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. FINDINGS. The legislature finds that:

(1) Historically, retail electricity customers in the state have purchased electrical service from vertically integrated utilities with recognized service territories.

(2) Most retail electricity customers pay a set rate for a package of electrical services, the components of which are not separately identified in bills for service.

(3) The electricity industry is changing. This change is in part due to federal legislation and regulatory decisions requiring utilities and other owners of transmission facilities to provide nondiscriminatory access to the transmission system, to legislation and programs in other states to introduce competition into retail electricity markets, and to programs within this state to allow some customers either to purchase electricity from alternate suppliers or to have their utility purchase electricity for them at market-based rates. The change is also due to developments in technology and in the electricity market that make it increasingly feasible for retail electricity customers to purchase individual components of electrical service separately.

(4) As opportunities increase to purchase electrical service components separately, the importance of accurately allocating costs among those components will also increase. Accurate cost allocations will facilitate accurate pricing of individual components of electrical service, and alleviate potential concerns about cost shifting between components where one component is subject to competition and another is not, and about cost shifting between customer classes or between customers within a single class.

(5) At present, there is no uniformly applied cost allocation method, and there are no uniformly accepted comprehensive definitions of some components of electrical service. In part for these reasons, the extent to which cost allocations currently differ from one electric utility to another is unknown.

NEW SECTION. Sec. 2. DEFINITIONS. 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.

(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, 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 retail electric customers 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 city or town that owns or operates an electric utility authorized by chapter 35.92 RCW.

(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; or (e) 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 allocate costs to, different components of electrical service.

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

NEW SECTION. Sec. 3. UNBUNDLING COMPONENTS OF ELECTRICAL SERVICE AND RELATED PRODUCTS. (1) Except as provided in section 5 of this act, by September 30, 1998, every electric utility shall unbundle the costs of its assets and operations, to accurately allocate the costs of utility functions in serving each class of retail electric customer, and to allow for fair and accurate pricing of unbundled services and products. However, nothing in chapter . . ., Laws of 1998 (this act) shall be construed as requiring an electric utility to set new rates.

(2) At a minimum, an electric utility shall allocate costs separately for generation capacity and energy supply, delivery services, metering, customer account services including billing, programs to support conservation or renewable resources other than hydroelectric power, marketing and sales, general administration and overhead, and other products and services. Within the category of delivery services, an electric utility shall allocate costs separately for transmission, distribution, and control area services.

(3)(a) By September 30, 1998, each electrical company shall submit a cost study described in subsection (4) 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.

(b) Except as provided in section 5 of this act, by September 1, 1998, each consumer-owned utility shall submit a cost study described in subsection (4) 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 department of community, trade, and economic development.

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

(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 functions of electrical service unbundled;

(c) The cost accounts allocated to each of these functions, and, if proportional allocation of accounts between functions is necessary, the proposed methodology;

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

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

(f) The principles and theory that form the basis for the allocations under (c) through (e) of this subsection;

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

(h) The time period over which cost data was compiled.

NEW SECTION. Sec. 4. ANALYSIS OF REPORTS‑-REPORT TO THE LEGISLATURE. (1) The department of community, trade, and economic development shall receive, analyze, and summarize the studies required of consumer-owned utilities under section 3 of this act.

(2) By December 1, 1998, the department and commission shall prepare a joint report on the results of the cost studies required under section 3 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 cost-allocation methods and in descriptions of unbundled functions.

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

NEW SECTION. Sec. 5. REQUIREMENTS FOR SMALL UTILITIES. (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 3 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 3 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 3(4) of this act to the department of community, trade, and economic development.

NEW SECTION. Sec. 6. CAPTIONS. Captions used in this act are not any part of the law.

NEW SECTION. Sec. 7. EMERGENCY CLAUSE. 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.