RD165 - Annual Status Report on the Development of a Competitive Retail Market for Electric Generation within the Commonwealth of Virginia


Executive Summary:
Since the year 2001, the Virginia State Corporation Commission (“SCC” or “Commission”) has reported annually to the Governor and General Assembly regarding the status of electric industry competition in Virginia. The report also included information regarding wholesale and retail market conditions in states and regions thought to be relevant to Virginia’s transition to retail choice. The report included a chronology and summary detailing the progress of competition and activities of interest during the past twelve months. Although passage of S.B. 1416 in the 2007 legislative session modifies the Commonwealth’s transition to retail competition and establishes new regulatory requirements, this report is tendered by the Commission in compliance with § 56-596 of the 1999 Restructuring Act.

During the past year, the SCC continued the scheduled implementation of the 1999 Restructuring Act as required by statute. The Commission notes that, under S.B. 1416, mass market retail competition is scheduled to end on December 31, 2008. As such, this year’s report is significantly reduced in scope and scale. We also note that S.B. 1416 allows for retail choice beyond 2008 for large commercial and industrial customers and for certain aggregated load. We expect that, should this report continue to be statutorily required into the future, shopping activities for these customers, as permitted by S.B. 1416, will constitute the most of the content of such future reports.

As had been the case for several years, by July 1, 2007, the majority of the Commonwealth’s 3.2 million electricity customers had the right to choose an alternative supplier of electricity. In compliance with the 1999 Restructuring Act, all electricity customers of Virginia’s investor-owned utilities and electric cooperatives were eligible to switch to a competitive supplier except for about 29,900 customers in the southwestern part of the Commonwealth and approximately 7,880 customers served by Powell Valley Electric Cooperative.

Virginia remains in a similar situation as the past several years in that there have not been any new competitive offers to provide electricity supply. Similar to other states that offer retail access, competitive activity remains stagnant in Virginia. One supplier continues to serve a small portion of Dominion Virginia Power (“Virginia Power” or “DVP”) customers in northern Virginia with a limited renewable resource and another supplier serves four large Delmarva customers. Staff is not aware of any other electricity supply offers.

We also note that the SCC, both by itself and as a member of the Organization of PJM States, Inc. (“OPSI”), continued to participate in various proceedings before the Federal Energy Regulatory Commission (“FERC”) this past year. While Virginia’s return to a form of cost-of- service regulation may alter the impact of PJM Interconnection, LLC (“PJM”) electricity market outcomes on Virginia’s homes and businesses, PJM markets and processes are still important to the Commonwealth’s energy future. For example, Virginia’s electric cooperatives and municipal utilities and their retail customers still face significant exposure to PJM wholesale market electricity prices. Also, Dominion Virginia Power currently purchases about 1700 MW of capacity and some associated energy in PJM administered wholesale markets and other Virginia utilities continue their participation in PJM markets as well.

On September 12, 2006, the Commissioners of the SCC wrote to the Governor and the General Assembly stating that “we cannot represent to you with confidence that the PJM administered wholesale electric market is, in fact, competitive, nor can we represent to you that it is transparent.” We note here that events before FERC this past year demonstrate that this longstanding concern regarding NM and its market monitoring function has been well founded. The issue of alleged improper PJM management interference with the PJM market monitor in the performance of his duties is discussed at length in this report. Proceedings regarding this matter continue before FERC as this report is finalized.

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Provisions of the 1999 E1ectric Utility Restructuring Act that exempt the generation of electric energy from regulation, prohibit public service corporation s from exercising the power of eminent domain to acquire property for generation facilities, authorize the collection of wires charges, and authorize competition for metering and billing services are repealed.

Amending legislation passed by the 2003 Session of the General Assembly as House Bill 2637 to § 56-580 of the Code of Virginia, suspended application of the 1999 Restructuring Act to Kentucky Utilities operating in the Commonwealth as Old Dominion Power Company until such time as the utility provides retail electric services in any other service territory in any jurisdiction to customers who have the right to receive competitive retail electric energy.

PJM Interconnection, LLC is a regional transmission organization in the mid-Atlantic area comprised of all or part of 13 states: Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia, and the District of Columbia. PJM ensures the reliable operation of the electric power supply system, facilitates an effective wholesale electricity market, and manages a long term regional electric a transmission planning process to maintain grid reliability and relieve congestion. Additional information is available at: http://www.pjm.com.