framework to sales and use tax, requiring sellers of electricity and gas to file, with the Commission, agreements entered into with either the distributor or political subdivision to collect and remit all sales and use taxes. Distributors and political subdivisions are prohibited from providing energy services to any person unless the seller has been certified by the Commission and has filed its agreements. Sellers are required to waive all rights to challenge the validity of any agreement and of any right to a refund. A declaratory judgment action is authorized. Legal action challenging the validity of any agreement suspends that agreement until a final court judgment is made; if a court judgment invalidates the agreement structure, energy services may only be provided upon a showing of public convenience and necessity by the Commission.

This act is similar to SB 476 from 1999.