Utah Legislature 80618EDT

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Electrical Deregulation and Customer Choice Task Force

MINUTES OF
ELECTRICAL DEREGULATION AND CUSTOMER CHOICE TASK FORCE
Thursday, June 18, 1998 - 9:00 a.m. - Room 303 State Capitol

Members Present:
    Sen. Leonard M. Blackham, Chair
    Rep. Beverly Ann Evans, Chair
    Sen. Eddie "Ed" P. Mayne
    Sen. Millie M. Peterson
    Sen. Michael G. Waddoups
    Rep. Judy Ann Buffmire
    Rep. Christine R. Fox-Finlinson
    Rep. Kevin S. Garn
    Rep. J. Brent Haymond
    Rep. David Ure

Members Excused:
    Sen. Lorin V. Jones
    Rep. Ralph Becker

Staff Present:
    Brian Allred,
        Research Analyst
    Robert H. Rees,
        Associate General Counsel
    Beverlee LeCheminant,
        Legislative Secretary
    Jared Faerber,
        Law Clerk

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 May 21, 1998 - Sen. Blackham called the meeting to order at 9:15 a.m.

     MOTION: Rep. Ure moved to approve the minutes of the May 21, 1998 meeting. The motion passed unanimously.

2.    Task Force Business - Sen. Blackham distributed copies of the July 3rd and July 16th draft agendas to the task force members. He indicated that the task force will be discussing the potential impacts of restructuring on various governmental entities, industries, and associations at these meetings.

3.    Review of Restructuring Options and Programs - Mr. Robert Rees, Associate General Counsel, gave an overview of possible legislative approaches to electrical restructuring. He indicated that possible approaches range from no action to legislation enacting a comprehensive restructuring plan without Public Service Commission (PSC) involvement. He provided task force members with printed copies of his slide presentation.

    Mr. Jared Faerber, law clerk, gave an overview of some of the pilot programs which are occurring in various states. He indicated that most of the pilot programs are small scale experiments that allow customers to choose their electricity provider and that the purposes of pilot programs are: 1) to provide utilities, regulators, and customers with insights into the practical problems of restructuring; 2) to test customer interest and reactions to choice; and 3) to test supplier interest. He also discussed approaches of other states that are phasing in competition. He provided task force members with printed copies of his slide presentation.
    Rep. Garn asked if the intent of the task force was to study some of the possible legislative approaches and start making decisions as to which approach the task force would like to take, if any?

    Sen. Blackham stated that it is not the intent of the chairs to choose one of the legislative approaches for the task force to work toward at this time, but to help the task force discover what other states are doing and to begin thinking about what approach Utah should take..

    Rep. Garn suggested that it might be time for the task force to look at some of the pilot programs from other states and decide if it has a desire to study some of them in more depth.

    Sen. Blackham indicated that the task force could direct staff to study the two pilot programs to find out more detailed information on them and then present that information to the task force at a future meeting.

    Rep. Garn noted that if the task force waits until the end of the year to focus on these pilot programs, there may not be enough time to take action on them.

    Sen. Mayne stated that he would like to see the task force continue to discuss restructuring impacts for the next two meetings before it focuses on pilot programs.

    Sen. Blackham told the task force that the chairs could adjust the agendas for the August meetings to include a detailed analysis of pilot programs and proposals to allow some classification of customers to move to competition. He added that the task force will continue to discuss restructuring impacts in the July meetings.

4.    Unbundling -

    a.    Review of Unbundling Approaches in Other States - Mr. Brian Allred, Research Analyst, gave an overview of unbundling experiences from other states. He indicated that he looked at 21 states that are in various stages of addressing unbundling. He explained that, generally speaking, unbundling is recognized as an essential step to competition and is usually ordered by legislation or a regulatory commission the particular date by which it is to occur. Regulators and workgroups meet to work out the details and gain consensus, but details of how and what to unbundle in most states is yet to be resolved.

     b.    Public Service Commission (PSC) Report on Unbundling - Commissioner Stephen Mecham, PSC, indicated that the report on unbundling is the first of four reports the PSC will submit to the task force. He gave a brief overview of the report to the task force.

     c.    Discussion Panel -

     PacifiCorp - Mr. Doug Larsen, commended the PSC on its report and said that PacifiCorp supports Option #4 in the PSC's report as a way of dealing with unbundling. He indicated that PacifiCorp has been providing electricity as a bundled product for 80 years and with the PSC's preliminary investigation into unbundling retail electricity services, PacifiCorp poses two questions: 1) How might electricity services be unbundled; and 2) which of them, once unbundled, might be competitively provided? He noted that PacifiCorp recognizes the complexity of the unbundling issues and is participating in several forums to continue study on this issue. PacifiCorp believes that it is important to move forward in a methodical way with the first step being the separation of cost between generation, transmission, distribution, and customer service. Once this process has been fully developed, parties can start to determine the level in which each of these services can and need to be separated.

     Committee of Consumer Services (CCS) - Ms. Nancy Kelly distributed a summary of CCS's comments regarding unbundling and an article from the Wall Street Journal titled "A Shocking Giveaway to Utilities," and indicated that CCS does not believe that any electricity services should be unbundled at this time. CCS believes that the cost of unbundling may outweigh the possible benefits and will lead to higher prices and less reliable service. Ms. Kelly said that if generation is separated from transmission and distribution there will be increased transactions costs; increased inefficiency due to loss of economies of vertical integration; increased costs of regulation coupled with decreased effectiveness in protecting core retail customers; cost shifting between customer groups; and increased prices to small customers who remain with the utility. She reported that CCS recommends that before proceeding with further unbundling activity, the question of whether unbundling is in the best interest of the state's electricity customers should be answered through detailed study and that the benefits and costs by customer class be clearly identified.

     Utah Rural Electric Association - Mr. Mike Peterson, Executive Director, said that if the task force goes forward with unbundling the state would end up with competitive markets that would provide people with an opportunity to sell things, but the consumer would not always know what he is buying. With the developments taking place in other states who have started the electrical deregulation process, it is apparent that there are many issues yet to be resolved and the Association advocates the continued observance of those processes occurring outside the state.

     Utah Electric Deregulation Group(UEDG) - Mr. Rick Anderson, Energy Strategies, Inc., told the task force that the UEDG believes that the issue of unbundling is of major importance for the successful introduction of competition into the retail electric market, but UEDG are concerned about reliability and that if unbundling is not properly done, this could be a system that could lead to built-in bias toward incumbent utilities. He added that UEDG support Option #4 of the PSC's report and also supports the commission moving forward on an informal process to clarify definitions and on a formal process to engage in cost allocations.

    Mr. Charles Johnson, Utility Consultant, explained that most of the items listed for unbundling are part of the dynamic electricity system and it is necessary that these items be integrated into the transmission system at this time. The generation services that were discussed in the PSC's report are for purposes of voltage control and to keep the transmission system reliable, and those costs need to be allocated across these various functions. He concluded by saying that if these services are going to be unbundled and customers will be charged for them, the services need to be measured separately on an hour-by-hour basis.

    Ms. Clair Geddes, United We Stand, remarked that telecommunications is, in effect, a pilot program in the state which began three years ago and and has resulted in cramming, higher rates, and no choice. She indicated that she feels the task force can learn something from what has happened with the telecommunications pilot program. She suggested that the task force use the telecommunications experience as a guide to see how the state should proceed with electrical deregulation.

    Task Force questions and discussion followed.

5.    Adjourn -

     MOTION: Rep. Buffmire moved to adjourn the meeting at 11:50 a.m. The motion passed unanimously.

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