The Public Utilities Commission must issue detailed implementation rules, approve the issuance of securitization bonds, as well as decide whether to force Public Service of New Hampshire (PSNH) to write off $76 million in stranded costs for tax deferrals, which the company says it cannot do under federal tax rules.
Enforcement Activities
The sale of PSNH's fossil generation assets must take place no later than July 1, 2001, unless the PUC finds that a delay is in the public interest. The PUC will oversee the asset sale.
Customer Protection
The original restructuring legislation authorized the Commission to continue to ensure consumer protection, safety and reliability of service. Senate Bill 472 sets PSNH's systems benefits
efficiency/conservation programs. Rate Regulation
The Commission will regulate the rates for the distribution and transmission components. PSNH must reduce its rates by 5% on October 1, 2000, and then by an additional 15% when competition actually becomes available. Residential rates should drop by 17%. The initial 5% rate reduction will end upon the earlier of the start of competition or April 1, 2001. Overall customer savings must be at least $450 million. Savings expected from rate reduction bond financing and the pending merger would be additional.
The commission shall establish charges for retail customers that purchase or otherwise obtain or are supplied back-up, maintenance, emergency or other delivery service provided to a retail customer by an electric utility. Such charges shall be just and reasonable, and shall not be designed in a manner that creates a charge similar to or has the same effect as an exit fee.
FOLLOW-UP
Beginning in 2000, the New Hampshire Public Utility Commission must submit a report to the legislative oversight committee on electric utility restructuring by October 1st of each year. The report shall concern the results and effectiveness of the system benefits charge.
RESTRUCTURING AUTHORITY Law
"The Electric Discount and Energy Competition Act," was passed by the legislature in January 1999, and signed by the Governor on February 9, 1999.
Applicability
A municipal electric corporation, a municipal electric utility, or a cooperative electric utility that existed prior to the effective date of this Act is not subject to the requirements of this Act, except that a local governmental entity may choose to require the municipal electric corporation, municipal electric utility or cooperative electric utility to implement retail choice.
MARKET STRUCTURE Dates
The law requires the New Jersey Board of Public Utilities (BPU) to open up the state's retail electricity market by August 1, 1999.
Phase-in
The four investor-owned utilities include: Public Service Electric and Gas (PSEG), Atlantic City’s Conectiv, GPU (Jersey Central P&L), and Rockland Electric. Conectiv received final approval from BPU for its restructuring plan in July of 1999. Consumers will be given retail choice by November 14, 1999. Rates will be cut by 5% on August 1, 1999, increased to 7% on January 1, 2001, and increased again to 10.2% on August 1, 2002. GPU received final approval from BPU for its restructuring plan as of August 1, 1999. The settlement includes rate reductions in addition to the 5% due on August 1, 1999. An additional reduction in rates will include 1% in 2000, 2% in 2001, and 3% in 2002.
MARKET POWER Functional unbundling
The Act does not mandate divestiture. The BPU may require a utility to functionally separate its generation assets to its holding company or a related competitive business segment. The BPU may order divestiture to an unaffiliated entity if it finds that concentration or location of generation facilities results in market control that would adversely effect the formation of a competitive generation marketplace.
Rate Reductions
Consumers will receive a 5 percent discount off their electric bills, when competition starts, and at least another 5 percent discount over the next three years. The BPU must decide the exact
amount and timing of the second rate discount. During a term to be fixed by the board, each electric public utility shall reduce its aggregate level of rates for each customer class by a percentage to be approved by the board, which shall be at least 10 percent relative to the aggregate level of bundled rates in effect as of April 30, 1997. The board may set a term for an electric public utility to phase in a rate reduction of ten percent or more during the first 36 months of the transition period. On the starting date of the transition period, each electric public utility shall reduce its aggregate level of rates for each customer class, including any surcharges assessed pursuant to this act, by no less than five percent. The board may order a rate reduction that exceeds the 10 percent rate reduction if necessary in order to achieve just and reasonable rates.
Conectiv received final approval from BPU for its restructuring plan in July of 1999. Consumers will be given retail choice by November 14, 1999. Rates will be cut by 5% on August 1, 1999, increased to 7% on January 1, 2001, and increased again to 10.2% on August 1, 2002. GPU received final approval from BPU for its restructuring plan as of August 1, 1999. The settlement includes rate reductions in addition to the 5% due on August 1, 1999. An additional reduction in rates will include 1% in 2000, 2% in 2001, and 3% in 2002.
Other
The board will conduct an investigation into competitive metering and billing, and customer service issues within 3 months of the instituting of retail competition. The board shall issue an order for providing customers the opportunity to choose a supplier for some or all customer account services not later than one year from the starting date of retail competition.
STRANDED COSTS Definition
New Jersey approved a market transition charge to be collected as a limited duration non-bypassable charge payable by all of the electric public utility's customers.
Calculation and Recovery
The following categories are costs capable of being recovered: 1. Utility generation plant stranded costs;
2. Stranded costs related to long-term and short-term power purchase contracts with other utilities, including buydowns and buyouts of such contracts and interim debt;
3. Stranded costs related to long-term power purchase contracts with non-utility generators, including buydowns and buyouts of such contracts and interim debt issued to effectuate the buydown and buy out of such contracts, and the costs of new power contracts as the result of renegotiation, restructuring, or termination of previous non-utility generator power purchase contracts; and
4. Restructuring related costs, as the board determines to be appropriate for recovery in a market transition charge.
A stranded cost filing must be submitted to the board and the board may approve, reject, or approve with modifications in order to comply with the act. The term of the market transition charge is limited to 8 years, absent extraordinary circumstances.
CUSTOMER SERVICE ISSUES