Restructuring of the electric utility industry continues to be a topic given to much discussion but little action in the General Assembly. The joint legislative study established in 1996 for the purpose of examining state and federal developments relating to retail competition in the electricity market (1996 SJR 118) has been extended through 1997. The bill which continued the legislative subcommittee also charged the Staff of the State Corporation Commission ("SCC") with the task of producing a working model for restructuring, together with the necessary statutory and regulatory changes and a timetable for transition, all by November 7 of this year (after election day but in time for action in the 1998 session). (SJR 259) Toward that end, the SCC has established five "working groups" consisting of representatives of the utility industry, potential competitors, industrial ratepayers, consumers and others to assist the Staff in developing its model. Those groups are considering environmental concerns, stranded costs, cost/benefit analysis, system reliability and model structure. Meanwhile, the legislative subcommittee and its own working group on taxation issues are working independently on restructuring issues and options.
Subsidization of nonregulated business with revenues generated by the regulated services of electric and gas utilities was the subject of a failed bill (HB 2455) which was submitted and supported principally by a consortium of HVAC contractors and small appliance dealers (i.e., those with whom the utilities will be competing). That bill would have required the SCC to ensure that regulated electric and gas utilities do not use ratepayer funds to subsidize nonregulated activities. Problems with the scope and language of the bill, together with fact that the issue falls within the scope of the electric restructuring study, resulted in the proposal being put off. But this bill's proponents were successful in adding language to the study bill (SJR 259, discussed above) requiring that the interests of small businesses and residential consumers be considered.
The prospect of escalating municipal franchise fees charged for use of the rights-of-way was addressed by a bill which, as originally offered, would have limited such fees to the "activity related costs" directly incurred by the municipality in administering the easement. The bill was intended to prevent cities and others from turning franchise agreements into profit centers in the deregulated environment being created by the federal Telecommunications Act. Not surprisingly, the bill met significant resistance from the Virginia Municipal League. In the end, a temporary fix was employed, prohibiting municipalities from raising franchise fees or requiring in-kind contributions, but providing that these prohibitions will expire on July 1, 1998, to give the parties time to work toward a compromise solution. (SB 1013, HB 2915) Similar protection is being afforded to cable television providers. (SB 2888)
Public utility rate experiments have been made exempt from the general limitation that utilities may not increase rates more than once within any 12-month period. (SB 2101) Such rate experiments must be approved by the SCC when they will effect a rate increase.
Strict five and ten-year forecasting requirements previously imposed upon electric utilities by statute have been replaced by a more flexible reporting obligation. The companies will still need to file forecasts of their programs of operation with the SCC, but now they will do so "on such terms and for such time periods as directed by the Commission." (SB 2054)
Investments in foreign utility companies by Virginia utilities that are exempt from the federal Public Utility Holding Company Act may be subject to such conditions and limitations as may be imposed by the SCC in order to protect domestic ratepayers of affiliated companies. Otherwise, the SCC may withhold certification required by the federal law. (SB 846)
The "small service company" exemption from the Utility Facilities Act was expanded by increasing from 10 to 35 the number of commercial or industrial customers that may be served. (SB 2103) Absent an exemption from the Act, a certificate of public convenience and necessity is required in order to construct, enlarge or acquire facilities that are not ordinary extensions or improvements in the usual course of business.
Interest rate caps limiting electric cooperatives to 6% on annual dividends and membership capital have been removed. (HB 2266)
Michael J. Quinan
Mr. Quinan is a Principal in the Firm.
E-mail: quinan@woodsrogers.com