The Virginia Electric Utility Restructuring Act, Chapter 23 (§ 56-576 et seq.) of Title 56 of the Code of Virginia, was enacted by the 1999 Session of the General Assembly. When the Act is fully implemented, consumers in the Commonwealth will be able to purchase electric generation services from the supplier of their choice.
The Restructuring Act was the product of a three-year study by the legislative Joint Subcommittee Studying Electric Utility Restructuring. At the joint subcommittee's recommendation, the Restructuring Act established the Legislative Transition Task Force to work collaboratively with the State Corporation Commission in conjunction with the phase-in of retail competition in electric services.
The Task Force commenced its work in June 1999. Its report to the 2000 Session of the General Assembly (Senate Document 54 of 2000) acknowledges that the General Assembly's responsibilities with respect to implementing retail choice did not end with the passing of the Restructuring Act in 1999. The restructuring of Virginia's electric utilities is understood to be an ongoing endeavor that will require consistent monitoring.
Following the extensive examination of implementation issues during its first year, the Task Force expected its second year of existence to be comparatively uneventful. However, two developments required the Task Force's work this year to match, and in some regards to surpass, the intensity of its 1999 efforts.
First, the State Corporation Commission's Order of October 19, 2000, regarding the functional separation of the generation, distribution, and transmission services of incumbent electric utilities focused the attention of all interested parties on the issue of rates for default service after capped rates expire in July 2007.
The second development has been the heightened scrutiny of electric utility restructuring efforts in light of the price spikes, power shortages, and other problems facing California. While some of the Golden State's misfortunes are attributable to factors unrelated to its restructuring legislation (including the absence of construction of new electricity generation facilities and inclement weather), a large part of California's misfortune is attributable to aspects of that state's restructuring law. For example, prohibitions on long-term power contracts and requirements that power be purchased on the daily spot market conducted by the state's independent system operator are blamed for surging prices of wholesale power. Meanwhile, retail price caps prevent distribution companies from passing along the increase in wholesale electricity costs, which in turn has left two investor-owned utilities teetering at the brink of insolvency.
The Task Force has acknowledged that the 1999 Restructuring Act should not be viewed as engraving in stone every aspect of the deregulation of retail electricity generation services. Instead, it views the Act as a dynamic template that can be fine-tuned to address evolving circumstances and issues raised during the course of the transition to competition. In each of its two years of existence, the Task Force has proposed numerous amendments to the Act, both substantive and technical. Virginia's measured march toward the deregulation of electric generation has allowed power providers, regulators and other interested parties to alert the Task Force regarding issues in advance of the advent of restructuring, which, in turn, is expected to allow the Commonwealth to avoid the problems that would have resulted from a hurried rush into deregulation, such as are being observed from California's experience.
The Task Force received testimony advocating more than a dozen legislative amendments affecting Virginia's electric utilities. Of these, eight received the Task Force's endorsement:
• Senate Bill 1420: Omnibus Legislation Addressing Default Service Rates, Functional Separation Issues, Competition for Metering and Billing Services, and Related Matters
The Task Force endorsed legislation that establishes a mechanism for establishing the rates for default service after the capped rate period. The SCC is required to attempt to identify default service providers through competitive bidding. If that process does not produce willing and suitable default service providers, it may require a distributor to provide default service. The SCC is prohibited from regulating, on a cost plus or other basis, the price at which generation assets or their equivalent are made available for default service; however, a distributor may bid to provide default service on such basis. A distributor's default service plan must provide that the procurement of generation capacity and energy will be based on the prices in competitive regional electricity markets. If a plan is not approved, the sec will establish rates for default services based on prices in competitive regional electricity markets. A "competitive regional electricity market" is defined as a market where competition, not statutory or regulatory price constraints, effectively regulates the price of electricity.
In considering functional separation plans, the sec will consider the potential effects of transfers of generation assets on the rates and reliability of capped rate service and on default service and the development of a competitive market for retail generation services in Virginia. The omnibus bill contains provisions restricting the ability of an incumbent utility to make further transfers of generation assets without SCC approval.
In order to facilitate the development of a competitive electricity market in Virginia, and thereby avoid the need for default service, the omnibus bill includes provisions requiring the SCC to consider the goals of advancement of competition and economic development in all relevant proceedings. It also requires the sec to report annually on the status of competition in the Commonwealth and the status of the development of regional competitive markets, and to make its recommendations to facilitate effective competition in the Commonwealth as soon as practical.
The omnibus bill also establishes timetables for the introduction of competitive retail billing and metering services. Providers of electricity distribution services will be allowed to recover their costs directly associated with the implementation of billing or metering competition through a tariff for all licensed suppliers, in a manner approved by the sec. The rates for any non-competitive services provided by a distributor will be adjusted to ensure that they do not reflect costs properly allocable to competitive metering or billing service. The bill includes amendments to consumption tax provisions to address the fact that billing services may be provided by competitive providers who are not the same as the company delivering electricity to a consumer.
At the SCC's suggestion, the omnibus bill includes provisions that authorize the SCC to establish competition phase-in plans on a utility-by-utility basis, establish that the provisions of the Act will be applied to any municipal electric utility that is made subject to the Act to the same extent that such provisions apply to incumbent utilities, provide that rates for new services applied for after January 1, 2001, will be treated as capped rates, and clarify that default service will be made available after consumer choice is available to all customers in Virginia. Other provisions of the omnibus bill require the SCC to establish minimum periods, if any, that customers must receive service from their incumbent electric utilities or from default service providers after having obtained service from other suppliers.
• Senate Joint Resolution 467: Study of Generation Siting Procedures
The Task Force endorsed a proposal directing the Task Force to study procedures applicable to the construction of new electricity generation facilities in the Commonwealth. The Task Force is directed to recommend amendments to the Commonwealth's administrative and regulatory procedures as may be appropriate to facilitate the approval of construction of sufficient electricity generation capacity to provide a competitive market for electricity in the Commonwealth as soon as practical, without lessening necessary environmental considerations including siting and air quality impacts.
• House Bill 2469: Income Tax Deduction for Contributions to Energy Assistance Programs
The Task Force endorsed a recommendation of the Consumer Advisory Board calling for the establishment of an individual income tax deduction for contributions to a utility company emergency energy program. The deductions would apply where the utility company is an agent for a charitable organization that assists individuals with emergency energy needs. To be eligible, the contributions must be to an organization that qualifies for charitable contributions under the Internal Revenue Code. The deduction would be available only for taxpayers who do not take a deduction for such contributions on their federal tax return.
• House Bill 2473: Low Income Energy Assistance Program
The Consumer Advisory Board recommended the establishment of a Home Energy Assistance Program. The Task Force endorsed the proposal. The proposal designates the Department of Social Services as the state agency responsible for coordinating state efforts regarding a policy to support the efforts of public agencies, private utility service providers, and charitable and community groups seeking to assist low-income Virginians in meeting their seasonal residential energy needs. The measure also created the Home Energy Assistance Fund to be used to supplement DSS's administration of the Low Income Home Energy Assistance Program (LIHEAP) block grant and to assist in maximizing the amount of federal funds available under LIHEAP and the Weatherization Assistance Program by providing funds to comply with fund matching requirements. It would be funded through contributions under the Neighborhood Assistance Act, donations from individuals, and general fund appropriations. The Department would be required to coordinate the activities of appropriate state agencies, as well as any non-state programs that elect to participate; provide a clearinghouse for information exchange regarding residential energy needs of low-income Virginians; collect and analyze data regarding the amounts of energy assistance provided, and the extent to which there is unmet need for energy assistance in the Commonwealth; track recipients of low-income energy assistance; develop and maintain a statewide list of available private and governmental resources for low-income persons in need of energy assistance; and report annually on the effectiveness of low-income energy assistance programs in meeting the needs of low-income Virginians, including the effect of utility restructuring on low-income energy assistance needs and programs. The legislation as introduced included two related recommendations of the Consumer Advisory Board for funding of the Low Income Energy Assistance Program. First, the Board recommended that the Program be funded in part through contributions from business firms, who would be eligible for $1 million in tax credits under the Neighborhood Assistance Act. Second, the Program would be funded in part through voluntary contributions from individuals under an income tax refund check-off.
• House Bill 2472: Definition of Renewable Energy
The Task Force endorsed a Consumer Advisory Board recommendation that a definition of renewable energy be added to the Restructuring Act. The proposal defined renewable energy as energy that is derived from the sun or other natural processes and is replenishable by natural processes over relatively short time periods. The proposal also identified specific forms of energy as being included within the term "renewable energy." The Task Force amended the proposal to specify that the term includes energy from waste.
• House Bill 2470: Marketing of "Green Power"
At the Consumer Advisory Board's request, the Task Force endorsed a proposal to authorize the SCC to establish criteria pursuant to which providers of electricity may designate certain electricity as "green power." Suppliers of electricity who do not obtain the SCC's designation would be prohibited from labeling their power as "green."
• Senate Bill 896 and House Bill 1935: Expansion of Municipal Utility Service Area
The Task Force unanimously agreed to support a proposal offered by Senator W. Roscoe Reynolds addressing an issue in the City of Martinsville. The amendment to subsection F of § 56-580 clarifies that a municipal electric utility may expand its service territory without becoming subject to the Restructuring Act if the new service area is within the municipality's borders.
• Senate Bill 1257: Eminent Domain Authority Of Public Service Corporations
The Task Force agreed to support a proposed amendment to § 56-579 D in order to clarify that on and after January 1, 2002, public service corporations may no longer file petitions to exercise the right of eminent domain in conjunction with the construction or enlargement of any electric energy generation facility.
