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Electrical Deregulation and Customer Choice Task Force

MINUTES OF

ELECTRICAL DEREGULATION AND CUSTOMER CHOICE TASK FORCE

April 23, 1998 - 9:00 a.m. - Room 403 State Capitol


Members Present:
    Sen. Leonard M. Blackham, Chair
    Rep. Christine R. Fox, Chair
    Rep. Judy Ann Buffmire
    Sen. Lorin V. Jones
    Sen. Eddie "Ed" P. Mayne
    Sen. Millie M. Peterson
    Sen. Michael G. Waddoups
    Rep. Ralph Becker
    Rep. Beverly Ann Evans
    Rep. Kevin S. Garn
    Rep. J. Brent Haymond
    

Members Absent:
    Rep. David Ure

Staff Present:
    Brian Allred,
        Research Analyst
    Robert H. Rees,
        Associate General Counsel
    Patricia Owen,
        Associate General Counsel
    Beverlee LeCheminant,
        Legislative Secretary

Note: Copies of information distributed during the meeting are on file in the Office of Legislative Research and General Counsel

1. Welcome - Approval of Minutes of November 13, 1997 - Rep. Evans called the meeting to order at 9:20 a.m.

     MOTION: Sen. Peterson moved to approve the minutes of the November 13, 1997 meeting. The motion passed unanimously.

2.    Task Force Business - Rep. Evans indicated that the format of the meetings this year has been changed. Rather than holding four hour meetings with a break in the middle, the meetings will be three hours without a break.

    Rep. Evans informed the task force members that the agenda item on litigation relating to restructuring, will be held over until the May meeting.

3.    Review of 1998 General Session Legislation and April 30, 1998 Deadline for Draft Legislation Recommendations - Mr. Brian Allred, Research Analyst, reminded the task force that at its November meeting it passed motions which became 1998 General Session HJR 7. HJR 7 outlined a process for study for this year and specified areas that were to be addressed in draft legislation that would be suggested by April 30th of this year. HJR 7 was amended during the session to reflect the fact that the task force was not required to present legislation this year, but could if it felt it was appropriate. 1998 General Session SB 67 included reference to items which were to be studied by the Public Service Commission (PSC) and then reported to the task force during the year, but SB 67 did not pass. Subsequent to SB 67, there was a request from the chairs of this task force, as well as from the President of the Senate and the Speaker of the House, that the PSC provide the information as outlined in SB 67.

    Sen. Blackham stated that in light of the actions that occurred during the session and the amendment to HJR 7, requiring the task force to have bills to start working on and considering might be premature. The task force has some significant issues that are going to be addressed by the PSC in its reports and, not having received that information yet, any proposed legislation may not adequately or properly address the issues. He suggested that the task force become more educated on this issue for the next few months.

    Sen. Peterson stated that she would like to have more information on some of the issues that the task force addressed briefly last year, but didn't spend much time on. One of those issues is the tax issue and how it is going to impact power plants in the state if they are not competitive.

    Sen. Mayne said he has prepared legislation and is ready to submit it, but he will hold it until November. He stated that he concurs with Senator Peterson that the task force needs further study this year.

    Rep. Becker said he concurs with Senator Blackham's and Senator Peterson's comments. There are other issues that affect consumers in this state and it would be helpful for the task force to be able to discuss each issue thoroughly.

    Rep. Haymond said he concurs that legislation is premature. He indicated that he would like a formal schedule of issues that need to be addressed and that the task force needs to come to a resolution on each issue before it moves on to the next issue.

    Sen. Peterson suggested sending a copy of the minutes to the legislators who are not on the task force so they can become educated on this issue also.

    Rep. Buffmire suggested that the task force meet every two weeks to be able to acquire all the information that is needed to draft legislation.

    Sen. Jones agreed with Rep. Buffmire's suggestion of holding a meeting every two weeks. He also suggested having the managers from the individual rural cooperative companies come before the task force to give their input.

     MOTION: Rep. Haymond moved that the task force hold meetings two times each month. The motion passed unanimously.

    MOTION: Rep. Haymond moved that the task force hold their next meeting on May 21st and then meet the first Thursday of the month and the Thursday after interim day thereafter. The motion passed unanimously.

     MOTION: Rep. Buffmire moved that the task force eliminate the April 30th deadline for legislation and encourage those who have proposals or legislation to bring them forward and the task force will discuss them. The motion passed unanimously.
     MOTION: Sen. Waddoups moved that the task force hold only one meeting in September because of the Legislature's site visit on September 2nd and 3rd. The motion passed unanimously.

4.    Proposed Study by the Public Service Commission - Mr. Stephen Mecham, Chair, Public Service Commission, stated that the PSC has been asked to study and make suggestions on what electric services can be unbundled and, of those unbundled services, which can be competitive by June 1, 1998. This issue will then be discussed at one of the task force's June meetings. He indicated that the PSC is to submit its report on market power on August 1st, its suggestions and options on customer protection programs on September 1st, and its suggestions on how to approach the issue of stranded cost by October 1st.

5.    Update on Electric Industry Restructuring in the States and Congress -

    A.    Restructuring implementation and study in other states - Mr. Matthew Brown, National Conference of State Legislatures, distributed a Comparison of Selected Electric Restructuring Legislation, and Electric Industry Restructuring in the States and gave a brief overview of restructuring activity in the states, focusing on California.

     B.    Restructuring in Colorado - Mr. Bruce Smith, Director of Colorado Public Utilities, and Mr. Morey Wolfson, Assistant to the Commissioners, Colorado Public Utilities Commission, gave a presentation on the description of the Colorado Public Utilities Commission; a description of the Colorado PUC stakeholder analysis; a description of Colorado PUC Research regarding the role of generation in electric utility industry restructuring, the role of transmission in electric industry restructuring, and the Colorado electric market; and an overview of Colorado legislative activity. They provided task force members with copies of their presentation with an empirical analysis of a dominant firm's market power in a restructured electricity market.

     C.    Federal Proposals - Mr. Jeff Genzer, National Association of State Energy Officials, indicated that he believes that it is highly unlikely that there will be a federal bill on electrical deregulation this year and, because of the complexity of the issue, it is going to be hard for a bill to be passed until the year 2000. He reviewed the administration's set of guidelines which were issued publicly at the end of March and various congressional proposals.

    As part of his review, he highlighted the following issues: establishing the administration's flexible mandate where retail customers would have the right to choose a supplier on January 1, 2003 unless the state or nonregulated utilities in the state choose to opt out of competition; establishing the administration's support of the concept of stranded cost recovery consistent with FERC Order #888; establishing new statutory authority; developing consumer information, including the Secretary of Energy requiring electricity suppliers to disclose common information on price terms and conditions of service, as well as generation source and emissions characteristics; the potential repealing of the Public Utility Holding Company Act; enhancing FERC jurisdiction over mergers or should FERC be given specific additional market power control such as ordering divestiture of

assets as a way to mitigate market power; establishing reliability where FERC would be given specific authority to oversee the National Electric Reliability Council; establishing use of independent system operators such as the administration's proposal to amend the Federal Power Act to require transmitting utilities to turn over operation control to ISO's; creating separate regional transmission planning bodies which would be done through regional compacts for purposes of transmission planning and siting; establishing renewable portfolio standards where the administration would propose that all electricity sellers must generate up to 5.5% from renewable generation sources in 2010 and would expire by 2015; eliminating the purchase requirement under the Public Utilities Regulatory Policies Act that utilities purchase from so called qualifying facilities, renewable resources, or cogenerators; establishing funding for public benefits programs, such as the establishment of a $3 billion federal matching fund; establishing new trading authority on the environmental side for nitric oxide giving the Environmental Protection Agency additional authority to mandate trading of nox, but oppose no new requirements for nox; establishing a rural safety net; establishing a universal service requirement; clarifying federal jurisdiction, especially if FERC is given additional authority to order retail transmission in a transmission system other than where the end user is located in order to effectuate a retail sale authorized by a state; establishing state authority on reciprocity where the administration would specifically require Congress to provide states the authority, if they have implemented retail competition, to preclude an out-of-state utility with a retail monopoly from selling within the state unless customer choice is permitted in the other state; and establishing tax exempt financing where the administration would eliminate tax exempt financing on the generation or transmission end for consumer-owned utilities for the future, though existing debt and distribution system financing would continue to be tax deductible.

     MOTION: Rep. Haymond moved to adjourn. The meeting adjourned at 12:00 noon.

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