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Electric Industry Restructuring: The States Forge Ahead
About 30 states have begun (em
either through the legislature, the utility commission, informal working groups, or some combination of these (em to consider issues such as retail wheeling, unbundled utility structures, and alternative rate regulation.1 California's "Blue Book" hearings have drawn the most attention, but significant efforts are also underway elsewhere. Although each state is approaching the issue in its own way, successful industry restructuring will ultimately require coordination across state lines. Ongoing investigations in various states offer a glimpse of restructuring principles in their genesis.New York
New York's current activities grew out of a previous Public Service Commission (PSC) general inquiry that produced guidelines in July 1994, permitting electric utilities to offer discounted rates to contestable customers (Re Competitive Opportunities Available to Customers of Electric and Gas Service, Case 93-M-0229, 154 PUR4th 19 (1994)).2 In August 1994, the PSC initiated a second phase of that proceeding "to identify regulatory and ratemaking practices that will assist in the transition to a more competitive electric industry" (154 PUR4th 35). To that end, the PSC assigned an Administrative Law Judge (ALJ) to develop general principles that would form the basis for movement to a more competitive marketplace. Throughout the Fall of 1994, various concerned parties submitted proposals and attended meetings, but failed to reach consensus. In December, the PSC put forth for public comment a set of nine proposed
principles (In the Matter of Competitive Opportunities Regarding Electric Service, Case 94-E-0952, 158 PUR4th 252).
Approved in final form in June 1995, the Principles to Guide the Transition to Competition for Electric Service call for increased customer choice and pricing options, continued commitment to environmental protection and energy efficiency, and performance-based regulation for those parts of the industry that remain monopolies (161 PUR 4th, June 7, 1995). The principles also state that utilities should have a "reasonable opportunity to recover prudent and verifiable expenditures and commitments made pursuant to their legal obligations," and encourage "respect for the reasonable expectations" of IPPs. The most controversial principle originally declared that vertically integrated utilities were "incompatible" with effective competition, but was revised to state that the vertically integrated structure "must be thoroughly examined to ensure that it does not impede or obstruct" the development of effective competition.
The June order noted that various restructuring models were under discussion, and declared that the PSC was "particularly interested in the continuation of the collaborative process, which has great potential to lead to innovative public policy solutions." Expressing a desire to move expeditiously, the PSC requested a recommended decision or report on the proposed models by the end of this year.
Restructuring efforts began in Rhode Island in June 1994, when large industrial consumers petitioned the state's Division of Public Utilities and Carriers (Division), a staff advocacy body for ratepayers, to investigate bundled rates and retail competition. A docket in July 1994 included the state's utilities, environmental groups, consumer groups, and a cogenerators association (Dkt. No. D-94-9). In January 1995, the various parties decided to engage in a "cooperative collaborative process." After open meetings and settlement discussions, the