HOUSE BILL NO. 647
INTRODUCED BY K. GILLAN, DELL, G. FORRESTER, GALLUS, MANGAN, SCHMIDT
A BILL FOR AN ACT ENTITLED: "AN ACT GENERALLY REVISING THE LAWS RELATING TO ELECTRICAL
ENERGY; EXTENDING THE TRANSITION PERIOD FOR UTILITIES TO PHASE IN CUSTOMER CHOICE OF
ELECTRICITY SUPPLIER; DEFINING "AFFILIATE SUPPLIER" FOR PURPOSES OF ELECTRICITY SUPPLY
DURING THE EXTENDED TRANSITION PERIOD; ALLOWING A WINDOW OF OPPORTUNITY FOR A LARGE
CUSTOMER TO RECEIVE ELECTRICITY FROM THE DEFAULT SUPPLIER; PROVIDING RESTRICTIONS ON
THE REMARKETING OF ELECTRICITY PURCHASED FROM THE DEFAULT SUPPLIER; CREATING AN
EXCESS PROFITS TAX ON ELECTRICAL ENERGY GENERATION IN MONTANA; AUTHORIZING THE PUBLIC
SERVICE COMMISSION TO USE THE PROCEEDS OF THE EXCESS PROFITS TAX TO CONTRACT FOR THE
PURCHASE OF ELECTRICITY FOR SALE TO MONTANA CUSTOMERS ON BEHALF OF THE DEFAULT
SUPPLIER; DIRECTING THE PUBLIC SERVICE COMMISSION TO ESTABLISH RATES FOR THE DEFAULT
SUPPLIER FOR ELECTRICITY PURCHASED BY THE COMMISSION; AMENDING SECTIONS 15-72-104,
69-8-103, 69-8-201, 69-8-403, AND 69-8-404, MCA; AND PROVIDING AN IMMEDIATE EFFECTIVE DATE."
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
Section 1. Section 15-72-104, MCA, is amended to read:
"15-72-104. Wholesale energy transaction tax -- rate of tax -- exemptions -- cost recovery. (1) (a) Except as provided in subsection (3), a wholesale energy transaction tax is imposed upon electricity transmitted within the state as provided in this section. The tax is imposed at a rate of 0.015 cent per kilowatt hour of electricity transmitted by a transmission services provider in the state.
(b) For electricity produced in the state for delivery outside of the state, the taxpayer is the person owning or operating the electrical generation facility producing the electricity. The transmission services provider shall collect the tax from the person based upon the kilowatt hours introduced onto transmission lines from the electrical generation facility. The amount of kilowatt hours subject to tax must be reduced by 5% to compensate for transmission line losses.
(c) For electricity produced in the state for delivery within the state, the taxpayer is the distribution services provider. The transmission services provider shall collect the tax based upon the amount of kilowatt hours of electricity delivered to the distribution services provider. The taxpayer may apply for a refund for overpayment of taxes pursuant to 15-72-116.
(d) For electricity produced outside the state for delivery inside the state, the taxpayer is the distribution services provider. The transmission services provider shall collect the tax based upon the amount of kilowatt hours of electricity delivered to the distribution services provider.
(e) For electricity delivered to a distribution services provider that is a rural electric cooperative for delivery to purchasers that have opted for customer choice under the provisions of Title 69, chapter 8, part 3, the taxpayer is the distribution services provider. The transmission services provider shall collect the tax based on the amount of kilowatt hours of electricity delivered to the distribution services provider that is attributable to customers that have opted for customer choice.
(f) For electricity delivered to a distribution services provider that prior to May 2, 1999, was owned by a public utility as defined in 69-3-101, the tax is imposed on the successor distribution services provider. The transmission services provider shall collect the tax based upon the amount of kilowatt hours of electricity delivered to the distribution services provider.
(2) (a) If more than one transmission services provider transmits electricity, the last transmission services provider transmitting or delivering the electricity shall collect the tax.
(b) If the transmission services provider is an agency of the United States government, the distribution services provider receiving the electricity shall self-assess the tax subject to the provisions of this part.
(c) If an electrical generation facility located within the state produces electricity for sale inside and outside the state, sales within the state are considered to have come from electricity produced within the state for purposes of the tax imposed by this section.
(3) (a) Electricity transmitted through the state that is not produced or delivered in the state is exempt from the tax imposed by this section.
(b) Electricity produced in the state by an agency of the of the United States government for delivery outside of the state is exempt from the tax imposed by this section.
(c) Electricity delivered to a distribution services provider that is a municipal utility described in 69-8-103(5)(b)
69-8-103(6)(b) or a rural electric cooperative organized under the provisions of Title 35, chapter 18, is exempt from the tax
imposed by this section.
(d) Electricity delivered to a purchaser that receives its power directly from a transmission or distribution facility owned by an entity of the United States government on or before May 2, 1997, or electricity that is transmitted exclusively on transmission or distribution facilities owned by an entity of the United States government on or before May 2, 1997, is exempt from the tax imposed by this section.
[(e) Electricity delivered by a distribution services provider to a customer with loads of 1,000 kilowatts or greater that was first served by a public utility after December 31, 1996, is exempt from the tax imposed by this section, provided that the customer purchases the electricity pursuant to a contract or contracts that establish the purchase price or prices of electricity. The exemption allowed by this subsection (3)(e) does not apply to electricity purchased under a renewal or extension of an existing contract or existing contracts.]
(4) A distribution services provider is allowed to recover the tax imposed by this section and the administrative costs to comply with this part in its rates. (Bracketed language terminates January 1, 2003--sec. 40, Ch. 556, L. 1999.)"
Section 2. Section 69-8-103, MCA, is amended to read:
"69-8-103. Definitions. As used in this chapter, unless the context requires otherwise, the following definitions apply:
(1) "Affiliate supplier" means the portion of a utility or that portion of the utility's successor in interest providing electrical energy to the distribution services provider or the distribution services provider's successor in interest during the transition period.
(1)(2) "Aggregator" or "market aggregator" means an entity, licensed by the commission, that aggregates retail
customers, purchases electric electrical energy, and takes title to electric electrical energy as an intermediary for sale to
retail customers.
(2)(3) "Assignee" means any entity, including a corporation, partnership, board, trust, or financing vehicle, to which a
utility assigns, sells, or transfers, other than as security, all or a portion of the utility's interest in or right to transition
property. The term also includes an entity, corporation, public authority, partnership, trust, or financing vehicle to which an
assignee assigns, sells, or transfers, other than as security, the assignee's interest in or right to transition property.
(3)(4) "Board" means the board of investments created by 2-15-1808.
(4)(5) "Broker" or "marketer" means an entity, licensed by the commission, that acts as an agent or intermediary in the
sale and purchase of electric electrical energy but that does not take title to electric electrical energy.
(5)(6) "Cooperative utility" means:
(a) a utility qualifying as an electric cooperative pursuant to Title 35, chapter 18; or
(b) an existing municipal electric utility as of May 2, 1997.
(6)(7) "Customer" or "consumer" means a retail electric customer or consumer. The university of Montana, pursuant to
20-25-201(1), and Montana state university, pursuant to 20-25-201(2), are each considered a single retail electric customer
or consumer with a single individual load.
(7)(8) "Customer-generator" means a user of a net metering system.
(8)(9) "Default supplier" means a distribution services provider or a person that has received a default supplier license
from the commission.
(9)(10) "Distribution facilities" means those facilities by and through which electricity is received from a transmission
services provider and distributed to the customer and that are controlled or operated by a distribution services provider.
(10)(11) "Distribution services provider" means a utility owning distribution facilities for distribution of electricity to
the public.
(11)(12) "Electricity supplier" means any person, including aggregators, market aggregators, brokers, and marketers,
offering to sell electricity to retail customers in the state of Montana.
(12)(13) "Financing order" means an order of the commission adopted in accordance with 69-8-503 that authorizes the
imposition and collection of fixed transition amounts and the issuance of transition bonds.
(13)(14) (a) "Fixed transition amounts" means those nonbypassable rates or charges, including but not limited to:
(i) distribution;
(ii) connection;
(iii) disconnection; and
(iv) termination rates and charges that are authorized by the commission in a financing order to permit recovery of transition costs and the costs of recovering, reimbursing, financing, or refinancing the transition costs and of acquiring transition property through a plan approved by the commission in the financing order, including the costs of issuing, servicing, and retiring transition bonds.
(b) If requested by the utility in the utility's application for a financing order, fixed transition amounts must include nonbypassable rates or charges to recover federal and state taxes in which the transition cost recovery period is modified by the transactions approved in the financing order.
(14)(15) "Functionally separate" means a utility's separation of the utility's electricity supply, transmission, distribution,
and unregulated retail energy services assets and operations.
(15)(16) "Interested person" means a retail electricity customer, the consumer counsel established in 5-15-201, the
commission, or a utility.
(16)(17) "Large customer" means, for universal system benefits programs purposes, a customer with an individual load
greater than a monthly average of 1,000 kilowatt demand in the previous calendar year for that individual load.
(17)(18) "Local governing body" means a local board of trustees of a rural electric cooperative.
(18)(19) "Low-income customer" means those energy consumer households and families with incomes at or below
industry-recognized levels that qualify those consumers for low-income energy-related assistance.
(19)(20) "Net metering" means measuring the difference between the electricity distributed to and the electricity
generated by a customer-generator that is fed back to the distribution system during the applicable billing period.
(20)(21) "Net metering system" means a facility for the production of electric electrical energy that:
(a) uses as its fuel solar, wind, or hydropower;
(b) has a generating capacity of not more than 50 kilowatts;
(c) is located on the customer-generator's premises;
(d) operates in parallel with the distribution services provider's distribution facilities; and
(e) is intended primarily to offset part or all of the customer-generator's requirements for electricity.
(21)(22) "Nonbypassable rates or charges" means rates or charges that are approved by the commission and imposed on
a customer to pay the customer's share of transition costs or universal system benefits programs costs even if the customer
has physically bypassed either the utility's transmission or distribution facilities.
(22)(23) "Pilot program" means a program using a representative sample of residential and small commercial customers
to assist in developing and offering customer choice of electricity supply for all residential and commercial customers.
(23)(24) "Public utility" means any electric utility regulated by the commission pursuant to Title 69, chapter 3, on May
2, 1997, including the public utility's successors or assignees.
(24)(25) "Qualifying load" means, for payments and credits associated with universal system benefits programs, all
nonresidential demand-metered accounts of a large customer within the utility's service territory in which the customer
qualifies as a large customer.
(25)(26) "Small customer" means a residential customer or a small commercial customer who has an individual account
with an average monthly demand in the previous calendar year of less than 100 kilowatts or a new commercial customer
with an estimated average monthly demand of less than 100 kilowatts of a public utility distribution services provider that
has opened access on its distribution system pursuant to Title 35, chapter 19, or this chapter.
(26)(27) "Transition bondholder" means a holder of transition bonds, including trustees, collateral agents, and other
entities acting for the benefit of that holder.
(27)(28) "Transition bonds" means any bond, debenture, note, interim certificate, collateral, trust certificate, or other
evidence of indebtedness or ownership issued by the board or other transition bonds issuer that is secured by or payable
from fixed transition amounts or transition property. Proceeds from transition bonds must be used to recover, reimburse,
finance, or refinance transition costs and to acquire transition property.
(28)(29) "Transition charge" means a nonbypassable rate or charge to be imposed on a customer to pay the customer's
share of transition costs.
(29)(30) "Transition cost recovery period" means the period beginning on July 1, 1998, and ending when a utility
customer does not have any liability for payment of transition costs.
(30)(31) "Transition costs" means:
(a) a public utility's net verifiable generation-related and electricity supply costs, including costs of capital, that become unrecoverable as a result of the implementation of this chapter or of federal law requiring retail open access or customer choice;
(b) those costs that include but are not limited to:
(i) regulatory assets and deferred charges that exist because of current regulatory practices and can be accounted for up to the effective date of the commission's final order regarding a public utility's transition plan and conservation investments made prior to universal system benefits charge implementation;
(ii) nonutility and utility power purchase contracts, including qualifying facility contracts;
(iii) existing generation investments and supply commitments or other obligations incurred before May 2, 1997, and costs arising from these investments and commitments;
(iv) the costs associated with renegotiation or buyout of the existing nonutility and utility power purchase contracts, including qualifying facilities and all costs, expenses, and reasonable fees related to issuing transition bonds; and
(v) the costs of refinancing and retiring of debt or equity capital of the public utility and associated federal and state tax liabilities or other utility costs for which the use of transition bonds would benefit customers.
(31)(32) "Transition period" means the period beginning on July 1, 1998, and ending on July 1, 2002 2005, unless
otherwise extended pursuant to this chapter, during which utilities may phase in customer choice of electricity supplier.
(32)(33) "Transition property" means the property right created by a financing order, including without limitation the
right, title, and interest of a utility, assignee, or other issuer of transition bonds to all revenue, collections, claims, payments,
money, or proceeds of or arising from or constituting fixed transition amounts that are the subject of a financing order,
including those nonbypassable rates and other charges and fixed transition amounts that are authorized by the commission
in the financing order to recover transition costs and the costs of recovering, reimbursing, financing, or refinancing the
transition costs and acquiring transition property, including the costs of issuing, servicing, and retiring transition bonds.
Any right that a utility has in the transition property before the utility's sale or transfer or any other right created under this
section or created in the financing order and assignable under this chapter or assignable pursuant to a financing order is
only a contract right.
(33)(34) "Transmission facilities" means those facilities that are used to provide transmission services as determined by
the federal energy regulatory commission and the commission.
(35) "Transmission services provider" means a person controlling or operating transmission facilities.
(35)(36) "Universal system benefits charge" means a nonbypassable rate or charge to be imposed on a customer to pay
the customer's share of universal system benefits programs costs.
(36)(37) "Universal system benefits programs" means public purpose programs for:
(a) cost-effective local energy conservation;
(b) low-income customer weatherization;
(c) renewable resource projects and applications, including those that capture unique social and energy system benefits or that provide transmission and distribution system benefits;
(d) research and development programs related to energy conservation and renewables;
(e) market transformation designed to encourage competitive markets for public purpose programs; and
(f) low-income energy assistance.
(37)(38) "Utility" means any public utility or cooperative utility."
Section 3. Section 69-8-201, MCA, is amended to read:
"69-8-201. Public utility -- transition to customer choice -- waiver. (1) A public utility shall, except as provided in this section, adhere to the following deadlines:
(a) On Subject to subsection (6), on or before July 1, 1998, all customers with individual loads greater than 1,000
kilowatts and for loads of the same customer with individual loads at a meter greater than 300 kilowatts that aggregate to
1,000 kilowatts or greater must have the opportunity to choose an electricity supplier.
(b) Subject to subsection (2), and as soon as is administratively feasible but before July 1, 2002, all other public utility customers must have the opportunity to choose an electricity supplier.
(2) (a) Except as provided for in subsection (4), the commission may determine that additional time is necessary for customers identified in subsection (1)(b); however, the implementation of full customer choice may not be delayed beyond July 1, 2004.
(b) A determination by the commission that additional time is necessary for subsection (1)(b) customers must be made at least 60 days in advance of the scheduled date and must be based on one or more of the following considerations:
(i) implementation would not be administratively feasible;
(ii) implementation would materially affect the reliability of the electric system; or
(iii) Montana customers or electricity suppliers would be disadvantaged due to lack of a competitive electricity supply market.
(3) The commission shall designate the public utility or one or more default suppliers to provide regulated default
service for those small customers of a public utility that are not being served by a competitive electricity supplier and those
customers who elect to receive service from the default supplier. The transition advisory committee shall review and
address the need for continued default supply service and make recommendation to the 57th legislature. A customer who
elects to receive service from the default supplier may only use the electricity for consumptive purposes and shall enter into
a contract with the default supplier that prohibits the customer from remarketing the electricity.
(4) Except as provided in 69-5-101, 69-5-102, 69-5-104 through 69-5-112, and 69-8-402, a public utility currently doing business in Montana as part of a single integrated multistate operation, no portion of which lies within the basin of the Columbia River, may:
(a) defer compliance with this chapter until a time that the public utility can reasonably implement customer choice in the state of the public utility's primary service territory, except that the public utility shall file a transition plan pursuant to 69-8-202 to provide transition to customer choice on or before July 1, 2002, and must have completed the transition period to customer choice by July 1, 2006; and
(b) petition the commission to delay the public utility's transition plan filing until July 1, 2004.
(5) Upon a request from a public utility with fewer than 50 customers, the commission shall waive compliance with the requirements of 69-8-104, 69-8-202 through 69-8-204, 69-8-208 through 69-8-211, 69-8-402, and this section.
(6) A customer who chose an electricity supplier prior to July 1, 2001, may make an election prior to October 1, 2001, to receive the customer's electricity from the default supplier. A customer who chose an electricity supplier prior to July 1, 2001, and who chooses to receive the customer's electricity from the default supplier pursuant to this subsection is bound by the election and may not again elect to choose an electricity supplier other than the default supplier."
Section 4. Section 69-8-403, MCA, is amended to read:
"69-8-403. Commission authority -- rulemaking authority. (1) Beginning on the effective date of a commission order regarding a public utility's transition plan, the commission shall regulate the public utility's retail transmission and distribution services within the state of Montana, as provided in this chapter, and may not regulate the price of electricity supply except as electricity supply may be procured as provided in this section:
(a) by one or more default suppliers for those customers not being served by a competitive supplier; or
(b) by the distribution function of a public utility for those customers that are not being served by a competitive
electricity supplier as provided by commission rules. During the transition period, those procurements may include a
cost-based contract from a supply affiliate an affiliate supplier or an unregulated division.
(2) The commission shall regulate the price of electricity purchased for the default supplier pursuant to [section 7].
(2)(3)(2) The commission shall decide if there is workable competition in the electricity supply market by determining
whether competition is sufficient to inhibit monopoly pricing or anticompetitive price leadership. In reaching a decision,
the commission may not rely solely on market share estimates.
(3)(4)(3) The commission shall license electricity suppliers and enforce licensing provisions pursuant to 69-8-404.
(4)(5)(4) The commission shall promulgate rules that identify the licensees and ensure that the offered electricity supply
is provided as offered and is adequate in terms of quality, safety, and reliability.
(5)(6)(5) The commission shall establish just and reasonable rates through established ratemaking principles for public
utility distribution and transmission services and shall regulate these services. The commission may approve rates and
charges for electricity distribution and transmission services based on alternative forms of ratemaking such as
performance-based ratemaking, on a demonstration by the public utility that the alternative method complies with this
chapter, and on the public utility's transition plan.
(6)(7)(6) The commission shall certify that a cooperative utility has adopted a transition plan that complies with this
chapter. A cooperative utility's transition plan is considered certified 60 days after the cooperative utility files for
certification.
(7)(8)(7) The commission shall promulgate rules that protect consumers, distribution services providers, and electricity
suppliers from anticompetitive and abusive practices.
(8)(9)(8) The commission shall license default suppliers and enforce default licensing provisions pursuant to 69-8-416.
(9)(10)(9) The commission shall promulgate rules for the licensing of default suppliers on or before December 1, 1999.
(10)(11)(10) Until the commission has determined that workable competition has developed for small customers, a
default supplier's obligation to serve remains.
(11)(12)(11) In addition to promulgating rules expressly provided for in this chapter, the commission may promulgate
any other rules necessary to carry out the provision of this chapter.
(12)(13)(12) This chapter does not give the commission the authority to:
(a) regulate cooperative utilities in any manner other than reviewing certification filings for compliance with this chapter; or
(b) compel any change to a cooperative utility's certification filing made pursuant to this chapter."
Section 5. Section 69-8-404, MCA, is amended to read:
"69-8-404. Licensing. (1) Except as provided in 69-8-311, an electricity supplier shall file an application with and obtain a license from the commission before offering electricity for sale to retail customers in the state of Montana.
(2) As a condition of licensing, an electricity supplier shall identify and describe its activities and purposes and the
purposes of each of the electricity supplier's affiliates, if any, including whether an affiliate that owns or operates
distribution facilities offers customer choice through open, fair, and nondiscriminatory access to the electricity supplier's or
the electricity affiliate supplier's affiliates distribution facilities.
(3) The commission may require electricity suppliers that provide electricity supply service to small customers to make a standard service offer that ensures that those customers have access to affordable electricity.
(4) The commission may require:
(a) proof of financial integrity and a demonstration of adequate reserve margins or the ability to obtain those reserves; and
(b) a licensee to post a bond should an electricity supplier fail to supply electricity or lack financial integrity.
(5) An electricity supplier shall provide the commission and all distribution services providers with copies of all license applications pursuant to subsection (2). Licensees shall update information and file annual reports with the commission and all distribution services providers.
(6) License applications are effective 30 days after filing with the commission unless the commission rejects the application during that period. If the commission rejects a license application, the commission shall specify the reasons in writing and, if practical, identify alternative ways to overcome deficiencies.
(7) Notwithstanding this chapter, a cooperative utility is not required to apply for a license from the commission to be an electricity supplier to customers served by that cooperative utility in its electric facilities service territory or to any customers served by another cooperative utility subject to the consent of the other cooperative utility's local governing body."
NEW SECTION. Section 6. Excess profits tax. (1) There is a tax imposed on the excess profits derived from the sale
of electrical energy generated in Montana. The tax rate is equal to:
(a) 90% of the excess profits for income from sales of 5 cents or more in excess of the base year price;
(b) 85% of the excess profits for income from sales of at least 3 cents but less than 5 cents in excess of the base year
price; and
(c) 75% of the excess profits for income from sales less that 3 cents in excess of the base year price.
(2) In order to calculate excess profits, each entity selling electrical energy generated in Montana shall report to the
department the total income from sales of electrical energy generated in Montana and the sales price for sales of electrical
energy generated in Montana. The department shall subtract from the total income for each sales price the total kilowatt
hours generated times the base year price. The sum determined is the tax base for the excess profits tax. The tax base times
the tax rate is the amount of excess profits tax due to the state.
(3) The base year price is calculated as the sales price in effect on July 1, 2001, for electrical energy to the default
supplier to provide electrical energy to small customers. The department shall adjust the base year price to account for
inflation by multiplying the base year price by the inflation factor for the prior year. For purposes of this subsection,
"inflation factor" has the meaning provided in 15-30-101.
(4) The proceeds of the excess profits tax must be deposited in the excess profits tax account provided for in [section
7].
(5) The department may request assistance from the public service commission in analyzing data necessary to calculate
the excess profits tax.
NEW SECTION. Section 7. Excess profits tax account -- use. (1) There is an excess profits tax account in the state
special revenue fund. The proceeds of the tax collected pursuant to [section 6] must be deposited in the account.
(2) The provision of electrical energy to Montana customers at affordable rates is a public purpose. The money in the
account may be used by the public service commission to contract for electrical energy for distribution to Montana
customers on behalf of the default supplier provided for in 69-8-416 and to fund energy conservation programs, renewable
energy programs, and the low-income energy assistance program provided for in 69-8-412.
NEW SECTION. Section 8. Codification instructions. (1) [Section 6] is intended to be codified as an integral part of
Title 15, chapter 31, and the provisions of Title 15, chapter 31, apply to [section 6].
(2) [Section 7] is intended to be codified as an integral part of Title 69, chapter 8, and the provisions of Title 69,
chapter 8, apply to [section 7].
NEW SECTION. Section 6. Effective date. [This act] is effective on passage and approval.
- END -
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