electric power competition
Purpose
Requires public power entities to open their service territories to competition in the sale of
electric generation service and confirms the authority of the Arizona Corporation Commission to
open the service territories of public service corporations to competition in the sale of electric
generation service.
Background
In late December 1996, the Arizona Corporation Commission (ACC) adopted rules to phase
in competition in the electric industry over the next several years, with competition set to begin in
1999. While distribution and transmission services will remain regulated, generation services will be
opened to competition. The ACC has regulatory control of public service corporations (PSCs) such
as Arizona Public Service, Tucson Electric Power and Citizens Utilities and consumer owned electric
cooperatives. As a result, all utilities regulated by the ACC must open their service territories when
competition begins in 1999. However, public power entities (PPEs), such as the Salt River Project,
cities and towns, electric and irrigation districts and the Arizona Power Authority, which are not
regulated by the ACC, require statutory authority to open their service territories to competition in
the sale of electric generation service.
Pursuant to rules adopted by the ACC, PSCs will be required to open 20% of their 1995 retail
customer load by January 1, 1999, 50% of their load by January 1, 2001, and their entire load by
January 1, 2003. Of the initial 20%, on January 1, 1999, the ACC rule stipulates at least 15% be
reserved for the residential customer class. This legislation requires PPEs to open 20% of their load
by December 31, 1998, with at least 15% reserved for the residential customer class, and their entire
load by December 31, 2000. With respect to PSCs, H.B. 2663 confirms the authority of the ACC
to require PSCs to open their loads in a similar manner on the same dates as PPEs. Excluded from
the requirements placed on PPEs are cities and towns with a population of less than 75,000 that do
not elect to compete in the sale of electric generation service, cities and towns with a population of
75,000 or more that elects by official action not to sell electric generation service in the service
territory of another supplier, electric and irrigation and water conservation districts and the Arizona
Power Authority.
Transaction privilege tax (TPT) and use tax statutes are also modified to clarify that the same
tax base for the utility classification of the TPT will apply after electric generation, transmission and
distribution are unbundled. Electric distribution utilities, PSCs or PPEs that operate, control or
maintain distribution facilities, will collect the use tax.
FACT SHEET
H.B. 2663 - Final Revised
Page
Provisions
Public Power Entities (PPEs)
1. Excludes a city or town, with a population of less than 75,000 people that does not elect by official action to compete in the sale of electric generation service and power districts,
electrical districts, irrigation and water conservation districts, and multi-county water
conservation districts, from the definition of "public power entity." A city or town with a
population of 75,000 or greater, that elects by official action not to sell electric generation
service in the service territory of another supplier is also excluded, subject to legislative
review in 2008.
2. Requires public power entities to determine terms and conditions for competition in the sale of electric generation service and to coordinate with the Commission, their efforts in the
transition to competition in electric generation service.
3. Requires the governing bodies of PPEs, when determining the terms and conditions for customer selection, complaint resolution, consumer protection,
stranded cost, distribution
services rates and charges, system benefit charges and other related matters, to at a minimum
provide:
(a) Public notice of proposed terms and conditions stating they are for competition in retail sale of electricity and that the PPE must hold a special meeting with a statement
providing the date, time and place of the meeting.
(b) For a period beginning with the public notice until 10 days after the close of the meeting, pertinent information to all interested parties at its main office, including
managements recommendations, relevant financial information and current terms and
report of consultants if any.
(c) That interested parties may file written comments with the PPE and requires the governing body to hold a meeting no earlier than 30 days and no later than 90 days
after the date of the public notice. Requires the governing body at the meeting to
afford representatives of the PPE an opportunity to explain the proposed terms and
conditions and the criteria for them as well as answer questions, allow consultants
retained to also comment and allow interested people a reasonable opportunity to
submit written comments and questions or make oral presentations.
(d) That the governing body must make its decision on the proposed terms and conditions following review of the information and comments gathered.
4. Requires all final decisions of the governing body of a PPE regarding terms and conditions for customer selection, complaint resolution, consumer protection, stranded cost, transmission
and distribution service rates and charges, system benefit charges and other matters to be in
writing, state the factual and legal basis for the decision and state the effective date of the
decision.
5. Requires PPEs to establish unbundled electric transmission and distribution service prices and terms and conditions that are nondiscriminatory and reflect the just and reasonable price for
providing the service, rather than the just and reasonable cost.
6. Specifies determinations made by PPEs regarding their electric competition information may be challenged under the public records statutes and action upon denial of access.
7. Allows PPEs to participate in retail electric competition statewide and requires PPEs to open the service territory currently served by them to competition in the sale of electric generation
service in the following manner:
(a) At least 20%, of which 15% must be reserved for the residential customer class, of the 1995 retail load by December 31, 1998.
(b) Their entire service territory no later than December 31, 2000.
8. Requires public power entities to maintain their existing service territories for electric distribution service and prohibits them from providing electric distribution services in the
service territories of other electric distribution utilities in this state. Subject to legislative
review in 2008 to determine if public power entities should retain their existing distribution
service territories.
9. Requires electric distribution utilities to provide other services for the service territories they serve in the following manner:
(a) Beginning December 31, 1998 through December 31, 2000, billing and collection services must be provided on a competitive basis for retail electric customers with
loads of one megawatt and above that have competitive service. After December 31,
2000, billing and collection services for competitive electric generation service will
be provided on a competitive basis for all customers with competitive electric
generation service.
(b) Beginning December 31, 1998 through December 31, 2000, metering must be provided on a competitive basis for retail electric customers with loads of one
megawatt and above that have competitive service. After December 31, 2000,
metering will be provided on a competitive basis for all customers with competitive
electric generation service. All meters must meet or exceed existing standards for
safety, reliability and accuracy.
(c) Beginning December 31, 1998 through December 31, 2000, meter reading must be provided on a competitive basis for retail electric customers with loads of one
megawatt and above that have competitive service. After December 31, 2000, meter
reading will be provided on a competitive basis for all customers with competitive
electric generation service.
10. Requires PPEs to permit the aggregation of loads by multiple customers rather than prohibiting them from engaging in any act that restricts customers from forming associations
to negotiate lower electricity rates.
11. Stipulates that the existing system of determining electric distribution service territories through CC&Ns, official actions of public power entities or contracts among electric
distribution utilities or the manner of setting and regulating electric distribution service prices
is not altered. Subject to legislative review in 2008.
Code of Conduct (PPEs)
12. Requires the governing body of a PPE to adopt a code of conduct to prevent anticompetitive activities that may result from the PPE providing competitive and noncompetitive services to
retail customers. The code of conduct must address at least the following policies:
(a) Allocating costs between noncompetitive and competitive activities to avoid cross subsidization.
(b) To prevent employees providing noncompetitive services from directing retail electric customers to the PPE's competitive services.
(c) To prevent employees from transferring proprietary information gained in the performance of noncompetitive services to employees engaged in performing
competitive services without the consent of the retail electric customer.
(d) To provide electric retail customers with complete and accurate disclosure of which services are competitive and which services are noncompetitive.
(e) To prohibit preferential treatment when providing noncompetitive services based on a retail electric customer's provider of competitive services.
13. Requires a PPE to provide a dispute resolution process, including nonbinding third party arbitrators or mediators, for customers and interested parties filing a complaint regarding
activities governed by the policies established by the code of conduct. Knowingly and
intentionally violating the code of conduct will result in the same civil penalties that apply to
PSCs for similar violations.
Electric
Distribution Service Prices (PPEs)
14. Requires public power entities to:
(a) Establish unbundled ancillary electric transmission, distribution and other service prices, terms and conditions that are nondiscriminatory and reflect the just and
reasonable price for providing the service.
(b) Exclude from consideration, the profits and losses associated with electric generation service in establishing electric distribution service prices, except for the temporary surcharge on electric distribution
service prices to pay for the unmitigated stranded
costs of electric generation service.
(c) Adopt reasonable terms and conditions governing their obligation to provide electric distribution and other services.
(d) Establish a temporary surcharge to pay for all or a portion of the unmitigated stranded costs of electric generation service incurred as a direct result of competition that were
incurred by public power entities serving their customers in this state prior to
December 26, 1996, that cannot be recovered in a competitive market.
(e) Allows unmitigated stranded costs to include employee severance costs necessitated by competition, which includes unemployment compensation, training and severance
benefits.
(f) Allow any provider of electric generation service access to the transmission and distribution facilities of PPEs under rates and terms and conditions of service that are
nondiscriminatory, cost based, just and reasonable and comparable to the rates
charged for the PPEs own use of the same facilities.
15. Requires PPEs stranded cost recovery to be determined based on the consideration of at least the following factors:
(a) The impact of stranded cost recovery on the effectiveness of competition.
(b) The impact of stranded cost recovery on customers of a PPE who do not participate in the competitive market.
(c) The impact, if any, on the PPE's ability to meet debt obligations.
(d) The impact of stranded cost recovery on prices paid by consumers who participate in the competitive market.
(e) The degree to which the PPE has mitigated or offset stranded costs and the costs associated with mitigating stranded costs.
(f) The degree to which some assets have values in excess of their book values.
(g) Appropriate treatment of negative stranded costs.
(h) The time period in which these stranded cost charges may be recovered.
(i) The ease of determining the amount of stranded costs.
(j) The applicability of stranded costs to interruptible customers.
(k) The amount of electricity generated by renewable generating resources owned by the PPE.
(l) Allowances that have been provided for the recovery of stranded costs to other electricity suppliers in this state, including whether 100 percent of regulatory assets
are recovered through the stranded cost surcharge.
16. Prohibits the imposition of a temporary surcharge on electric distribution service prices from causing the rates for standard offer service to exceed the rates in effect on December 30,
1998. Prohibits the surcharge from continuing past December 31, 1998.
17. Requires unmitigated stranded costs to be allocated among customer classes in a manner consistent with the PPEs current rate treatment of the stranded asset, in order to effect a
recovery of unmitigated stranded costs that is in substantially the same proportion as the
recovery of similar costs from customers or customer classes under current rates.
18. Excludes any reduction in electricity purchases from a PPE resulting from self-generation, demand side management or other demand reduction attributable to any cause other than
retail access from being used to calculate or recover any stranded cost from a customer.
19. Requires a PPE to participate in and support an independent system operator, an independent system administrator or other efforts to coordinate scheduling of generation or transmission.
20. Requires PPEs to reduce the price for bundled service for electric retail customers unable to choose competitive electric generation by at least 10 percent over a maximum ten year period,
which must begin on any date between January 1, 1991 and the effective date of the bill.
Each PPE must report its beginning effective date for the 10 year period and the proposed
apportionment among its customer classes to the Joint Legislative Budget Committee by
December 31, 1998.
Consumer Protection (PPEs)
21. Requires PPEs to adopt rules and procedures to protect the public against deceptive, unfair and abusive business practices and to coordinate their rules and procedures with the ACC,
which address at least:
(a) Deceptive and unfair business practices, including deposit requirements and reconnection fees.
(b) Intrusive and abusive marketing practices and deceptive and untrue advertising practices.
(c) The provision of an ombudsman office to investigate complaints regarding the subsidization of competitive prices by any price or charge for noncompetitive electric
service.
(d) Requiring PPEs to make available all information necessary to demonstrate compliance with the requirement of establishing distribution prices that are
nondiscriminatory and reflect the just and reasonable cost consistent with sound
business principles.
22. Prohibits PPEs that form affiliates for the purpose of providing services that require a licensed contractor or has employees perform these services, including electrical, heating, ventilation,
air conditioning, plumbing or construction services, from advertising these services in their
billing statement or in other mailings done by the distribution utility.
23. Stipulates the rules must require plain language in advertising and billing, using uniform words and phrases with the same meanings, so customers can make accurate comparisons.
24. Requires a separate written and dated authorization for a change in retail electricity supplier subject to:
(a) Prohibiting the authorization from containing any inducements.
(b) Requiring the authorization to be in legible print with clear and plain language confirming the rates, terms, conditions and nature of the service provided.
(c) Prohibiting the authorization from stating or suggesting the customer must take action to retain their current electricity supplier.
(d) An electricity supplier that submits or executes a change in a customer's electricity supplier, without authorization, must refund to the customer the entire amount of
their electricity charges for three months or the period of the unauthorized service,
whichever is less.
(e) Requiring the authorization to be in the same language as any promotional or inducement materials provided to the customer.
(f) Prohibiting any box or container from being used to collect entries for sweepstakes or a contest, that at the same time, is used to collect authorization by a customer to
change their electricity supplier or to subscribe to other services.
25. Stipulates customer information, account information and related proprietary information are confidential unless specifically waived by the customer in writing and requires public power
entities and electricity suppliers and providers of other services to adopt rules to ensure
confidentiality.
26. Requires contractors employed by a public power entity, either directly or through an affiliate, for interior household energy service to be licensed by the Registrar of Contractors and
requires the contractors to comply with all municipal permit and inspection standards and life
safety codes.
27. Requires public power entities, with a service territory in this state through certificates of convenience and necessity, resolutions of public power entities or contract or agreements
among utilities to act as the supplier of last resort for electric generation service for every
customer in their service territory whose annual usage is 100,000 kilowatt hours or less if
other electricity suppliers are unwilling or unable to supply electric generation service and
whose service has been discontinued through no fault of the customer. Subject to legislative
review by the Auditor General in 2008.
28. Entitles public power entities that provide electric distribution services to recover just and reasonable costs for supplying electric generation service as a supplier of last resort through
a distribution charge on retail customers whose annual usage is 100,000 kilowatt hours or
less.
29. Classifies the failure to comply with the rules regarding deceptive business practice and separate written authorization for a change in retail electricity supplier as an unlawful practice
pursuant to consumer fraud and anti-trust statutes and allows the Attorney General to
investigate and take appropriate action.
Consumer Outreach and Education (PPEs)
30. Stipulates public power entities are responsible for ensuring and overseeing a comprehensive public education program relating to electric generation service competition, coordinated
between the PPEs and the ACC, designed to do the following:
(a) Educate retail electric customers about the changes in the electric industry.
(b) Provide customers with accurate and unbiased information so they may make informed choices when participating in the competitive market.
(c) Encourage public participation in the decision making process relating to establishing a competitive electric industry.
31. Requires public power entities to work with interested parties, including but not limited to community based consumer advocate organizations, to develop and implement an outreach
and education plan which must include:
(a) Dissemination of information by means of interactive approaches, as well as brochures and a variety of mass media outlets.
(b) An explanation in clear and plain language of the basic concepts of competitive electric generation service, including specified issues.
(c) Publicized public forums conducted in several areas of this state to obtain public input and provide opportunities for the exchange of questions and answers.
(d) Targeted efforts to reach rural, low income, elderly, nonenglish speaking, disabled, minorities and at risk populations.
Confidentiality of Electric Retail Competition Information (PPEs)
32. Specifies records and proceedings relating to competitive activity, including trade secrets or privileged, commercial or financial information, if disclosure gives an advantage to
competitors, are not open to public inspection and cannot be made public except by order of
the public power entity's or electricity supplier's governing body.
33. Specifies the information protected is any information similar to information that would be confidential if reported by a public service corporation to the Commission.
Consumer Choice (PPEs)
34. Requires, at a minimum, that during the initial construction of a residential structure, electric and natural gas facilities be installed in a manner that gives the consumer ultimately residing
in the structure and all subsequent consumers, the capability to select electricity or natural gas
as an energy source for each specified appliance.
35. Exempts residential structures from this requirement when the structure is not located within the service territory of the PPE furnishing the energy, when the PPE furnishing the entity
notifies the owner or the contractor that the extension of facilities to the structure are not
economically feasible or when the PPE and the owner agree it is not economically feasible or
otherwise inappropriate.
36. Prohibits any person or entity from engaging in any practice that interferes with the opportunity to have electric and natural gas facilities installed in and to an existing residential
structure in a manner that allows the ultimate resident the choice between electricity or
natural gas as the energy source for the specified appliances. Reasonable sales and marketing
activities are exempted.
37. Requires that electric and natural gas facilities be permitted to occupy trenches as long as the installation is completed in compliance with industry safety codes.
38. Allows a contractor or property owner to require the occupants of the trench to pay a pro rata share of the costs associated with providing the trench.
39. Requires the parties to meet and in good faith attempt to resolve their disputes, regarding these requirements, through an informal dispute resolution process before initiating a
complaint with a public power entity or the ACC.
Application for Rehearing
40. Allows any party to the proceedings regarding the order or decision of the governing body of a PPE regarding their terms and conditions to apply for a rehearing of any matter
determined in the action within 20 days of entry of the decision.
41. Specifies that unless otherwise ordered, the filing of the application for rehearing does not stay the order or decision of the PPE and that if the PPE does not grant the application within
20 days it is deemed denied and if the application is granted, the PPE must hear the matter
and determine it within 20 days after final submission.
42. Prohibits a claim arising from any order or decision of a governing body of a PPE regarding terms and conditions and other related matters or regarding compliance with an
intergovernmental agreement (IGA) from accruing in any court to any party or the state unless they make, before the effective date of the decision, an application for rehearing with
the PPE.
43. Requires the application to specifically set forth the grounds on which the application is based and prohibits any person or the state from arguing or relying on any ground not in the
application in any court.
44. Requires any person who files an application to comply with and obey any order or decision or the requirements of any order or decision of the PPE and prohibits them from operating
in any manner to stay or postpone the enforcement of the decision, except in cases and on
terms directed by the PPE.
45. Allows a PPE after a rehearing and consideration of all the facts to change or modify the order or decision and specifies the order or decision has the same force and effect as an
original order or decision, but does not affect any enforcement rights arising from the original
order or decision, unless decided so by the PPE.
Actions to Set Aside or Modify Decisions of PPEs
46. Allows any interested party or the Attorney General on behalf of the state that is dissatisfied with a final order or decision of a PPE regarding terms and conditions or other related matters
or compliance with an IGA to commence an action in Superior Court, within 30 days after
a rehearing is denied or granted, against the PPE to set aside, affirm in part, reverse in part
or remand with instructions to the PPE that the order or decision is unlawful or the rule,
practice or act is unreasonable.
47. Requires the PPE to file and serve their answer within 20 days after service of the complaint and specifies the action will be at issue and ready for trial upon 10 days notice to either party.
48. Specifies the action must be dismissed if the PPE rescinds the order or decision complained of and requires an altered, modified or amended order or decision of a PPE to replace the
original order or decision and judgment must be given as though made by the PPE in the first
instance.
49. Stipulates the trial must conform, as nearly as possible, to other civil action trials and requires judgments to be given affirming, modifying or setting aside the original or amended order or
decision.
