SENATE BILL NO. 19
INTRODUCED BY M. HALLIGAN
AN ACT REVISING THE LAWS GOVERNING CUSTOMER CHOICE IN ELECTRIC ENERGY SUPPLY; EXTENDING THE TRANSITION PERIOD; EXTENDING THE DATES REQUIRING RESIDENTIAL AND SMALL COMMERCIAL CUSTOMER PARTICIPATION IN THE SELECTION OF AN ELECTRICITY SUPPLIER; EXTENDING PILOT PROGRAM REPORT DATE REQUIREMENTS; EXTENDING TRANSITION PLAN DATE REQUIREMENTS; EXTENDING THE TERMINATION DATE OF THE TRANSITION ADVISORY COMMITTEE; AMENDING SECTIONS 69-8-103, 69-8-104, 69-8-201, 69-8-211, 69-8-301, AND 69-8-501, MCA; AND PROVIDING AN IMMEDIATE EFFECTIVE DATE.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
Section 1. 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) "Aggregator" or "market aggregator" means an entity, licensed by the commission, that aggregates retail customers, purchases electric energy, and takes title to electric energy as an intermediary for sale to retail customers.
(2) "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) "Board" means the board of investments created by 2-15-1808.
(4) "Broker" or "marketer" means an entity, licensed by the commission, that acts as an agent or intermediary in the sale and purchase of electric energy but that does not take title to electric energy.
(5) "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) "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) "Customer-generator" means a user of a net metering system.
(8) "Default supplier" means a distribution services provider or a person that has received a default supplier license from the commission.
(9) "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) "Distribution services provider" means a utility owning distribution facilities for distribution of electricity to the public.
(11) "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) "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) (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) "Functionally separate" means a utility's separation of the utility's electricity supply, transmission, distribution, and unregulated retail energy services assets and operations.
(15) "Interested person" means a retail electricity customer, the consumer counsel established in 5-15-201, the commission, or a utility.
(16) "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) "Local governing body" means a local board of trustees of a rural electric cooperative.
(18) "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) "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) "Net metering system" means a facility for the production of electric 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) "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) "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) "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) "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) "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) "Transition bondholder" means a holder of transition bonds, including trustees, collateral agents, and other entities acting for the benefit of that holder.
(27) "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) "Transition charge" means a nonbypassable rate or charge to be imposed on a customer to pay the customer's share of transition costs.
(29) "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) "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) "Transition period" means the period beginning on July 1, 1998, and ending on July 1, 2002, unless otherwise
extended pursuant to this chapter, during which utilities may phase in customer choice of electricity supplier 2007.
(32) "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) "Transmission facilities" means those facilities that are used to provide transmission services as determined by the federal energy regulatory commission and the commission.
(35)(34) "Transmission services provider" means a person controlling or operating transmission facilities.
(35) "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) "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) "Utility" means any public utility or cooperative utility."
Section 2. Section 69-8-104, MCA, is amended to read:
"69-8-104. Pilot programs. (1) Except as provided in 69-8-201(4) 69-8-201(3) and 69-8-311, beginning July 1, 1998,
utilities shall conduct pilot programs using a representative sample of their residential and small commercial customers. A
report describing and analyzing the results of the pilot programs must be submitted to the commission and the transition
advisory committee established in 69-8-501 on or before July 1, 2000 2005.
(2) Utilities shall use pilot programs to gather necessary information to determine the most effective and timely options for providing customer choice. Necessary information includes but is not limited to:
(a) the level of demand for electricity supply choice and the availability of market prices for smaller small customers;
(b) the best means to encourage and support the development of sufficient markets and bargaining power for the benefit
of smaller small customers;
(c) the electricity suppliers' interest in serving smaller small customers and the opportunities in providing service to
smaller small customers; and
(d) experience in the broad range of technical and administrative support matters involved in designing and delivering
unbundled retail services to smaller small customers."
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 or before July 1, 1998, all 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 Before July 1, 2002 2007, 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)(2) 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. The
transition advisory committee shall review and address the need for continued default supply service and make
recommendation to the 57th legislature.
(4)(3) 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)(4) 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."
Section 4. Section 69-8-211, MCA, is amended to read:
"69-8-211. Public utilities -- transition costs and charges -- rate moratorium. (1) Subject to the provisions of this section, the commission shall allow recovery of the following categories of transition costs:
(a) the unmitigable costs of qualifying facility contracts, including reasonable buyout or buydown costs, for which the contract price of generation is above the market price for generation;
(b) the unmitigable costs of energy supply-related regulatory assets and deferred charges that exist because of current regulatory practices and that can be accounted for up to the effective date of the commission's final order regarding a public utility's transition plan, including costs, expenses, and reasonable fees related to issuing of transition bonds;
(c) the unmitigable transition costs related to public utility-owned generation and other power purchase contracts, except that recovery of those costs is limited to the amount accruing during the first 4 years after the commission enters an order pursuant to 69-8-202(3); and
(d) other transition costs as may qualify for recovery under this section.
(2) Transition costs as determined by the commission upon an affirmative showing by a public utility must meet the following requirements:
(a) Transition costs must reflect all reasonable mitigation by the public utility, including but not limited to good faith efforts to renegotiate contracts, buying out or buying down contracts, and refinancing through transition bonds.
(b) The value of all generation-related assets and liabilities and electricity supply costs must be reasonably demonstrable and must be considered on a net basis, and methods for determining value must include but are not limited to:
(i) estimating future market values of electricity and ancillary services provided by the assets;
(ii) appraisal by independent third-party professionals; or
(iii) a competitive bid sale.
(c) Investments and power purchase contracts must have been previously allowed in rates or, if not previously in rates, must be determined to be used and useful to ratepayers in connection with the commission's approval of the utility's transition plan.
(d) Unless otherwise provided for in this chapter, only costs related to existing investments and power purchase contracts identified in subsection (2)(c) and costs arising from those investments and power purchase contracts may be included as transition costs.
(3) (a) On commission approval of the amount of a public utility's transition costs, those costs must be recovered through the imposition of a transition charge.
(b) A transition charge may not be collected from customers for:
(i) new or additional loads of 1,000 kilowatts or greater that were first served by the public utility after December 31, 1996; or
(ii) loads served by that customer's own generation.
(c) Subject to commission approval, a public utility and a customer may agree to alter the customer's transition charge payment schedule. Public utilities may file with the commission tariffs for electric service rates that foster economic development or retention of existing customers within the state, including generally available rate schedules. Transition charges are the only charges that may be imposed upon a customer class to recover transition costs under this section. A separate exit fee may not be charged.
(4) Transition charges must be imposed within a transition cost recovery period approved by the commission on a case-by-case basis. Except for transition costs recovered under subsection (1)(c), categories of transition costs may have varying transition cost recovery periods.
(5) Approval of transition costs and collection of those transition costs through transition charges is a settlement of all transition costs claims by a public utility. A public utility seeking to recover transition costs through any means not authorized by this chapter may not collect transition charges with respect to these transition costs.
(6) Except as provided in subsection (7), public utilities shall implement a rate moratorium during the transition period
as follows:
(a) From July 1, 1998, through June 30, 2000, public utilities may not charge rates higher than those rates in effect on
July 1, 1998.
(b) From from July 1, 2000, through June 30, 2002, and only for those customers subject to the provisions of
69-8-201(1)(b), public utilities may not increase that increment of rates normally allocated to electric supply-related costs
above the increment associated with electric supply-related costs reflected in rates in effect on July 1, 1998. Beginning on
July 1, 2000, public Public utilities may propose increases to those increments of rates normally allocated to transmission
and distribution costs.
(7) Excepted from the provisions of subsection (6) are:
(a) increased costs related to universal system benefits programs greater than those currently in rates, including the treatment of universal system benefits program costs as an expense;
(b) increased costs necessary to implement full customer choice, including but not limited to metering, billing, and technology. Those costs must be recovered from the customers on whose behalf the increased costs are incurred.
(c) subject to commission approval, an extraordinary event resulting in either:
(i) a 4% annual revenue requirement increase from July 1, 1998, through June 30, 2000; or
(ii) an 8% power supply-related annual revenue requirement increase from July 1, 2000, through June 30, 2002;
(d) the increase or decrease in the annual state and local property tax expense that has occurred since May 2, 1997.
(8) Notwithstanding subsections (6) and (7), during the transition period, public utilities may not charge rates or collect costs that include costs reallocated to transition costs at a level higher than the public utility would reasonably expect to recover in rates had the current regulatory system remained intact.
(9) Public utilities shall apply savings resulting under 69-8-503 toward the rate moratorium pursuant to subsection (6).
(10) During the 4-year transition period Before July 1, 2002, public utilities may accelerate the amortization of
accumulated deferred investment tax credits associated with transmission, distribution, and the general plant as an
adjustment to earnings if electric earnings fall below 9.5% earned return on average equity. The public utility may include
the flow through of investment tax credits so that the public utility's earned return on equity is maintained at 9.5%.
Accumulated deferred investment tax credits amortized under this subsection may not be reflected in operating income for
ratemaking purposes.
(11) The commission shall issue the accounting orders necessary to align rate moratorium timing and requirements to actual transition bonds savings."
Section 5. Section 69-8-301, MCA, is amended to read:
"69-8-301. Cooperative utility -- transition plan for customer choice. (1) Except as provided in 69-8-311, on or
before July 1, 2001 2006, the local governing body of a cooperative utility shall adopt a transition plan.
(2) (a) Except as provided in subsection (2)(b), transition plans must contain a transition period that may not end later
than July 1, 2002 2007. At the conclusion of the transition period, all customers must have the opportunity to choose an
electricity supplier.
(b) If after a pilot program for customers of a cooperative utility with loads less than 1,000 kilowatts, a competitive
market, technology, or other conditions precedent to full customer choice have not developed, then the transition plan may
be altered by the cooperative utility's governing body for those customers.
(3) This chapter does not require the cooperative utility to divest itself of any generation, transmission, or distribution assets or prohibit a cooperative utility from divesting itself voluntarily of those assets.
(4) A cooperative utility's local governing body shall certify to the commission that the local governing body has adopted a transition plan. In the cooperative utility's certification filing, the cooperative utility shall provide to the commission documentation that the cooperative utility's transition plan is consistent with this chapter."
Section 6. Section 69-8-501, MCA, is amended to read:
"69-8-501. Transition advisory committee. (1) A transition advisory committee on electric utility industry restructuring is created. The transition advisory committee is composed of twelve voting members who are appointed as follows:
(a) The speaker of the house shall appoint six members from the house of representatives, not more than three of whom may be from one political party.
(b) The president of the senate shall appoint six members from the senate, not more than three of whom may be from one political party.
(2) The following entities shall appoint nonvoting advisory representatives to the transition advisory committee:
(a) The director of the department of environmental quality shall appoint one department representative.
(b) The legislative consumer committee shall appoint one representative.
(c) One representative of the cooperative utility industry is appointed as designated by the Montana electrical cooperative association.
(d) The public utilities in the state of Montana shall appoint one member.
(e) The commission shall appoint one member.
(f) The governor shall appoint the following nonvoting committee members:
(i) one representative from the industrial community with an interest in the restructuring of the electric utility industry;
(ii) one representative from the nonindustrial retail electric consumer sector;
(iii) one representative from organized labor;
(iv) one representative from the community comprising environmental and conservation interests;
(v) one representative from a low-income program provider;
(vi) one representative of Montana's Indian tribes; and
(vii) one representative of the electric power market industry.
(3) In case of a vacancy, a replacement must be selected in the manner of the original appointment.
(4) Legislative members are entitled to salary and expenses as provided in 5-2-302.
(5) The public service commission, legislative services division, and appropriate state agencies shall provide staff assistance as requested by the committee.
(6) Transition advisory committee members must be appointed within 60 days of May 2, 1997, to an initial term
expiring on December 31, 1999. Subsequent terms must be for up to 2 years, expiring on January 1 of odd-numbered years.
(7) The voting members shall select a transition advisory committee presiding officer.
(8) The transition advisory committee on electric utility industry restructuring must dissolve on the earlier of either the
date that full transition to retail competition is completed or December 31, 2004 2007.
(9) The transition advisory committee shall provide an annual report on the status of electric utility restructuring on or
before November 1 to the governor, the speaker of the house, the president of the senate, and the commission and shall
provide quarterly interim summary reports to the members of the legislature through January 1, 1999.
(10) The transition advisory committee shall meet at least quarterly or as often as is necessary to conduct its business.
(11) The transition advisory committee shall analyze and report on the transition to effective competition in the
competitive electricity supply market. The annual report made in the year 2000 must evaluate specifically the pilot
programs for customers with loads under 1,000 kilowatts and must include legislative recommendations, if it appears
appropriate, about the best means to further encourage the development of customer choice and meaningful market access
for the benefit of smaller customers. The annual report for the year 2000 must also address the need, if any, for additional
consumer protection including protection from abusive or anticompetitive practices.
(12) The criteria that the transition advisory committee must use to evaluate effective competition in the electricity supply market include but are not limited to the following:
(a) the level of demand for power supply choice and the availability of market prices for smaller customers;
(b) the existence of sufficient markets and bargaining power to the benefit of smaller customers and the best means to encourage and support the development of sufficient markets;
(c) the level of interest among electricity suppliers and the opportunity for electricity suppliers to serve smaller customers; and
(d) the existence of the requisite technical and administrative support that enables smaller customers to have choice of electricity supply.
(13) The transition advisory committee shall recommend legislation if necessary to promote electric utility restructuring and retail choice of electricity suppliers.
(14) The transition advisory committee shall make recommendations to the governor, regarding the implementation of
statewide universal system benefits and universal energy assistance funds, in time to allow for those funds to be created on
or before January 1, 1999. This may include recommendations regarding the assignment of an existing government agency
or private, nonprofit entity as the fund administrator and administration guidelines for the funds, including the means by
which funds may be made available for use.
(15)(14) The transition advisory committee shall monitor and evaluate the universal system benefits programs and
comparable levels of funding for the region and make recommendations to the 58th legislature to adjust the funding level
provided for in 69-8-402 to coincide with the related activities of the region at that time.
(16)(15) On or before July 1, 2002, the transition advisory committee, in coordination with the commission, shall
conduct a reevaluation of the ongoing need for universal system benefits programs and annual funding requirements and
shall make recommendations to the 58th legislature regarding the future need for those programs. The determination must
focus specifically on the existence of markets to provide for any or all of the universal system benefits programs or whether
other means for funding those programs have developed. These recommendations may also address how future
reevaluations will be provided for, if necessary.
(17)(16) On or before November 1, 2001 of each odd-numbered year, the transition advisory committee shall collect
information to determine whether Montana utilities or their affiliates have an opportunity to sell electricity to customers
outside of the state of Montana comparable to the opportunity provided pursuant to this chapter to utilities or their affiliates
located outside the state of Montana. That information must be included in the a report to the 58th each legislature.
(18) On or before November 1, 1998, the transition advisory committee shall make recommendations to the governor
and the legislature regarding the provision of low-income energy assistance programs in Montana by all energy providers."
Section 7. Effective date. [This act] is effective on passage and approval.
- END -
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