A state-by-state look at retail competition.
Lori M. Rodgers is an associate editor with Public Utilities Fortnightly.
Rhode Island's customer choice program for large-industrial and government consumers is five months old. California consumers will see retail choice on Jan. 1. New York, Illinois, Idaho and Washington have pilot programs well under way. And a statewide pilot program was set to begin this month in Pennsylvania.
Yet retail choice may prove vulnerable in New Hampshire — the one state that has shown the greatest commitment to retail choice. The dogged determination by regulators not to surrender all the consumer benefits to a rescue package has tied up the issue. It was in New Hampshire that state regulators opposed any automatic full recovery of utility transition costs, only to see their decision taken up on appeal to the courts, where it may lie "stranded" for some time.
Here, at some risk (the story changes daily), is a quick breakdown of how a good many of the states stack up on retail choice.
Mandates Set, Deadlines Looming
One group of states appears noticeably ahead of the rest, with fixed, mandatory deadlines for full competition, forged through joint action by utility regulators, the state legislature and the governor.
California. The Public Utilities Commission continues to march toward its Jan. 1 deadline. It has ordered utilities to give consumers unbundled bills (generation, transmission and distribution) by June 1998 and approved rate reduction bonds for the three biggest utilities. %n1%n In July, the PUC began accepting registration for electric service providers; more than 100 ESPs had paid the $100 fee as of September. %n2%n
Maine. The Public Utilities Commission is striving to set up restructuring under the law signed by Gov. Angus King on May 29. The law %n3%n calls for supplier choice to begin March 1, 2000. To get there, the PUC has outlined an ambitious timetable for dealing with the 13 rulemakings (em including billing and metering services; sale and capacity of energy; marketing; renewable resources; and bill unbundling (em needed to achieve that goal. %n4%
In July, the PUC appointed a 15-member Consumer Education Advisory Board, including utility, industrial, consumer and legislative representatives.
Massachusetts. Massachusetts Electric Co.'s pilot was approved last year by the Department of Public Utilities. XENERGY, an unregulated subsidiary of New York State and Gas Co., provides power to 14 commercial or industrial customers. The companies saved an average of 14.5 percent during the first year, XENERGY says. Retail and small business customers have saved 4 to 18 percent, according to Massachusetts Electric President Larry Reilly. In July, the DPU told companies interested in participating in the statewide customer choice program, scheduled for Jan. 1, to begin registering. The DPU is holding discussions on changes in metering, billing and information services.
Michigan. A June commission order %n5%n set deadlines for retail choice with a plan to open 2.5 percent of each utility's load to competition this year and another 2.5 percent every year through 2001, with all remaining customers receiving choice on Jan. 1, 2002. Once that date arrives, the Michigan Public Service Commission wants only those states that allow Michigan utilities to compete "on a level playing field" to be allowed to supply power to state customers. The state's attorney general, a business coalition and a consumers organization filed suit against the PSC, Detroit Edison and Consumers Energy in August, charging that the commission's expedited schedule gave an unfair advantage to utilities. The parties failed to get an injunction, however, so hearings are continuing. Also in its June order, the PSC endorsed recovery of stranded costs for all "prudent" items, but deferred any decision on stranded costs pending the new state legislation to implement a securitization plan and resolve uncertainty regarding tax treatment, which was expected to be introduced this fall.
In April, Consumers Energy held a lottery to select the 17 participants for its pilot program (customers who use 3 megawatts or more, for a total of 100 MW of CE's load program) which the PSC approved in November 1996. But, according to CE's executive director of rate and regulatory matters, Lisa Thibdaue, some customers face a big learning curve. The process is going slower than anticipated, she admits; no one has yet taken power from an alternate provider. Consumers' full choice plan comes before the PSC on Oct. 14. Thibdaue says some politicians think that once the green light is given, customer choice will happen "overnight"; customers, she says, have more appreciation for the time it takes.
Montana. Montana's new restructuring and customer choice law %n6%n sets two deadlines for mandatory retail choice.
First, retail choice must be available by July 1, 1998, to all customers of investor-owned electric utilities with loads greater than 1,000 kilowatts, or with loads greater than 300 kWa per meter that aggregate to 1000 kWa or more. Second, all remaining customers of electric IOUs must have retail choice as soon as feasible, but before July 1, 2002. %n7%n
Meanwhile, the act also dictates that beginning July 1, 1998 all utilities must run pilot programs to offer choice to residential and small-commercial customers. Cooperatives may opt in or out. Interest by out-of-state providers was rather limited as of September.
The law also requires IOUs to file transition plans at least one year before any customer is entitled to exercise retail choice. On Aug. 14, the Montana PSC ruled that Montana Power's transition plan for pilot programs was incomplete regarding consumer education and stranded costs, and asked the company to file a revised plan. %n8%n PacifiCorp filed its transition plan on July 10, but the PSC had yet to rule by press time. %n9%n
Pennsylvania. Gov. Tom Ridge signed Pennsylvania's Electricity Generation Customer Choice and Competition Act late last year, requiring all of the state's electric public utilities to file a restructuring petition with the PUC between April 1 and Sept. 30 of this year. Starting on Jan. 1, 1999, one-third of each customer class must be allowed to choose an alternate generation supplier. A second third may choose by Jan. 1, 2000, with choice mandated for all customers by Jan. 1, 2001.
In late August, the PUC approved pilot programs for retail access for the state's IOUs. %n10%n Plans call for alternate power sources to be plugged into their new customers on Nov. 1, giving power suppliers about eight weeks for educating consumers of their options.
Rhode Island. On July 1, Rhode Island allowed large customers choice as a prelude to full competition, slated for January 1998. (It is not a pilot, callers are hastily informed.) Nineteen non-regulated power producers are registered to serve about 30 industrial customers, yet most have no load. A few companies haven't decided whether they plan to stick around for full choice, blaming the state's poor economy. %n11%n Part of the blame was also placed with the utilities commission. Bob Kwartin, director of retail power marketing for Eastern Power Distribution, says: "The way the commission has written the rules makes it difficult for the customers to find savings. In Pennsylvania and New York, the PUCs have worked to make sure that not all the benefits flow to the utility (em at least for the pilots."
The most enthusiastic marketer is New Energy Ventures, which captured 11 of the 18 customers that switched. Other successful players include Evantage (an unregulated subsidiary of Virginia Electric and Power Co.) which picked up two accounts, Enron and Providence Southern.
Pilot Plans Under Way, But No Mandate
In this group, experiments are going on in earnest and energy suppliers are active in the state. Some of these experiments may expand soon to include greater numbers of customers or more utilities. There may even be some sort of legislation. However, there's been no commitment by the state to the idea of customer choice.
Idaho. The utilities commission in April approved pilot programs filed by Washington Water Power Co. and Idaho Power. %n12%n The two-year pilot at Washington Water Power for residential and commercial customers was deferred due to lack of supplier interest. Its one-year-old industrial pilot is going well, says a spokesperson. Idaho Power's pilot allows users of 5 to 10 MW to choose fixed or market prices.
Illinois. On Aug. 15, the state commerce commission sent an analysis of S.B. 55 to Senate President James "Pate" Philip, which found that the bill "leans too heavily in favor of the utilities [and] does not provide the structural framework where alternative competitors can emerge." %n13%n The bill reportedly would take away some ICC authority over special contracts, depreciation rates and rates charged by a utility to its tariffed services customers during the transition period. It also would repeal the need to complete statewide and utility-specific least-cost energy plans.
The commission report criticizes the securitization plan designed in S.B. 55 as providing no guarantees that proceeds will buy down uneconomic assets. It also attacks the transition charge, which is based on a setoff for a so-called "mitigation factor," and which the commission believes would give an inherent advantage to traditional utilities that continue to provide bundled service to retail customers.
Illinois Power and Central Illinois Lighting Co. have had pilot programs in place for more than a year.
Iowa. The first pilot program in Iowa was filed with the utilities board and the Federal Energy Regulatory Commission in September by MidAmerican Energy of Des Moines. The Market Access Service project was created with the Iowa Industrial Energy Group and would allow the utility's 50 largest customers (em those with at least 4 MW of load (em to participate in the first year of a two-year introductory phase. A spokesperson for MidAmerican says they would like the pilot to start in 1997 or early 1998, depending on when the plan receives regulatory approval.
New Jersey. The Garden State represents a hybrid (em on the one hand, the Board of Public Utilities has issued a formal order setting deadlines for full-scale, permanent retail choice for electric consumers, but the board's decisions carry the status of recommendations only, and must go before the state Legislature before becoming effective.
The board voted in May to accelerate deadlines for retail choice: 10 percent of customers by October 1998, 20 percent by January 1999 and all ratepayers by July 2000. %n14%n In July, it opened dockets for rate unbundling, stranded cost filings and restructuring plans to be filed by Atlantic City Electric, Jersey Central Power & Light, Public Service Electric and Gas Co., and Rockland Electric Co. Those dates accelerate the timetable that had been announced in January. %n15%n
Earlier this year, the BPU approved the state's first, and so far only, retail choice pilot, conducted by GPU Energy. %n16%n The first energy provider to participate, Conectiv Energy, began supplying power to nearly 10,000 residential and 850 commercial and industrial customers (em 86 percent of Monroe Township's population (em in September. About 13 percent of the township decided to stay with GPU Energy. Conectiv, a division of Delmarva Power & Light Co., hopes to provide 5-percent savings.
New Mexico. This spring, the PUC approved a transition-to-competition plan for Texas-New Mexico Power Co. Rates now are frozen for three years; customers will be allowed to choose their electricity supplier beginning May 1, 2000. In September, Public Service Company of New Mexico submitted a full retail choice plan to the PUC and to a state legislative committee. PNM is asking for statewide retail competition by January 2001 and "possible securitization" of stranded asset recovery and other transition costs. Commission action was expected by October; whether the Legislature will take up the electric restructuring issue this year or next was not known at press time.
New York. An early pilot plan for Orange & Rockland Utilities Inc., which began in the summer 1996, is no longer alone. On Sept. 17, the commission gave final approval of tariffs and terms and conditions for a pilot program for commercial farmers and food processors in neighboring territories. %n17%n Niagara Mohawk Power Corp., New York State Electric & Gas Corp., and Central Hudson Gas and Electric Corp. will begin offering the program Nov. 1. Rochester Gas & Electric will begin its program Feb. 1, 1998.
On Sept. 10, the commission also OK'd Consolidated Edison Co.'s competitive plan, which will initiate electricity choice for part of its residential and commercial market in mid-1998. The PSC also approved a Con Ed five-year plan to reduce rates for all customers by more than $1 billion. A plan approved in July for New York State Electric & Gas Corp. will allow its customers to purchase electricity on the open market by Aug. 1, 1999.
Washington. Puget Sound Energy applied for authority to open a pilot program on July 1 to give 10 percent of its electric customers choice. The pilot is a follow-up to last November's program that allowed large industrial customers to purchase energy at market costs. The Washington Utilities and Transportation Committee approved the new program on Aug. 14; %n18%n customers will be eligible to take service from alternate providers from Nov. 1, 1997 through December 1999.
Washington Water Power has residential and industrial pilots in place: two alternate suppliers are participating in the residential pilot, while suppliers are serving 10 industrials under the Direct Access Delivery Service program.
Next on the List?
The following states are well on their way to competition, with pilot programs scheduled either to begin or awaiting approval and, in some cases, legislation in the works.
Missouri. Union Electric, and Empire District Electric Co. have filed applications with the PSC to initiate pilots. Hearings were held on the latter in July, but the PSC hadn't acted on either application at press time. Work was going forward with the 35-member Retail Electric Competition Task Force, appointed by the PSC in May. A market report is due Nov. 4; all others are due Feb. 15, 1998.
Oregon. The state's first two customer choice programs were filed with the Oregon PUC within weeks of each other. Portland General Electric, on Aug. 1, filed its pilot for 50,000 residents, small business and commercial customers in St. Helens, Sandy, Oregon City and Hillsboro. It would also be open to industrial customers or groups of customers anywhere in the state with a minimum of 5 MW of demand. In September, the PUC staff suspended the filing because of time constraints. The tariff requires PUC approval of alternate ESPs; none were certified by the proposed Oct. 1 start-up date.
Then, on Sept. 2, Portland General Electric announced its plan for all customers, which was promised as part of the PGE-Enron merger. No decision is expected on that filing until "very late in 1998," according to the commission. %n19%n One interesting component of the pilot, which is not in the full plan, is that PGE will pay participating service providers as much as $4 per customer, per month as an incentive to participate, since it targets such a small population. The credit may not be implemented until other plan issues are resolved, a spokesperson says. PacifiCorp, in spite of media announcements about its proposed program for large industrial customers, had not formally filed with the commission at press time.
Texas. In July, Fort Worth-based Texas-New Mexico Power Co., submitted a plan to the PUC for total customer choice (em not an experiment or pilot. The plan calls for gradual reductions in base rates for commercial, residential and municipal customers over a five-year transition period (Jan. 1, 1998 through Dec. 31, 2002) and guaranteed rate reductions during the transition. The PUC rejected an earlier T-NMP plan last year that had called for a rate freeze and community, rather than individual customer, choice. State legislation died this year and won't be taken up again until 1999.
Conducting Studies, Gathering Data
Finally, there are states perhaps waiting for cues for some more advanced programs. Many are conducting studies.
Connecticut. Legislators in Connecticut came close to voting on a bill that would have brought customer choice to the state, but it was withdrawn at the last minute in May. Now, technically, the Department of Public Utility Control can't take any action on electric industry restructuring until state legislators pass a bill, but that doesn't mean the staff is sitting on its hands. A spokesperson said they are working to determine what dockets and customer outreach programs, for example, they will need.
Delaware. An August draft report, prepared by PSC staff, recommends that retail choice be phased in for all customers of Delmarva Power & Light Co., and the Delaware Electric Cooperative, from April 1999 through April 2003 (25 percent of load for each customer class per year). Staff admitted, though, that "increased competition in Delaware may not produce the level of economic benefits that are anticipated in states with higher electricity prices, and may even create new risks for electricity customers." A final draft is due to the PSC Nov. 21. The PSC will deliver a final report to the Delaware House of Representatives by Jan. 31, 1998.
Georgia. Commission staff presented its Proposed Plan for Studying Restructuring Issues, 1997-2001 in July. Five focus groups (Statutory Changes, Principles to Consider, System Operations, Tax Implications of Restructuring, Stranded Cost) also presented their findings. The General Assembly is looking separately at the issue.
Hawaii. The commission opened a generic docket in December and should have a report by early next year. Milton Higa, the PSC's administrative director, says the commission is acting on its own; the legislation isn't "under siege" by customers, and there aren't many large industrial customers that could take up the cause, as has happened in mainland states. "We're not oblivious to what's going on, but there are physical and environmental constraints we're cognizant of" (em in particular the fact that there are no transmission links between the islands.
Indiana. The Indiana Utility Regulatory Commission presented its annual "Regulatory Flexibility" reports to the General Assembly (see, www.ai.org/iurc/electric/restruct.html.) A legislative committee is studying the issue and could have a final draft report submitted to the General Assembly as early as this month.
Kansas. The state is halfway through a governor-mandated, three-year study period.
No pilot programs have been filed with the Kansas Corporation Commission yet, but Midwest Energy Inc., a co-op in Hays, plans to file its plan this fall, which would make customer choice available to all its members. "Our customers own the system," a spokesperson said. "How dare we say they can't use it fully?"
A study by The National Regulatory Research Institute at the request of the KCC finds that in the long term, the state would see "positive benefits" from retail competition. It recommends that the state "should begin in the shortest time possible to lay the groundwork for implementation of retail competition" (see, www.kcc.state.ks.us/pi/nrri.htm).
Maryland. Scores of power producers, municipalities, consumer groups and vendors spoke at ongoing commission hearings this year. Staff submitted a framework for customer choice in May that recommends unbundling rates for IOUs in April 1998, followed by a three-phase enrollment and service "prototype" program. Service would begin for 10 percent of customers in April 1999 and conclude with full choice in 2001. Whether the commission would accept or modify the staff framework wasn't known at press time. The PSC is acting independently from the Legislature, which appointed a 20-member task force in July. A report is scheduled to be submitted in December.
Utah. Four PSC task forces are voluntarily evaluating the impact restructuring would have on the state (the economic analysis and reliability task force reports are in). But some feel that there's been some "regulator bashing" in the Statehouse and that the "ball's been taken out of the PSC's court" according to a spokesperson. A legislative task force is working on an accelerated agenda. The Legislature froze utilities' interim rates in the spring, effective until March 1998. Utah is "almost a one-party state," says Rich Collins, with the PSC. He expects that rural groups and munis would "have enough clout to slow or stop" the process, but it doesn't look like that's going to happen, he adds.
Virginia. A proposal by the State Corporation Commission's staff on whether or not Virginians will benefit from industry restructuring was due to the General Assembly by Nov. 7. A special legislative committee is studying the issue. At public rate hearings for Virginia Power (Feb. 17) and American Electric Power-Virginia (May 19), the SCC will consider each company's regulation plan; the filings serve as each companies' plan for preparing itself for a more competitive industry. No date is yet set for an Allegheny Power-Virginia hearing. No pilot programs are under way or have been filed yet.
Wisconsin. In July, the Wisconsin PSC revised its 32-step plan for restructuring. The PSC says "electric industry restructuring [should] be subordinate to and compatible with assuring a reliable electric supply." The new three-year, seven-step plan would implement retail competition after February 2000, if the PSC finds it is a viable alternative. The state plans further study into competitive generation, development of an independent system operator, unbundled pricing, tax incentives, current standards and the construction of merchant plants.
Wyoming. A newly released economic impact study by Black & Veatch, requested by the commission, is online at psc.state.wy.us. Four scenarios were analyzed, all of which resulted in "electricity price and economic impacts generally reduced due to phased or partial implementation of retail access." Nonetheless, the study concluded that these reductions and impacts "do not appear to provide the rationale for or against a particular restructuring policy in the state."
New Hampshire - Out of Category?
AN EARLY LEAD. The state of New Hampshire took the lead in February when it OK'd direct access for electric customers, but has since seen the process bog down over its insistence that utilities should not automatically recover all stranded costs. On March 3, Northeast Utilities (parent company of Public Service Company of New Hampshire) appealed the PUC decision to the U.S. District Court in Concord. The court issued a temporary restraining order in April to postpone the appeal until after the PUC had completed its rehearing process. (See, PSNH v. Patch, et al., Civ. Action Nos. 97-97-j, et al., Apr. 28, 1997, 1997 wl 216415, to be reported at 962 F.Supp. 222 [D.N.H.].)
Utility Bankruptcy? NU claims that the restructuring rules, if enforced, could lead to bankruptcy for NU subsidiaries Public Service Company of New Hampshire and North Atlantic Energy Corp. The PUC is not a party to the suit, and thus has attempted to move forward with the rehearing process on its deregulation plan. During the summer, however, PSNH succeeded for a while in delaying the PUC proceedings. Acting on requests from PSNH, the PUC in a series of orders agreed to suspend portions of the final plan subject to rehearing (Order No. 22,548), accept additional testimony and evidence (Order No. 22,576), accept a mediation process conducted through the court (stipulation filed May 13). Rehearing was eventually suspended until July 2 (Order No. 22,599) and again to Sept. 2 (Order No. 22,664).
Back on Track. In August, the PUC denied a motion by PSNH for any further delay in the rehearing process beyond Sept. 2. In doing so, the PUC appeared
to be losing patience: "[T]he issue before us is whether we should continue to abstain from moving forward with policy directive that we are required to implement by law" (Order No. 22,681). The PUC was expected to issue its rehearing order this fall.
Electric Restructuring on the Internet
NRRI. The National Regulatory Research Institute at Ohio State University summarizes regulatory and legislative action in all 50 states and the District of Columbia at www.nrri.ohio-state.edu (updated monthly).
Trade Associations. The National Rural Electric Cooperative Assoc. offers its "Retail Wheeling Update" on the Internet. The September 1997 update was posted at www.nreca.org/news/retailwheel/ret_wh0997.html.
Consultants. GDS Associates Inc. updates deregulation activity and requests for proposals for wholesale power at www.gdsassoc.com (updated weekly, or as needed). Hagler Bailly ("ACCESS Index: Deciphering Retail Energy Competition") ranks each state according to electric and gas restructuring activity. (Issued quarterly for public domain at www.habaco.com; more detailed information available under a license agreement. Contact Ken Malloy at 703-351-0300 for more information.)
Others. The LEAP Letter, a newsletter that reports state legislative activity in electric restructuring, presents a "Comparison of Selected Electric Restructuring Legislation," a point-by-point comparison of the eight state-level bills (California, Maine, Montana, Nevada, New Hampshire, Oklahoma, Pennsylvania and Rhode Island) that have been signed into law to date at www.spratley.com/leap/state-laws.html.
1Re Proposed Policies Governing Restructuring California's Electric Services Industry and Reforming Regulation, Decision 97-05-040, May 6, 1977 177 PUR4th 1, and Decision 97-08-056, Aug. 1, 1996 (Calif.P.U.C.).
2See Internet site: "Registered Electric Service Providers," accessible through Calif. PUC home page, at www.cpuc.ca.gov.
3H.P. 1274 - L.D. 1804, "An Act to Restructure the State's Electric Industry." Full text available at www.state.me.us/mpuc/ld1804.pdf.
5Re Restructuring of the Electric Industry Case No. u-11-290, June 5, 1997, 177 PUR4th 201 (Mich. P.S.C.).
6S.B. 390, An Act Generally Establishing Restructuring Requirements for Montana's Electric Utility Industry, also known as Montana Electric Utility Industry Restructuring and Consumer Choice Act." Full text available at www.psc.mt.gov/documents/sb390.htm.
7The state public service commission may extend that deadline two more years if it finds that retail choice is not administratively feasible, or that workable competition is lacking. Also, the act allows Montana-Dakota Utilities Co. to defer choice for its customers until 2006.
8Re Montana Power Co., Docket No. d97.7.90, Order No. 5986b, Aug. 15, 1997 (Mont.P.S.C.).
9Re PacifiCorp, Docket No. d97.7.91, July 10, 1997.
10Allegheny Pwr. Co., Docket No. p-00971172; Duquesne Light Co., Docket No. p-00971175; Metropolitan Edison Co., Docket No. p-00971168; Pennsylvania Pwr. Co., Docket No. p-00971173; PECO Energy Co.,Docket No. p-00971170; Pennsylvania Elec. Co., Docket No. p-00971169; Penn. P&L Co., Docket No. p-00971183; and UGI Co., Docket No. p-00971171 (all orders approved Aug. 21, 1997, entered Aug. 29, 1997). See generally, puc.paonline.com/electric/
eleclist.htm. For order adopting guidelines for pilot programs, see, Re Elec. Gen. Customer Choice & Competition Act (em Retail Access Pilot Programs, Docket No. m-00960890, Mar. 16, 1997 176 PUR4th 1 (Pa.P.U.C.).
12Re Washington Water Power Co., Order No. 26884, April 10, 1997, 177 PUR4th 194 (Idaho P.U.C.); Re Idaho Power Co., Case ipc-e-95-15, Order No. 26872, Apr. 7, 1997 (Idaho P.U.C.).
14These deadlines modify earlier deadlines recommended in January. See, Re The Energy Master Plan, Phase II, Docket No. ex94120585y, Jan. 16, 1997, 1997 wl 40737 (N.J.B.P.U.).
15Re The Energy Master Plan, Phase II, Docket No. ex94120585y, July 11, 1997, 1997 wl 410517 (N.J.B.P.U.).
16Re GPU Energy, Docket No. eo96120856, July 7, 1997 (N.J.B.P.U.).
17Re Dairylea Co-op., Inc., Case 94-e-0385, Feb. 17, 1997, 175 PUR4th 428 (N.Y.P.S.C.), order denying reconsideration, May 22, 1997, 178 PUR4th 319.
18Wash. UTC v. Puget Sound Energy Co., Docket No. ue-971102, Aug. 14, 1997 (Wash.U.T.C.).
19See Docket No. ue-102..R2