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A Bill Bought and Paid for By Virginia s Utilities
Virginia Power and other Virginia utilities have been lobbying hard for SB 1269, a bill that rewrites the laws governing the electric industry in Virginia. SB 1269, a radical bill that will completely restructure the electric industry, is being rushed through this year s 6 week session of the General Assembly. It has already passed in the Senate and has been sent to the House of Delegates, where it has two weeks to pass.
Virginia Power has spent hundreds of thousands of dollars in campaign contributions to both parties, in an attempt to "grease the wheels" of this legislation. They have over a dozen lobbyists working at the General Assembly on behalf of SB 1269. The bill was drafted at a last minute secret meeting, which was attended by lawmakers who are proponents of the bill, the incumbent utilities and the large industrial consumers. Consumer and environmental organizations were not invited to attend the closed negotiating marathon. The resulting bill, SB 1269, is called a step towards competition, but we say the games been fixed.
SB 1269
Does not improve the safety, reliability or affordability of electricity service for residential and small business consumers.
Has no provision that attempts to reduce Virginia Power s existing market share of 80%
Forces consumers to bail out the state s incumbent utilities for their bad investments
Bails out Virginia s utilities for their bad investments and poor management practices
Favors large industrial consumers at the expense of residential and small business consumers
Creates an incentive for generating more dirty electricity and for building more power plants
Does not assure affordable electric service for low-income consumers or for people on a fixed income
Call 1-800-643-0157 and tell your member of the House of Delegates to protect you by voting no on SB 1269.
For more information call Public Citizen at 202-546-4996 ext. 350 or call Virginia Consumer Action at 703-754-4005
Talking Points on SB 1269 s Impact on Consumers
S. 1269 benefits the incumbent utilities, especially Virginia Power, by creating a set of rules that favor the existing utilities. Virginia Power benefits the most from the legislation because it enjoys an 80% market share in the state. The law in effect makes Virginia Power an unregulated monopoly. A further complication is the fact that Virginia has transmission constraints, making it difficult for competitors to bring electricity into the state.
Virginia Power wants to rush this bill through the 1999 session because passage of the legislation will result in windfall profits for the utility. Virginia Power will make millions of dollars if this law is passed and they are anxious to capitalize upon the contentious election this fall. A big campaign contributor, like Virginia Power, has the most political clout during an election year, especially since both Republicans and Democrats need money for their big battle over the control of the legislature.
The following information explores in detail why the bill is bad for consumers.
Rate Caps Benefit Electric Utilities and Harm Customers
If the House of Delegates votes to approve SB 1269, these are the last electric utility rate reductions Virginia consumers will ever see. Rate cases protect consumers from unfair pricing. Last week the SCC accepted a rate case settlement for American Electric Power-Virginia that eliminated a $30.5 million rate increase request and cut rates by $6 million. Last year, the SCC accepted a Virginia Power rate settlement that will save more than $700 million, compared to rates that were then in effect
The bill discards decades of rate regulation based on the real cost of providing service and a just and reasonable profit level and takes a dangerous gamble on the development of a robustly competitive electric generation market to keep rates in line. Under SB 1269:
Rates will be capped at current levels without a going-in rate case although electric generation is a declining cost industry.
There is no legislated rate reduction.
The "cap" is a floor, permitting rates to go up due to fuel costs, tax changes, and financial distress of utilities. Some electric companies get another chance to file for a rate increase before caps take effect. During the cap period some utilities are permitted to ask to raise rates for distribution and transmission services regardless of profits made on generation.
Customers will be denied any rate reductions that result from improved efficiency or declining costs. Utilities may retain over-earnings through July 1, 2007 when rate caps expire and as long as it takes thereafter for vigorous competition to drive down rates to residential customers. We think that will be a long time.
Stranded Cost Recovery is a Blank Check for Electric Utilities
The stranded cost recovery solution was a last-minute deal struck between the utilities and large industrial customers, the class of customers most likely to benefit from retail choice. Earlier versions of the SJR 91 bill called for SCC proceedings to determine stranded costs for each utility. The rate cap/wires charge provision in SB 1269 is grossly unfair to consumers.
No generation assets or obligations are "stranded" until competition is effective. Yet, SB 1269 permits utilities to begin collecting excess earnings to cover "stranded costs" a year before retail choice even begins and years before effective competition for residential customers has a chance of developing.
SB 1269 sets up a one-size-fits-all stranded cost recovery plan that assumes that all utilities in the state, as of July 1, 2007, will have recovered every penny of their net, just and reasonable stranded costs and not a penny more. This plan is a regulatory gamble with billions of dollars on the table and no mechanism to guarantee that rates will fall once "stranded costs" are written off in 2007.
SB 1269 does not meet the requirements of HB 1172, enacted in 1998, which stated that "just and reasonable net stranded costs shall be recoverable and appropriate consumer safeguards related to stranded costs and considering stranded benefits shall be implemented..."
There will be no SCC proceeding to determine if each utility has any stranded costs or how much the just and reasonable net stranded costs are for each utility.
SB 1269 does not even consider stranded benefits. Utilities, whose generation assets will be worth more under competition, get to keep those stranded benefits for their shareholders.
SB 1269 contains no consumer safeguards regarding stranded cost recovery.
This legislation is simply a blank check that permits Virginia s electric utilities to overcharge their small customers for years to come to pay for undefined, unquantified, and unfair stranded costs while keeping all stranded benefits for their shareholders.
Legislators should pull the plug on electric utility deregulation.
Residential and small business customers will not benefit from electric restructuring under the terms of SB 1269. As a low cost state, Virginia should watch what happens to consumers in the high cost states that have passed deregulation. States like California and Massachusetts have implemented their laws, and so far there is no competition for residential consumers. In California, less than 1% of consumers have changed suppliers and in Massachusetts no one is competing with the incumbent utilities to serve residential consumers.
Call 1-800-643-0157 and tell your member of the House of Delegates to protect you by voting no on SB 1269. For more information call Public Citizen at 202-546-4996 ext. 350 or call Virginia Consumer Action at 703-754-4005
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