HB 900 -- Utility Deregulation

Sponsor:  Burton

This bill authorizes competition in retail sales of generation
of electrical service.

MUNICIPAL UTILITIES AND ELECTRIC COOPERATIVES

The bill allows municipal utilities and electric cooperatives to
vote to compete among electricity providers in retail sales of
generation service.  If a municipal utility or electric
cooperative elects not to compete to provide retail generation
service, it is prohibited from selling retail generation service
to consumers outside its territory.  The voters of a municipal
utility's territory or the members of an electric cooperative
must approve a ballot measure authorizing participation before
participating in competition.  Once the municipal utility or
electric cooperative elects to participate in competition, it
cannot later elect no longer to compete, and it must begin
competing in its certified territory within one year of approval.

COMPETITIVE TRANSITION COSTS

Electric utilities competing in the retail sale of generation
service are permitted to recover prudently incurred, net,
verifiable transition costs.  The Public Service Commission is
authorized to determine the amount of recovery for each utility
and approve a recovery plan.  The plan will propose a
competitive transition charge, allocated to all customers, and
permit recovery of the costs over a 10-year period.  Within 21
months of August 28, 1999, the commission is required to approve
and publish a recovery plan for each utility submitting a plan.

The bill authorizes the commission to set the amount of the
competitive transition charge, which must not exceed the cost
per kilowatt-hour, including transmission and distribution, paid
on August 28, 1999, during the recovery period.  Anti--
competitive recovery mechanisms such as entry and exit fees are
prohibited, and charges must be nonbypassable,
nondiscriminatory, appropriate to all customer classes, limited
in duration, and consistent with competition.  The charge
applies only to customers within the utility's certified
territory as it was before retail competition was implemented.

Recovered competitive transition costs will be used solely to
reduce the utility's related capital expenditures.  Electric
utilities are required to mitigate competitive transition costs,
and the commission is authorized to allow for mitigation in
rates.

TRANSITION BONDS

The bill allows the commission to authorize the issuance of
transition bonds to recover some or all of a utility's
recoverable competitive transition costs.  The principal of and
interest on transition bonds must be paid from competitive
transition charges.  Any proceeds from the issuance or sale of
the bonds must be used to reduce the utility's recoverable
competitive transition costs and related capitalization.  A
final order of the commission authorizing issuance of transition
bonds and any competitive transition charge established by the
commission for recovery through transition bonds is irrevocable.

PUBLIC INTEREST PROTECTION

The bill requires the commission to adopt before January 1,
1999, rules and regulations requiring that standard offers and
consumers' retail electric bills provide similar information
regardless of provider.  These rules and regulations are
effective January 1, 2000.

The commission must also, before January 1, 2000, establish
procedures to ensure that a consumer's generation service is not
switched without reliable confirmation of the consumer's intent
to make the change and to provide a complaint process for
unauthorized switching.

CODES OF CONDUCT

The bill requires the commission to adopt rules and regulations
requiring that transmission and distribution utilities provide
service to all generation service customers in their territories
and to all non-exempt utilities at fair and nondiscriminatory
rates and terms of access.

The commission must also establish standards to ensure that
competitive electricity providers and affiliated transmission
and distribution utilities maintain an arm's-length relationship
and that the relationship does not interfere with the
development of effective competition.

EMERGENCY SERVICE

The bill authorizes the commission, through a competitive
bidding process, to designate utilities to act as emergency
suppliers of generation service to any non-interruptible
consumer if the consumer's provider fails to supply generation
for reasons other than nonpayment.

RETAIL MARKETING AREAS

The state will be divided into retail marketing areas (RMAs),
which represent geographic designations for the purpose of
aggregating retail electric customers.  Retail electric service
for each RMA will be bid out by the commission for those in the
area that choose not to opt out of the RMA.  Incumbent electric
utilities will file plans with the commission proposing the
division of their certified territories that allows for reliable
and efficient delivery of power, and the plans are subject to
final commission approval.

AGGREGATION

The bill permits all customer classes to aggregate their
electrical loads.  Private entities, political subdivisions, and
other licensed entities may aggregate loads.  If a political
subdivision serves as an aggregator for residential customers,
aggregation must be offered to all residential customers within
its jurisdiction.  However, the political subdivision may not
require consumers within its jurisdiction to purchase generation
service from it.

LICENSING

All competitive electricity providers, aggregators, and brokers
of generation service are required to obtain a license through
procedures and conditions established by the commission.  The
procedures and conditions must relate to reliability of service,
financial and operational fitness, billing practices and
customer service, disclosure of pending legal actions against
the license applicant, and disclosure of all affiliates of the
license applicant.  Commission licensing requirements must not
unnecessarily delay competition or be unduly burdensome.

The bill authorizes the commission to deny, limit, suspend, or
revoke a license in order to protect the public interest or
enforce the provisions of this bill and commission rules and
regulations.  The license is valid for 5 years and is renewable
under the same terms and conditions as the original license.

PENALTIES

The commission is authorized to impose administrative fines of
up to $5,000 per day for each occurrence of a violation of the
provisions, rules, and regulations governing public interest
protection, codes of conduct, or licensing.

POWER POOLS

This bill requires the commission and utilities to work with the
federal government, other states in the region, and interstate
power pools to establish independent system operators to operate
the transmission system.

PERFORMANCE BASED RATE MAKING

The commission is also authorized to approve or propose
performance-based or incentive rate mechanisms and rate caps in
rate making to allow consideration of factors other than cost of
service and to allow the greatest possible mitigation of
competitive transition costs.

The bill requires the General Assembly, during the 2003
legislative session, to review the effects of unbundling
electric utility services.