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, a port district, a water-sewer district, or a 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 utility providing electrical service that is operated by a city or town as 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; (e) landfill gas; or (f) biomass energy based on solid organic fuels from wood, forest, or field residues, or dedicated energy crops that do not include wood pieces that have been treated with chemical preservatives such as creosote, pentachlorophenol, or copper-chrome-arsenic.

(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 the accounting, functionalization, classification, and assignment or allocation of the costs of electrical service.

(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, and a service quality and reliability report described in subsection (4) of this section, to the commission. The commission shall review each cost study and each service quality and reliability report in an open public meeting to determine whether the filings meet 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 described in subsections (2) and (3) of this section, and a service quality and reliability report described in subsection (4) of this section, to its governing body in an open public meeting. The governing body shall determine whether the study and report meet the requirements of this section. By October 1, 1998, each consumer-owned utility shall submit the cost study and service quality and reliability report to the state auditor.

(2) Except as provided in section 4 of this act, by September 30, 1998, every electric utility shall unbundle. At a minimum, an electric utility shall include in such unbundling the accounting treatment for generation and energy supply, delivery services separately identifying transmission, distribution, and control area services, metering and billing, customer account services, programs to support conservation or renewable resources other than hydroelectric power, fish and wildlife mitigation, general administration and overhead, and taxes; the functionalization of costs separately for generation and energy supply, transmission, distribution, and other; the classification of costs separately to include, but not be limited to, energy and capacity; and the assignment or allocation of costs separately to include, but not be limited to, residential, small commercial, industrial, and other. For the purpose of chapter . . ., Laws of 1998 (this act), as directed by the commission for an electrical company or the governing body of a consumer-owned utility, the electric utility shall use the data from either the cost study used to formulate the retail rates in effect as of the effective date of this act, or a more recent cost study.

(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 used, such as fully embedded costs, marginal or incremental costs, or some combination thereof;

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

(c) The costs attributed to each of these classifications, functions, and assignments or allocations and, if proportional attribution of costs between classifications, functions, and assignments or allocations is necessary, the proposed method of attribution;

(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 assigned or allocated costs;

(f) If the utility used marginal costs for the classifications, or assignments or allocations, a clear description of those classifications, or assignments or allocations, and the rationale for this choice; and

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

(4) The service quality and reliability report required of each electric utility under subsection (1) of this section shall include, to the extent such data are currently collected and reasonably available, the following information:

(a) The level of satisfaction of the utility's customers as measured by customer surveys;

(b) The number of customer complaints filed during a calendar year with the commission if the utility is an electrical company or with the governing body if the utility is a consumer-owned utility;

(d) The number of times the average customer or feeder line is without power during a calendar year.

If available, the report shall include a copy of the survey instrument or script used to collect the information described in (a) of this subsection.

NEW SECTION. Sec. 3. (1) The state auditor shall receive, analyze, and summarize the studies and reports 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, the electric utilities, and others in analyzing and summarizing the studies and reports.

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

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

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

(d) Observations regarding the consistency or lack of consistency among utilities in the amount and kinds of information available regarding service quality and reliability; and

(e) An examination of alternative formats for simple, standardized disclosure of fuel mix, air emissions, and other environmental impacts of coal, hydroelectric, natural gas, nuclear, wind, and other generating resources, including the approaches used by utilities that have offered pilot programs to their customers allowing market access.

In the report, the commission shall also describe any issues arising from the cost studies and service quality and reliability reports 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 and preparing service quality and reliability reports 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 and service quality and reliability report described in section 2 of this act to the state auditor.

NEW SECTION. Sec. 5. Any municipal electric utility formed by a municipality with a population of more than four hundred thousand as of the effective date of this section shall submit a report to its governing body by December 1, 1998, with the following information:

(1) The ratio of the municipal electric utility's customers to its employees as of the effective date of this section, and the changes in the ratio that have occurred over the previous ten years; and

(2) The annual sources of funding and the amount of annual expenditures, including federal funds, by the municipal electric utility on conservation, renewable resources, and low-income weatherization and energy bill-paying assistance programs during the previous ten years. This part of the report shall describe: (a) The amount of electricity saved by such conservation programs; (b) the overhead costs to the municipal electric utility to administer such programs, including but not limited to amounts expended by other municipal departments and nonprofit entities in administering such programs; and (c) for low-income weatherization programs, the overhead cost per unit weatherized as compared to the overhead costs of comparable programs administered by the state.

NEW SECTION. Sec. 6. 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, or to require the commission to approve new revenue levels for electrical companies. 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. 7. 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.