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. Public power entities may also coordinate the opening of their service
territory with the schedule set by the ACC for PSCs. 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, 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. This legislation also stipulates that the surcharge applied to recover all
FACT SHEET
H.B. 2663 - Revised
Page
or a portion of the unmitigated stranded costs of electric generation service, costs which cannot be
recovered in a competitive market, are not part of the base. Electric distribution utilities, PSCs or
PPEs that operate, control or maintain distribution facilities, will collect the use tax.
There is an undeterminable adverse fiscal impact to the general fund associated with this
legislation relating to the exclusion of the surcharge to recover stranded costs from the transaction
privilege tax. Currently, stranded cost recovery is incorporated in the bundled rate paid by electric
retail customers which is taxed. According to the fiscal note prepared by the Joint Legislative Budget
Committee, this exclusion may have a fiscal impact as high a $9,000,000 per year beginning in FY
2000, if stranded cost recovery is amortized over a ten-year period, assuming the exclusion of $2.1
billion in stranded costs from 5% state sales tax, which would cost $105 million in total.
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."
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 through enforceable intergovernmental
agreements (IGAs).
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, 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. Requires public power entities 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 (which includes metering and billing services) for the service territories they serve. Subject to sunset review by the Auditor
General in 2003.
10. Requires PPEs to permit the aggregation of loads of 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.
Electric Distribution Service Prices (PPEs)
12. 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) Coordinate, with the Commission, their respective rules and procedures through intergovernmental agreements or reciprocity filings.
(g) 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.
13. Allows PPEs to coordinate the reduction for the price for bundled service for electric retail customers with a rate reduction for the price for bundled service adopted by the ACC for
PSCs.
Consumer Protection (PPEs)
14. Requires public power entities to adopt rules and procedures to protect the public against deceptive, unfair and abusive business practices and to coordinate their rules and procedures
through reciprocity filings or IGAs with the Commission, 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.
15. 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.
16. Prohibits mailings for billing purposes from including any advertisements for electric or electric related services provided by the billing entity that can be provided by others unless
the billing entity provides its customer mailing list to all other people who provide the same
service for as long as the billing remains a service of the distribution utility.
17. 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.
18. 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 to adopt rules to ensure confidentiality.
19. 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.
20. 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.
21. 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.
22. 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)
23. 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.
24. 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)
25. 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.
26. 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)
27. 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.
28. 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.
29. 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.
30. 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.
31. 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.
32. 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
33. Allows any party to the proceedings regarding the 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.
34. Specifies that unless otherwise ordered, the filing of the application for rehearing does not stay the 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.
35. Prohibits a claim arising from any 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.
36. 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.
37. Requires any person who files an application to comply with and obey any decision or the requirements of any 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.
38. Allows a PPE after a rehearing and consideration of all the facts to change or modify the decision and specifies the decision has the same force and effect as an original decision, but
does not affect any enforcement rights arising from the original decision, unless decided so
by the PPE.
Actions to Set Aside or Modify Decisions of PPEs
39. Allows any interested party or the Attorney General on behalf of the state that is dissatisfied with a final 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 decision is unlawful or the rule, practice or act
is unreasonable.
40. 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.
41. Specifies the action must be dismissed if the PPE rescinds the decision complained of and requires an altered, modified or amended decision of a PPE to replace the original decision
and judgment must be given as though made by the PPE in the first instance.
42. 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 decision.
43. Allows either party to the action to appeal to the Court of Appeals within 30 after the judgment of the Superior Court is given.
44. Specifies the burden of proof in all trials, actions and proceedings be upon the party averse to the PPE or seeking to vacate or set aside any determination of the governing body of the
PPE to show it is unlawful and not supported by substantial evidence showing the governing
body of the PPE abused its discretion.
45. Prohibits any court of this state from having jurisdiction to enjoin, restrain, suspend, delay or review any decision of the PPE or to enjoin, restrain, or interfere with PPE in the performance
of its official duties and specifies the rules or decrees fixed by the PPE will remain in force
pending the decision of the courts.
46. Applies the antitrust statutes to the provisions of competitive electric generation service by PPEs and specifies the exemption from antitrust statutes does not apply to the provision of
competitive electric generation service.
Consumer Outreach and Education - Public Utilities (PSCs)
47. Confirms the Commission's authority to develop and oversee a comprehensive public education program regarding electric generation service competition, in order to transition
to competition, which may 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.
48. Specifies the Commission may work with interested parties, including community based consumer advocate organizations, to develop and implement an outreach and education plan
which may 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.
49. Specifies the public policy of Arizona is that a competitive market will exist in the sale of electric generation service and confirms the authority of the ACC to:
(a) Open the service territories of PSCs, except foreign nonprofit, member owned cooperative corporations, no later than December 31, 1998 for 20% of their 1995
retail load, of which 15% must be reserved for the residential customer class, and their
entire service territory no later than December 31, 2000.
(b) Establish requirements for certificating and regulating electricity suppliers that are PSCs.
(c) Maintain the current service territories of PSCs and prohibit PSCs from providing electric distribution service in the service territories of other electric distribution
utilities and maintain the current service territories of PSCs. Subject to legislative
review by the Auditor General in 2008.
(d) Require an electric distribution utility that is a PSC to provide other services (which includes metering and billing services) for the service territory they serve. Subject to
legislative review by the Auditor General in 2003.
(e) 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. Unmitigated
stranded costs can include employee severance costs necessitated by competition,
including unemployment compensation, training and severance benefits. Exempts
electric distribution services provided to customers who do not have competitive electric generation service between December 31, 1998 and December 31, 1999.
Also, allows the ACC to exempt electric distribution services provided to retail
electric customers who have regulated electric generation service between December 31, 1998 and December 31, 1999.
(f) Require electric distribution utilities that are PSCs to act as the supplier of last resort for electric generation service for every customer in their distribution 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. Allows for the recovery of costs
incurred by the distribution utilities that are PSCs for supplying electricity through a
distribution charge on retail customers whose annual usage is 100,000 kilowatt hours
or less. Subject to legislative review by the Auditor General in 2008.
(g) Investigate complaints and impose sanctions for subsidization of competitive services by any regulated rate or charge for any noncompetitive electric service.
(h) Exclude the profits or losses associated with electric generation service when regulating electric distribution service.
Supervising and Regulating (PSCs)
50. Confirms the authority of the ACC to adopt rules which:
(a) Protect the public against deceptive, unfair and abusive business practices including intrusive and abusive marketing and deceptive and untrue advertising.
(b) Provide that a separate authorization to change electricity supplier which cannot contain inducements, must confirm rates, terms and conditions and cannot suggest the
customer must take action to retain their current supplier. Requires an electricity
supplier that submits or executes a change in a customer's electricity, without
authorization, to refund to the customer the entire amount of their electricity charges
for three months or the period of the unauthorized service, whichever is less.
(c)
