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1998 SESSION

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SB 688 Electric Industry Restructuring Act; created.

Introduced by: Jackson E. Reasor, Jr. | all patrons    ...    notes | add to my profiles

SUMMARY:

Electric Industry Restructuring Act. Establishes a five-year, phased transition to full retail competition in the electric utility industry. The bill's plan for transition from the current, fully regulated market to a market in which electric customers may purchase electrical generation service from their provider of choice, includes the following features: 1. January 1, 2000: All electric utilities must submit to the Virginia State Corporation Commission (i) a transition plan for the phase transition to retail competition and (ii) an application for a rate change or an alternative rate plan, either to be in effect until June 30, 2001. 2. July 1, 2000: One or more independent system operators (ISO) and regional power exchanges (RPX) are to be established. 3. July 1, 2001, through December 31, 2003: Enhanced wholesale competition with the following features: (i) electrical generation is no longer subject to rate regulation; (ii) the Virginia State Corporation Commission will continue to regulate transmission (to the extent of its jurisdiction) and distribution rates; (iii) Virginia's electric utilities are required to establish ISOs and RPXs to coordinate electric generation, and to establish wholesale electricity prices; (iv) regulated distribution companies will purchase electric power through an ISO/RPX, and then transmit and distribute electric power to all classes of retail customers; (v) large retail customers, however, are allowed (at their election) to purchase power from their local distribution company, or to contract, bilaterally, with another supplier of electricity; and (vi) the SCC is authorized to coordinate retail competition pilot programs to help prepare all retail customer classes for full competition in 2004. Large retail customers are defined in the bill as electric customers whose representative peak demand is five megawatts or greater during at least three billing months out of twelve. Large retail customers choosing to purchase power from another supplier during the enhanced wholesale competition period must pay the incumbent utility (whose market they are exiting) its net revenue loss, calculated on a per-kilowatt or per-kilowatt-hour basis, incurred as a result of losing that customer. Net revenue loss is calculated by subtracting from that customer's regulated rate (immediately prior to July 1, 2001) an estimated market rate established by the SCC, minus the regulated transmission and distribution rate charged the customer. 4. January 1, 2004: Full retail competition begins in which all retail electricity customers may purchase electrical generation services from the generation provider of their choice. Transmission and distribution will remain regulated, and subject to the regulatory oversight of the SCC. The bill also contains provisions addressing (i) consumer protections, including consumer education programs during the competition phase-in period (2001-2004), (ii) methods of ensuring that all retail customers will have a generation supplier after July 1, 2004, (iii) utility worker displacements resulting from retail competition, and (iv) electric efficiency and conservation. Virginia's incumbent electric utilities (those currently serving the Commonwealth) are furnished an opportunity to receive "stranded cost" payments from July 1, 2001, through December 31, 2003. Likewise, they may be liable for "stranded benefits" during the same period. The stranded cost/benefit formula offered in the bill compares an incumbent utility's estimated revenues from all generating facilities with the SCC's estimate of the annual revenues such facilities must receive to (i) recover costs (including the cost of fuel, operation, and maintenance, and the cost of energy production), and (ii) earn a fair and reasonable rate of return. Based on its estimate, the SCC will order a nonbypassable wires charge or credit (a customer billing surcharge or credit refund), apportioning to each customer its pro rata share of such revenue deficiency or surplus. The bill requires an annual reconciliation of revenue estimates with actual receipts. This "true up" results in a recalculation or adjustment of the wires charge or benefit for the following year. Additional charges are passed along to electricity customers through nonbypassable wires charges, including pro rata apportionment of transition costs, such as the cost of customer education programs, and the cost of establishing the ISOs and RPXs. Finally, the Electric Industry Restructuring Act establishes a 10-member legislative task force to oversee the transition to retail competition from its inception in July 1, 1999, through July 1, 2005. The task force, consisting of four members of the Virginia Senate and six members of the House of Delegates, is directed to work collaboratively with the Virginia State Corporation Commission. Annual reports to the Governor and each succeeding session of the General Assembly are required from the task force, as it reviews the progress of each phase of the Commonwealth's transition through restructuring to retail competition.


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