AN ACT Relating to unfair business practices; adding a new chapter to Title 19 RCW; and prescribing penalties.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The legislature finds and declares it to be the public policy of the state of Washington to promote free and open competition in the sale and servicing of energy and nonenergy-related products and equipment. Free and open competition in the sale and servicing of energy and nonenergy-related products and equipment promotes the development of energy-efficient, quality products and equipment at reasonable cost to the consumer. Free and open competition promotes the development of a service industry providing quality services at reasonable cost to the the consumer. Free and open competition is vital to the continued life of the nonutility, energy-related small business. Free and open competition for energy service contracts promotes the public good. Free and open competition can only be achieved if the market for goods and services is not distorted or dominated by utilities that, by virtue of their special status as regulated monopolies in the development and distribution of energy, have an unfair competitive advantage in other energy-related enterprises.

The purpose of the legislature is to prohibit utilities from engaging in the sale or service of energy-consuming products and equipment, including household appliances, the sale of construction services, and the sale of energy efficiency modernization or retrofit services, except in circumstances that guard against subsidization by utilities of affiliates and unfair contracting practices and that otherwise ensure fair competition and a free and open market for products and services unaffected by the special competitive advantage enjoyed by the utilities.

NEW SECTION. Sec. 2. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Affiliate" means a person, including an individual, corporation, corporate subsidiary, firm, partnership, incorporated or unincorporated association, political subdivision including a public utility district, city, code city, town, and county; and combinations of political subdivisions, that controls, is controlled by, or is under common control with a utility, and that is engaged in the sale, lease, rental, installation, construction, modernization, retrofit, maintenance, or repair of equipment or products, including household appliances.

(2) "Emergency service" means service performed by a utility to correct malfunctions or interruptions in the generation, transmission, distribution, or use of natural gas or electricity that, if not corrected, may endanger life or property or otherwise affect public safety.

(3) "Utility" means a person, corporation, political subdivision, or other legal entity, or authorized representative, operating, maintaining, or controlling equipment or facilities for furnishing at retail natural, manufactured, or mixed gas or electric service to or for the public.

The term utility includes (a) those engaged in the production of gas or electric service for retail sale and regulated by the utilities and transportation commission, (b) public utility districts, (c) municipalities, (d) cooperative and mutual electric associations that produce or furnish gas or electric service, (e) those furnishing gas or electric service to another utility for resale, or (f) those possessing the exclusive grant or privilege to furnish gas or electric service at retail to consumers in an area or political subdivision in Washington state.

The term utility does not include (i) those selling compressed natural gas at retail for use as a vehicular fuel who purchase the gas from a utility, (ii) those furnishing gas or electric service only to tenants or cooperative or condominium owners in buildings owned, leased, or operated by the person, corporation, or other legal entity, or authorized representative, (iii) those furnishing gas or electric service to occupants of a manufactured home or trailer park owned, leased, or operated by the person, corporation, or other legal entity, or authorized representative, or (iv) producing or furnishing gas or electric service to fewer than twenty-five persons.

(4) "Utility contractor" means a person, including an individual, corporation, firm, incorporated or unincorporated association, or other business or legal entity, that contracts, whether in writing or not in writing, with a utility to provide the sales and services engaged in by affiliates as defined in subsection (1) of this section. Utility contractor includes a contractor, subcontractor, material supplier, or other person. Utility contractor does not include an official or employee of a utility.

NEW SECTION. Sec. 3. Except as otherwise set forth in this chapter, a utility shall not engage in the sale, lease, rental, installation, construction, modernization, retrofit, maintenance, or repair of products or equipment, including household appliances, that are not used for delivering or measuring utility service.

(1) A utility shall not engage in the sale, lease, rental, installation, construction, modernization, retrofit, maintenance, or repair of products or equipment, including household appliances, except by an affiliate.

(2) A utility shall not grant an unfair preference or privilege to an affiliate in the transaction of business between them or to a utility contractor in awarding a contract; except that the commissioner, under the authority of section 8 of this act, shall adopt rules governing the awarding of a contract by a utility to a utility contractor, and guidelines for waiver of those rules, such as lack of competitors or other circumstances when a waiver would not thwart the legislative declaration and purpose expressed in section 1 of this act.

(3) A utility or its agent, employee, or representative shall not refer or steer customers to specific individuals or companies engaged in the sale or servicing of energy-consuming products, equipment, or appliances, including an affiliate or utility contractor.

(4) A utility shall not lend money to, or guarantee, endorse, or act as a surety on the debts, liabilities, bonds, notes, contracts, or other obligations, or otherwise assist financially, an affiliate.

(5) A utility shall not purchase, receive, hold, or otherwise acquire the stock, shares, bonds, debentures, notes, or other securities, or other interest in an affiliate unless the utility pays at least the fair market value for the interest acquired.

(6) A utility shall not sell, lease, rent, assign, or transfer real or personal property to an affiliate, unless the utility receives at least the fair market value for the property sold, leased, rented, assigned, or transferred.

(7) This section does not prohibit a utility from providing emergency service, or providing any service required by law.

(8) A utility that violates this section is subject to a fine not to exceed twenty-five thousand dollars for each separate and distinct offense.

NEW SECTION. Sec. 4. An affiliate may engage in the sale, lease, rental, installation, maintenance, or repair of equipment, products, or appliances that are dependent upon energy supplied by a utility for their operation only if in compliance with the following requirements:

(1) The name of the affiliate must not resemble the name of the utility. Neither the utility nor the affiliate shall trade upon, promote, or advertise their affiliated status.

(2) The affiliate shall not have a place of business at or on premises owned or occupied by the utility. The affiliate shall not share the use of premises, equipment, inventory, personnel, or other resources of the utility.

(3) The affiliate shall not advertise, promote, or market its products or services through mailings of the utility or advertisements in which the utility's name is set forth.

(4) The affiliate shall maintain accounts, books, and records separate and distinct from those of the utility.

(5) Costs and expenses involved in operating the affiliate must be borne by the affiliate and not by the utility. Revenues from the affiliate must not be provided or disbursed to the utility.

(6) Assets of the affiliate must be maintained separate and distinct from the assets of the utility.

(7) The affiliate shall transact its business in the state, separate and independent of the utility so as to gain no competitive advantage by virtue of its status as an affiliate.

NEW SECTION. Sec. 5. An affiliate that violates any of the provisions of section 4 of this act is subject to a fine not to exceed twenty-five thousand dollars for each distinct and separate offense.

NEW SECTION. Sec. 6. The utilities and transportation commission has jurisdiction over utilities, affiliates, and utility contractors to ensure compliance with this chapter.

NEW SECTION. Sec. 7. The utilities and transportation commission shall:

(1) Review, inspect, and audit books, accounts, and other records kept by a utility, affiliate, or utility contractor and make the findings available to the commission;

(2) Investigate the operations of a utility, affiliate, or utility contractor and their relationship to each other for the purpose of ensuring compliance with this chapter and rules adopted under section 8 of this act.

NEW SECTION. Sec. 8. The utilities and transportation commission shall adopt rules and conduct hearings under chapter 34.04 RCW to administer and ensure compliance with this chapter.

NEW SECTION. Sec. 9. Judicial review of a decision of the utilities and transportation commission is governed by chapter 34.04 RCW.

NEW SECTION. Sec. 10. This chapter shall be known as the Washington state fair utility competition act.

NEW SECTION. Sec. 11. Sections 1 through 10 of this act shall constitute a new chapter in Title 19 RCW.