BP BHEAD INT S [atlas:bill]

AN ACT Relating to unbundling the components of electrical service; creating new sections; and declaring an emergency.

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

NEW SECTION. Sec. 1. The definitions in this section apply throughout chapter . . ., Laws of 1998 (this act) unless the context clearly requires otherwise.

(1) "Commission" means the utilities and transportation commission.

(2) "Conservation" means an increase in efficiency in the use of energy use that yields a decrease in energy consumption while providing the same or higher levels of service. Conservation includes low-income weatherization programs and programs that result in overall reductions of electrical system requirements.

(3) "Consumer-owned utility" means a municipal electric utility, an electric cooperative, a public utility district, an irrigation district, a port district, or a water-sewer district that is engaged in the business of distributing electricity to retail electric customers in this state.

(4) "Control area services" means scheduling, reactive power, spinning reserves, nonspinning reserves, voltage control and regulation, load following, and other related services necessary to sustain reliable delivery of electricity.

(5) "Delivery services" means the services needed to deliver electricity to a retail electric customer using transmission, distribution, and related facilities. Delivery services include control area services, and the real property upon which the delivery plant, equipment, and other delivery infrastructure is located.

(6) "Electric cooperative" means a cooperative or association organized under chapter 23.86 or 24.06 RCW.

(7) "Electric meters in service" means those meters that record in at least nine of twelve calendar months in any calendar year not less than two hundred fifty kilowatt hours per month.

(8) "Electrical company" means a company owned by investors that meets the definition of RCW 80.04.010 and is engaged in the business of distributing electricity to more than one retail electric customer in the state.

(9) "Electric utility" means any electrical company or consumer-owned utility as defined in this section.

(10) "Electricity" means electric energy, measured in kilowatt hours, or electric capacity, measured in kilowatts.

(11) "Governing body" means the council of a city or town, the commissioners of a municipal electric utility, an irrigation district, or public utility district, or the board of directors of an electric cooperative that has the authority to set and approve rates.

(12) "Irrigation district" means an irrigation district authorized by chapter 87.03 RCW.

(13) "Municipal electric utility" means a business providing electrical service, that is owned or operated by a city or town as authorized by chapter 35.92 RCW either directly or indirectly through the creation of a board, authority, corporation, or other entity to manage its operation.

(14) "Port district" means a port district within which an industrial district has been established as authorized by Title 53 RCW.

(15) "Public utility district" means a district authorized by chapter 54.04 RCW.

(16) "Renewable resources" means electricity generation facilities fueled by: (a) Water; (b) wind; (c) solar energy; (d) geothermal energy; (e) landfill gas; or (f) low-emission organic nontoxic biomass energy based on solid organic fuels from wood, forest, and field residues, or dedicated energy crops available on a renewable basis.

(17) "Retail electric customer" means any person or entity, including, but not limited to, a residential, commercial, or industrial customer, that purchases electricity for ultimate consumption and not for resale.

(18) "Small utility" means any consumer-owned utility with twenty-five thousand or fewer electric meters in service, or that has an average of seven or fewer customers per mile of distribution line.

(19) "State" means the state of Washington.

(20) "Unbundle" means to separately identify, and publish costs by classification, function, and allocation as used in common cost-of-service practice.

(21) "Water-sewer district" means a water-sewer district authorized by Title 57 RCW.

NEW SECTION. Sec. 2. (1)(a) By September 30, 1998, each electrical company shall submit a cost study described in subsections (2) and (3) of this section to the commission. The commission shall review each cost study in an open public meeting to determine whether the filing meets the requirements of this section, and to identify any issues in dispute. Nothing in chapter . . ., Laws of 1998 (this act) shall be construed as either increasing or limiting the authority of the commission to conduct hearings on disputed issues.

(b) Except as provided in section 4 of this act, by September 1, 1998, each consumer-owned utility shall submit a cost study with the information and documentation described in subsections (2) and (3) of this section to its governing body in an open public meeting. The governing body shall determine whether the study meets the requirements of this section. By October 1, 1998, each consumer-owned utility shall submit the cost study to the state auditor.

(2) Except as provided in section 4 of this act, by September 30, 1998, every electric utility shall unbundle the costs of its electrical service classifications, functions, and allocations. At a minimum, an electric utility shall classify, functionalize, or allocate costs separately for generation capacity and energy supply, delivery services, metering and billing, customer account services, programs to support conservation or renewable resources other than hydroelectric power, general administration and overhead, and taxes. Within the category of delivery services, an electric utility shall functionalize costs separately for transmission, distribution, and control area services. Classification shall separately include, but not be limited to, electric energy and capacity. Allocation shall separately include, but not be limited to, residential, small commercial, industrial, and other.

(3) The cost study required of each electric utility under subsection (1) of this section shall include the following documentation:

(a) A description of the fundamental cost study theory proposed, such as fully embedded costs, marginal or incremental costs, or some combination thereof;

(b) A detailed description of the classifications, functions, and allocations of electrical service unbundled;

(c) The costs assigned to each of these classifications, functions, and allocations and, if proportional assignment of costs between classifications, functions, and allocations is necessary, the proposed method of assignment;

(d) For utilities that operate in more than one state, the costs attributable to operations in Washington;

(e) For each class of retail electric customers, the method by which the utility calculated costs, and classified, functionalized, and allocated costs;

(f) If the utility proposes to use marginal costs for any classifications, functions, or allocations, a clear description of those classifications, functions, and allocations, and the rationale for this choice; and

(g) The time period over which cost data were compiled.

NEW SECTION. Sec. 3. (1) The state auditor shall receive, analyze, and summarize the studies required of consumer-owned utilities under section 2 of this act. The state auditor may consult with the commission, the department of community, trade, and economic development, and others in analyzing and summarizing the studies.

(2) By December 1, 1998, the state auditor and commission shall prepare a joint report on the results of the cost studies required under section 2 of this act, and shall submit the report to the energy and utilities committees of the senate and house of representatives. The report shall include the following information:

(a) A summary of the cost studies submitted by electric utilities; and

(b) Observations regarding the consistency or lack of consistency among utilities in methods of classification, functionalization, and allocation, and in descriptions of unbundled costs.

In the report, the commission shall also describe any issues arising from the cost studies submitted by electrical companies.

NEW SECTION. Sec. 4. (1) The legislature finds that: (a) Small utilities operate on a nonprofit basis, and typically serve rural areas where the cost of providing service exceeds that of urban areas; (b) most small utilities are full-requirements customers of the Bonneville power administration and do not purchase electricity and related products and services individually for resale to utility customers; and (c) the additional expense of unbundling is likely to significantly outweigh the potential benefits to small utilities.

(2) The provisions of section 2 of this act do not apply to a small utility. However, nothing in this section prohibits the governing body of a small utility from determining the utility should unbundle and comply with any or all of the provisions of section 2 of this act applicable to other consumer-owned utilities.

(3) A small utility whose governing body has determined the utility should unbundle is encouraged, but not required, to submit a cost study described in section 2 of this act to the state auditor.

NEW SECTION. Sec. 5. Nothing in chapter . . ., Laws of 1998 (this act) shall be construed as requiring an electric utility to establish new rates or to adopt new rate-making methods. In addition, nothing in chapter . . ., Laws of 1998 (this act) shall be construed as conferring on any state agency jurisdiction, supervision, or control over any consumer-owned utility.

NEW SECTION. Sec. 6. This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect immediately.