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HOUSE BILL 1392


AN ACT restructuring the electric utility industry in New Hampshire and establishing a legislative oversight committee.


SPONSORS: Rep. J. Bradley, Carr 8; Rep. Below, Graf 13; Rep. Guay, Coos 6; Rep. A. Merrill, Straf 8; Rep. Pfaff, Merr 11; Sen. Shaheen, Dist 21; Sen. Fraser, Dist 4; Sen. Cohen, Dist 24; Sen. Barnes, Dist 17; Sen. Rodeschin, Dist 8

COMMITTEE: Science, Technology and Energy


 

This bill:

(1) Establishes a legislative oversight committee on electric utility restructuring.

(2) Requires all electric utilities to submit rate restructuring plans.

(3) Establishes restructuring principles to be used by the public utilities commission in assessing and approving each utility's restructuring plan.

(4) Requires the committee to submit an annual report on its progress. The first report shall be submitted on or before November 1, 1996, to the governor, the senate president and the speaker of the house.


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EXPLANATION: Matter added to current law appears in bold italics.
Matter removed from current law appears in [brackets].
Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.




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129:1 Findings. The general court finds that:
I. New Hampshire has the highest average electric rates in the nation and such rates are unreasonably high. The general court also finds that electric rates for most citizens may further increase during the remaining years of the Public Service Company of New Hampshire rate agreement and that there is a wide rate disparity in electric rates both within New Hampshire and as compared to the region. The general court finds that this combination of facts has a particularly adverse impact on New Hampshire citizens.
II. New Hampshire's extraordinarily high electric rates disadvantage all classes of customers: industries, small businesses, and captive residential and institutional ratepayers and do not reflect an efficient industry structure. The general court further finds that these high rates are causing businesses to consider relocating or expanding out of state and are a significant impediment to economic growth and new job creation in this state.
III. Restructuring of electric utilities to provide greater competition and more efficient regulation is a nationwide phenomenon and New Hampshire must aggressively pursue restructuring and increased customer choice in order to provide electric service at lower and more competitive rates.
IV. Monopoly utility regulation has historically substituted as a proxy for competition in the supply of electricity but recent changes in economic, market and technological forces and national energy policy have increased competition in the electric generation industry and with the introduction of retail customer choice of electricity suppliers as provided by this chapter, market forces can now play the principal role in organizing electricity supply for all customers instead of monopoly regulation.
V. It is in the best interests of all the citizens of New Hampshire that the general court, the executive branch, and the public utilities commission work together to establish a competitive market for retail access to electric power as soon as is practicable and that interim stranded cost recovery charges be determined and put into effect for each utility operating in this state to expedite and facilitate the transition for such a market.
129:2 New Chapter; Restructuring of the New Hampshire Electric Utility Industry. Amend RSA by inserting after chapter 374-E the following new chapter:

CHAPTER 374-F
ELECTRIC UTILITY RESTRUCTURING

374-F:1 Purpose.
I. The most compelling reason to restructure the New Hampshire electric utility industry is to reduce costs for all consumers of electricity by harnessing the power of competitive markets. The overall public policy goal of restructuring is to develop a more efficient industry structure and regulatory framework that results in a more productive economy by reducing costs to consumers while maintaining safe and reliable electric service with minimum adverse impacts on the environment. Increased customer choice and the development of competitive markets for wholesale and retail electricity services are key elements in a restructured industry that will require unbundling of prices and services and at least functional separation of centralized generation services from transmission and distribution services.
II. A transition to competitive markets for electricity is consistent with the directives of part II, article 83 of the New Hampshire constitution which reads in part: "Free and fair competition in the trades and industries is an inherent and essential right of the people and should be protected against all monopolies and conspiracies which tend to hinder or destroy it." Competitive markets should provide electricity suppliers with incentives to operate efficiently and cleanly, open markets for new and improved technologies, provide electricity buyers and sellers with appropriate price signals, and improve public confidence in the electric utility industry.
III. The following interdependent policy principles are intended to guide the New Hampshire public utilities commission in implementing a statewide electric utility industry restructuring plan, in establishing interim stranded cost recovery charges, in approving each utility's compliance filing, in streamlining administrative processes to make regulation more efficient, and in regulating a restructured electric utility industry. In addition, these interdependent principles are intended to guide the New Hampshire general court and the department of environmental services and other state agencies in promoting and regulating a restructured electric utility industry.
374-F:2 Definitions. In this chapter:
I. "Commission" means the public utilities commission.
II. "Electricity suppliers" means suppliers of electricity generation services and includes actual electricity generators and brokers, aggregators, and pools that arrange for the supply of electricity generation to meet retail customer demand, which may be municipal or county entities.
III. "FERC" means the Federal Energy Regulatory Commission.
IV. "Stranded costs" means costs, liabilities, and investments, such as uneconomic assets, that electric utilities would reasonably expect to recover if the existing regulatory structure with retail rates for the bundled provision of electric service continued and that will not be recovered as a result of restructured industry regulation that allows retail choice of electricity suppliers, unless a specific mechanism for such cost recovery is provided. Stranded costs may only include costs of:
(a) Existing commitments or obligations incurred prior to the effective date of this chapter;
(b) Renegotiated commitments approved by the commission; and
(c) New mandated commitments approved by the commission.
374-F:3 Restructuring Policy Principles.
I. System Reliability. Reliable electricity service must be maintained while ensuring public health, safety, and quality of life.
II. Customer Choice. Allowing customers to choose among electricity suppliers will help ensure fully competitive and innovative markets. Customers should be able to choose among options such as levels of service reliability, real time pricing, and generation sources, including interconnected self generation. Customers should expect to be responsible for the consequences of their choices. The commission should ensure that customer confusion will be minimized and customers will be well informed about changes resulting from restructuring and increased customer choice.
III. Regulation and Unbundling of Services and Rates. When customer choice is introduced, services and rates should be unbundled to provide customers clear price information on the cost components of generation, transmission, distribution, and any other ancillary charges. Generation services should be subject to market competition and minimal economic regulation and at least functionally separated from transmission and distribution services which should remain regulated for the forseeable future. However, distribution service companies should not be absolutely precluded from owning small scale distributed generation resources as part of a strategy for minimizing transmission and distribution costs. Performance based or incentive regulation should be considered for transmission and distribution services. Upward revaluation of transmission and distribution assets is not a preferred mechanism as part of restructuring. Retail electricity suppliers who do not own transmission and distribution facilities, should, at a minimum, be registered with the commission.
IV. Open Access to Transmission and Distribution Facilities. Non-discriminatory open access to the electric system for wholesale and retail transactions should be promoted. Comparability should be assured for generators competing with affiliates of groups supplying transmission and distribution services. Companies providing transmission services should file at the FERC or with the commission, as appropriate, comparable service tariffs that provide open access for all competitors. The commission should monitor companies providing transmission or distribution services and take necessary measures to ensure that no supplier has an unfair advantage in offering and pricing such services.
V. Universal Service. Electric service is essential and should be available to all customers. A utility providing distribution services must have an obligation to connect all customers in its service territory to the distribution system. A restructured electric utility industry should provide adequate safeguards to assure universal service. Minimum residential customer service safeguards and protections should be maintained. Programs and mechanisms that enable residential customers with low incomes to manage and afford essential electricity requirements should be included as a part of industry restructuring.
VI. Benefits for All Consumers. Restructuring of the electric utility industry should be implemented in a manner that benefits all consumers equitably and does not benefit one customer class to the detriment of another. Costs should not be shifted unfairly among customers. A nonbypassable and competitively neutral system benefits charge applied to the use of the distribution system may be used to fund public benefits related to the provision of electricity. Such benefits, as approved by regulators, may include, but not necessarily be limited to, programs for low-income customers, energy efficiency programs, funding for the electric utility industry's share of commission expenses pursuant to RSA 363-A, support for research and development, and investments in commercialization strategies for new and beneficial technologies.
VII. Full and Fair Competition. Choice for retail customers cannot exist without a range of viable suppliers. The rules that govern market activity should apply to all buyers and sellers in a fair and consistent manner in order to ensure a fully competitive market.
VIII. Environmental Improvement. Continued environmental protection and long term environmental sustainability should be encouraged. Increased competition in the electric industry should be implemented in a manner that supports and furthers the goals of environmental improvement. Over time, there should be more equitable treatment of old and new generation sources with regard to air pollution controls and costs. New Hampshire should encourage equitable and appropriate environmental regulation, based on comparable criteria, for all electricity generators, in and out of state, to reduce air pollution transported across state lines and to promote full, free, and fair competition. As generation becomes deregulated, innovative market-driven approaches are preferred to regulatory controls to reduce adverse environmental impacts. Such market approaches may include valuing the costs of pollution and using pollution offset credits.
IX. Renewable Energy Resources. Increased future commitments to renewable energy resources should be consistent with the New Hampshire energy policy as set forth in RSA 378:37 and should be balanced against the impact on generation prices. Over the long term, increased use of cost-effective renewable energy technologies can have significant environmental, economic, and security benefits. To encourage emerging technologies, restructuring should allow customers the possibility of choosing to pay a premium for electricity from renewable resources and reasonable opportunities to directly invest in and interconnect decentralized renewable electricity generating resources.
X. Energy Efficiency. Restructuring should be designed to reduce market barriers to investments in energy efficiency and provide incentives for appropriate demand-side management and not reduce cost-effective customer conservation. Utility sponsored energy efficiency programs should target cost-effective opportunities that may otherwise be lost due to market barriers.
XI. Near Term Rate Relief. The goal of restructuring is to create competitive markets that are expected to produce lower prices for all customers than would have been paid under the current regulatory system. Given New Hampshire's higher than average regional prices for electricity, utilities, in the near term, should work to reduce rates for all customers. To the greatest extent practicable, rates should approach competitive regional electric rates. The state should recognize when state policies impose costs that conflict with this principle and should take efforts to mitigate those costs. The unique New Hampshire issues contributing to the highest prices in New England should be addressed during the transition, wherever possible.
XII. Recovery of Stranded Costs.
(a) It is the intent of the legislature to provide appropriate tools and reasonable guidance to the commission in order to assist it in addressing claims for stranded cost recovery and fulfilling its responsibility to determine rates which are equitable, appropriate, and balanced and in the public interest. In making its determinations, the commission shall balance the interests of ratepayers and utilities during and after the restructuring process. Nothing in this section is intended to provide any greater opportunity for stranded cost recovery than is available under applicable regulation or law on the effective date of this chapter.
(b) Utilities should be allowed to recover the net nonmitigatable stranded costs associated with required environmental mandates currently approved for cost recovery, and power acquisitions mandated by federal statutes or RSA 362-A.
(c) Utilities have had and continue to have an obligation to take all reasonable measures to mitigate stranded costs. Mitigation measures may include, but shall not be limited to:
(1) Reduction of expenses.
(2) Renegotiation of existing contracts.
(3) Refinancing of existing debt.
(4) A reasonable amount of retirement, sale, or write-off of uneconomic or surplus assets, including regulatory assets not directly related to the provision of electricity service.
(d) Stranded costs should be determined on a net basis, should be verifiable, should not include transmission and distribution assets, and should be reconciled to actual electricity market conditions from time to time. Any recovery of stranded costs should be through a nonbypassable, nondiscriminatory, appropriately structured charge that is fair to all customer classes, lawful, constitutional, limited in duration, consistent with the promotion of fully competitive markets and consistent with these principles. Entry and exit fees are not preferred recovery mechanisms. Charges to recover stranded costs should only apply to customers within a utility's retail service territory, except for such costs that have resulted from the provision of wholesale power to another utility. The charges should not apply to wheeling-through transactions.
XIII. Regionalism. New England Power Pool (NEPOOL) should be reformed and efforts to enhance competition and to complement industry restructuring on a regional basis should be encouraged. New Hampshire should work with other New England and northeastern states to accomplish the goals of restructuring. Working with other regional states, New Hampshire should assert maximum state authority over the entire electric industry restructuring process. While it is desirable to design and implement a restructured industry in concert with the other New England and northeastern states, New Hampshire should not unnecessarily delay its timetable. Any pool structure adopted for the restructured industry should not preclude bilateral contracts with pool and non-pool services and should not preclude ancillary pool services from being obtained from non-pool sources.
XIV. Administrative Processes. The commission should adapt its administrative processes to make regulation more efficient and to enable competitors to adapt to changes in the market in a timely manner. The market framework for competitive electric service should, to the extent possible, reduce reliance on administrative process. New Hampshire should move deliberately to replace traditional planning mechanisms with market driven choice as the means of supplying resource needs.
XV. Timetable. The commission should seek to implement full customer choice among electricity suppliers in the most expeditious manner possible. The pilot program established in 1995, 272 should be consistent with this pace and not delay implementation of statewide customer choice. The utilities should unbundle rates and services as soon as possible.
374-F:4 Implementation.
I. The commission is authorized to require the implementation of retail choice of electric suppliers for all customer classes of utilities providing retail electric service under its jurisdiction. The commission shall require such implementation no later than January 1, 1998, or at the earliest date determined to be in the public interest by the commission. However, in no event may the implementation be delayed beyond July 1, 1998, without prior legislative approval.
II. Upon the effective date of this chapter, the commission shall undertake a generic proceeding to develop a statewide industry restructuring plan in accordance with the above principles, and shall, after public hearings, issue a final order no later than February 28, 1997. In its order, the commission shall establish the interim stranded cost recovery charge for each electric utility as provided in paragraph VI.
III. The commission shall require all electric utilities subject to its jurisdiction to submit compliance filings, which shall include open access tariffs and such other information as the commission may require, no later than June 30, 1997. The commission shall investigate and shall approve utility compliance filings, subject to modification by the commission if necessary, after public hearing and subject to a finding that the filings are in the public interest and substantially consistent with the principles established in this chapter.
IV. Notwithstanding the provisions of paragraph I, no utility shall be required to implement its compliance filing resulting from the provisions of this chapter, until compliance filings representing at least 70 percent of retail electric sales (measured in kilowatt hours per year) have been or are being implemented.
V. The commission is authorized to allow utilities to collect a stranded cost recovery charge, subject to its determination in the context of a rate case proceeding that such charge is equitable, appropriate, and balanced, is in the public interest, and is substantially consistent with these interdependent principles. The burden of proof for any stranded cost recovery claim shall be borne by the utility making such claim.
VI.(a) In order to facilitate the rapid transition to full competition, the commission is authorized, in its generic restructuring order as provided in paragraph II, to set, without a formal rate case proceeding, an interim stranded cost recovery charge for each electric utility. Such interim stranded cost recovery charges shall be effective for 2 years from the implementation of utility compliance filings and shall be based on the commission's preliminary determination of an equitable, appropriate, and balanced measure of stranded cost recovery that takes into account the near term rate relief principle, is in the public interest, and is substantially consistent with these interdependent principles. The commission shall also consider the potential for future rate impacts due to possible differences between interim stranded cost recovery charges and charges that may finally be approved for stranded cost recovery.
(b) Any utility may seek adjustment of the interim stranded cost recovery charge at any time based on severe financial hardship, as determined by the commission. The setting of an interim stranded cost recovery charge shall establish no legal, factual, or policy precedent with respect to the final determination of stranded cost recovery by the commission in any subsequent administrative or judicial proceeding.
VII. The interim stranded cost recovery charge established for a utility as provided in paragraph VI may also be adjusted based upon the outcome of rate case proceedings to adjudicate claims for stranded cost recovery pursuant to paragraph V of this section. Any amounts approved by the commission for stranded cost recovery shall be net of amounts previously collected through interim stranded cost recovery charges.
VIII. The commission is authorized to order such charges and other service provisions and to take such other actions that are necessary to implement restructuring and that are substantially consistent with the principles established in this chapter. The commission is authorized to require that distribution and electricity supply services be provided by separate affiliates.
IX. An electricity supplier shall be eligible to compete, subject to necessary limitations established by the commission, for open access customers only if affiliated utilities file comparable open access transmission and distribution rates with the FERC or the commission, or both as appropriate, for all of their transmission facilities in New Hampshire and to the extent practicable, all of their distribution facilities in New Hampshire.
X. Nothing in this chapter shall be construed to prohibit the commission from otherwise exercising its lawful authority under title 34, in proceedings which relate to the introduction of competition in the retail electric utility industry including the retention of experts and consultants to assist the commission in its investigations and the assessment of such costs against utilities and any other parties to the proceedings, consistent with RSA 365:37 and RSA 365:38.
XI. Any administrative or adjudicative proceeding or public hearing relating to this chapter shall be subject to the provisions of RSA 541-A.
374-F:5 Oversight Committee; Establishment; Report; Meetings.
I. There is established a legislative oversight committee on electric utility restructuring consisting of 14 members as follows:
(a) Seven members of the house, at least 5 of whom shall be members of the science, technology and energy committee, or its successor, and at least 2 of whom shall be members of a minority party, appointed by the speaker of the house.
(b) Seven members of the senate, at least 2 of whom shall be members of the executive departments and administration committee, or its successor, and at least one of whom shall be a member of the minority party, appointed by the president of the senate.
II.(a) Committee members shall be appointed to an initial term expiring on December 4, 1996. Subsequent terms shall be for up to 2 years expiring on the first Wednesday of even-numbered years. Members may succeed themselves.
(b) A chairperson shall be selected by a majority of the committee members.
III. The committee shall provide an annual report on or before November 1 to the governor, the speaker of the house, the senate president, the state library, and the public utilities commission on the status of electric utility restructuring.
IV. The committee shall meet quarterly or as often as is necessary to conduct its business.
V. Members shall receive mileage when attending to the duties of the committee.
374-F:6 Duties. The committee shall be responsible for the following:
I. Following up the work of the retail wheeling and restructuring study committee established in 1995, 272.
II. Working with the commission to assess the results of the pilot program allowing for the competitive retail purchase of electricity established in 1995, 272.
III. Working with the commission to develop any new legislation necessary to promote electric utility restructuring and retail choice of electricity suppliers and to propose changes to or recodification of existing statutes to be more consistent with the restructuring principles established in this chapter.
IV. Working with the commission and other agencies, where necessary, to implement this chapter and its restructuring principles.
129:3 Adjudication. If any party challenges any provision of RSA 374-F as inserted by section 2 of this act or any application thereof in court, then the general court urges the court of jurisdiction to give priority to and expeditiously adjudicate any such challenge.
129:4 Severability. If any provision of this act or the application thereof to any person or circumstances is held invalid, the invalidity does not affect other provisions or applications of the act which can be given effect without the invalid provisions or applications, and to this end the provisions of this act are severable.
129:5 Effective Date. This act shall take effect upon its passage.

Approved: May 21, 1996
Effective: May 21, 1996