The Electric Utility Industry Restructuring TRANSITION ADVISORY COMMITTEE
Chair: Senator Fred Thomas
Vice-chair: Representative Bill Ryan
Committee staff: Stephen Maly, Research Analyst
Todd Everts, Legislative Environmental Analyst
Judy Keintz, Secretary
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TABLE OF CONTENTS
TAC Final Report: Executive Summary 1
I. Introduction and Overview 2
II. Budget Summary 6
III. Chronology of TAC Activities and Events 6
July 11, 1997, Helena 6
October 6-7, 1997, Billings 7
January 9, 1998, Helena 7
February 6, 1998, Missoula 8
March 13, 1998, Helena 8
April 24, 1998, Great Falls 9
July 24, 1998, Sidney 9
September 18, 1998, Helena 10
October 23, 1998, Helena 10
Other Related Events 11
IV. Abstract of Substantive Achievements & Works in Progress 13
The Education Subcommittee 14
January 22, 1998 14
March 24, 1998 14
July 1, 1998 15
September 17, 1998 16
The Universal System Benefits Program Subcommittee 17
TAC USBP Fund Statutory Directives 18
USBP Subcommittee Action 19
TAC Final Report: Executive Summary
Some parts and phases of the restructuring process proceeded in accordance with the schedule set forth in Senate Bill 390, while others did not. Deadlines for the Public Service Commission's final orders on utility transition plans and the start date of pilot programs were necessarily delayed.
The Transition Advisory Committee (TAC or Committee) was responsive to unanticipated decisions and events, such as the Montana Power Company's announcement of its intention to sell all of its generation assets in the state.
The TAC met its statutory requirements regarding quarterly meetings and reports, and conducted an additional meeting in conjunction with the Montana Consumer Counsel.
The TAC established the Education Subcommittee to ensure that other TAC members and interested legislators were informed about basic aspects of restructuring in Montana and elsewhere and to monitor and evaluate the fairness and effectiveness of customer education messages and materials produced by investor-owned utilities and participating electrical cooperatives.
The TAC established the Universal System Benefits Program (USBP) Subcommittee to develop and recommend a practical means of collecting and administering USBP funds as well as to find a method for determining the applicability of credits against universal system benefits charges.
The TAC considered and heard public comment on a variety of issues arising from restructuring. Some of these issues were of central importance, including customer aggregation and barriers to competition, while others were more peripheral to the scope of SB 390, such as water rights and continued access to recreational property.
Because important aspects of electrical industry restructuring are to be phased in over a number of years, relatively few matters could be concluded or resolved during the 1997-98 interim; therefore, the Committee's legislative recommendations are few in number. They include detailed draft legislation to structure the USBP and a proposal to repeal the reciprocity provisions of SB 390.
TRANSITION ADVISORY COMMITTEE FINAL REPORT
I. Introduction and Overview
Senate Bill 390 (Chapter No. 505, Laws of 1997)(1) established the Electric UtilityIndustry Restructuring Transition Advisory Committee (TAC or Committee) composed of20 members, 8 of whom are voting members, 4 each from Montana's House andSenate, with an equal number of Republicans and Democrats. The other 12 memberswere appointed by the governor to fulfill advisory functions as representatives of groupsin Montana with an interest in the restructuring process. (See Appendix I for a list ofmembers and their affiliations.)
SB 390 is a relatively complicated legislative package, not readily understood byMontana citizens who did not participate in or observe the bill's rites of passage duringthe 1997 session. The Committee made extensive use early on of several synopses ofthe bill, one of which is included in this report (see Appendix II), and can also be foundat the Public Service Commission's (PSC) website at www.psc.state.mt. One of theforemost challenges faced by the TAC was to better educate its own members on theintricacies of the bill, as well as some of the speculative aspects of restructuring that thelaw itself could not (and still cannot) address with any degree of certainty. Thepredictive power of the TAC has been constrained by limited knowledge of the future ofelectricity prices, the sources, types, and long-term availability of reliable electricitysupplies, and the shape energy markets will actually take in a changed economic andtechnology-influenced environment.
The membership of the TAC reflects the different groups in the state with an interest inthe outcome of restructuring. Stakeholders in the process include producers andpurveyors of electricity, such as investor-owned utilities and electrical cooperatives, aswell as electricity consumers of various sizes and types, including large industrial firms,public entities, small commercial enterprises, and residential customers. Underregulation, the interests of producers and consumers are largely congruent, or at leastheld together in a balanced fashion through the rulings and good offices of the PSC.With partial deregulation, firms in the generation segment of the production side arefree to pursue business interests that may be quite disparate from those of manycustomers. Market forces are believed to be the best means of achieving the balancethat was formerly struck by regulation.
Legislative passage and implementation of Montana's electrical industry restructuringbill did not occur in a vacuum. California and New Hampshire were early pioneers inthis venture. While different in many obvious respects, the industries and communitiesin both these states were burdened with relatively high energy costs. Montana was thefirst low-cost energy state to go forward with restructuring. As of April 1998, anadditional seven states had enacted restructuring legislation, another seven had moveddecisively toward restructuring through the issuance of comprehensive regulatoryorders, ten states had legislation or orders pending, and 23 states had some sort ofstudy commission in place to investigate feasibility. South Dakota was alone among the50 states in not having authorized any significant restructuring activity.(2) Meanwhile,several bills are pending in the U.S. Congress to establish restructuring on a nationwidebasis, although there is considerable resistance among states to preemptory action bythe federal government.
The Committee is authorized to make legislative recommendations. Under a generalprovision of SB 390, the TAC "shall recommend legislation if necessary to promoteelectric utility restructuring and retail choice of electricity suppliers."(3) The law mandatessuch action in only one general arena, however, during the 1997-98 interim. Aprovision of SB 390 requires the TAC to make recommendations to the governorregarding the implementation of statewide universal system benefits charges on orbefore January 1, 1999, and a related feature of the bill requires the TAC to makerecommendations to the governor and the Legislature regarding low income energyassistance derived from all energy providers in the state.(4) As is documented later inthis report, the Universal System Benefits Program (USBP) Subcommittee of the TACdeveloped guidelines and recommended them to the full Committee for considerationand for formal recommendation to the entire Legislature.
Other legislative recommendations are likely to emerge in the future, as the complicatedrestructuring process evolves. For example, the TAC's Education Subcommittee willcontinue to monitor activities that could lead members to suggest changes in the lawregarding who is ultimately responsible for customer education and/or what type andamount of funding may be required to effectively inform customers of what their choicesare in the nascent market for retail electricity supply and services. In addition, legislationwill probably be required to make more certain who will bear responsibility for providingelectricity to consumers who for one reason or another fail to make a deliberate choiceof power supplier at the end of the transition period.
There are a number of unanswered questions and unresolved issues to be addressedin subsequent phases of the restructuring process. For example, whether metering andbilling services must be unbundled from distribution charges and the extent of the PSC's jurisdiction regarding the distribution of proceeds resulting from the sale offormerly regulated utility assets are issues that arise in the review of transition plansthat utilities are required to file with the PSC under SB 390. In addition, as the text ofthe restructuring bill spells out, there is an anticipated sequence of required activities,such as transition plans, pilot programs, the licensure of suppliers, the unbundling ofutility bills. However, as this first phase of the process illustrates, there have beenseveral surprising turns of events that were not anticipated by the bill's supporters orthe Committee members.
The Montana Power Company's (MPC) announced intention to sell its generationfacilities in December caused the schedule of hearings and related meetings to change.A later decision by MPC to dissolve its electricity marketing affiliate and thenPacifiCorp's decision to sell its transmission and distribution system in the northwesternpart of the state caused additional delays in what had earlier been expected to be asmooth transition. There may be further surprises down the road, as restructuringproceeds in other western states and across the country as a whole. Even when theaforementioned sales have been completed, there will still be complicated matters todeal with, including the disposition of any remaining stranded costs, determining whowill be designated the supplier of last resort, if and how Independent System (or Grid)Operators will be established and maintained, and whether the FERC relicensingprocedures will have any effect on existing water rights and public access torecreational sites contained within or located adjacent to utility property boundaries.
On November 3, 1998, after the TAC's last meeting and just as this final report wasbeing prepared for printing, the Montana Power Company announced that it hadsuccessfully negotiated the sale of its hydroelectric facilities and its coal-fired productionplants to Fairfax, Virginia-based PP&L Global, a subsidiary of Pennsylvania Power andLight Resources, Inc. The sale price of $988 million was above the estimated $550million book value of the generation assets. MPC pledged at several TAC meetings toreturn to former ratepayers funds derived from the sale in excess of book value and thecompany's transaction costs, estimated at $50 million. While the sale ended months ofspeculation as to the identity of the purchaser, the exact identification of what wasbeing sold, and the purchase price, uncertainty abounds as to whether all former MPCemployees will be retained by the new owner and whether there are still stranded costsissues to resolve. The sale will likely not be completed until sometime in 1999, so it isunlikely that any associated problems will be addressed by the 56th Legislature.
No general conclusions are set forth in this report. This brief overview and thedescriptive sections below, along with the substantive appendices, should give thereader a fairly comprehensive view of the TAC's purposes, processes, andaccomplishments.
II. Budget Summary
In SB 390, the 1997 Legislature authorized the Legislative Services Division to receivegifts, grants, and donations to offset the Committee's costs and also appropriated up to$200,000 of the funds for the biennium. Donations from MPC, PacifiCorp, and theMontana Electric Cooperatives Association totaled approximately $79,000 in the 1997-98 interim, and expenditures (prior to the submission of this final report for printing anddistribution) amounted to about $44,000. Under SB 390, the remainder of unexpendedfunds will be returned to the donors on a proportional basis.
III. Chronology of TAC Activities and Events
The Committee met as a whole nine times, once more than expected at the outset ofthe 1997-98 interim. The date and location of each meeting is listed below, along withvery brief synopses of the topics addressed. In some cases, the synopsis will refer to aspecific document included as an appendix to this report; in others, readers are advisedto consult the official minutes (available from Legislative Services Division staff) forfurther details.
JULY 11, 1997, Helena
The Committee elected a chair and vice chair (Senator Thomas and RepresentativeRyan, respectively), reviewed the budget, and provided informational updates on thestatus of transition plans filed by utilities with the PSC, the position and perspective ofelectrical cooperatives, and on conferences that several members had attended. Staffprovided an overview of statutory duties and optional methods of fulfilling them. Acalendar of prospective meeting dates was adopted, and the task of developing acomprehensive work plan for the duration of the interim was assigned to asubcommittee.
OCTOBER 6-7, 1997, Billings
The main agenda items were Customer Aggregation (strategies and opportunities tocreate purchasing pools), Reciprocity (with neighboring states), and Market Powerissues (e.g., impediments to new entrants in the supply segment of the electricitymarket). The Committee also heard a presentation on the historical evolution of theelectrical industry in Montana by selected members as well as invited representativesfrom MPC, the Northwest Power Council, and the Electric Cooperatives. A subsequentpanel informed the Committee about various energy assistance programs in place inMontana. An additional topic at the meeting was the economic and other practicalfeasibility of fuel cell technology in a restructured electricity market.
JANUARY 9, 1998, Helena
The Committee held a special joint meeting with the Consumer Counsel to consider theramifications of MPC's December 9 announcement that it intended to sell all of itsgeneration assets (hydroelectric dams and coal-fired plants) in the state. The combinedbody heard presentations by MPC, the PSC, and staff from the Department of Revenueon the rationale for the sale; the expected effects on industrial, small commercial, andresidential customers; the consequences for the transition plan filing requirementsunder SB 390; and the state and local tax ramifications. Issues related to the possibleimpacts on fish and wildlife resources were also raised. The prospect of state purchaseof MPC's Missouri system dams was raised by Senator Mike Sprague who had alsobrought the matter to the attention of the Legislative Council.
FEBRUARY 6, 1998, Missoula
The meeting began with a public comment period and proceeded with subcommitteereports and members' and staff updates. There was a panel presentation on the statusof efforts to establish power purchasing pools through customer aggregation. On thistopic, the Committee heard from representatives of the University System, the MontanaAssociation of Counties, the Montana Hospital Association, the Montana School BoardAssociation, the Montana Automobile Dealers Association, and the MontanaEnvironmental Information Center. A further panel discussion involved marketers andsuppliers of electricity on the issue of barriers to entry into the retail market. Presentersincluded MPC, Montana-Dakota Utilities, the cooperatives, PacifiCorp, Enron,Commercial Energy, and the Bonneville Power Administration. A final panel discussedthe reciprocity provisions of SB 390, and staff provided a legal memorandum on theissue. (See Appendix III.)
MARCH 13, 1998, Helena
At a meeting that was focused primarily on issues linked to the pending sale of MPC'sgeneration assets, there was a series of informal panel discussions that dealt withelectricity prices, stranded costs, potential job and tax revenue losses, water rights,recreational access, and fish and wildlife management in relation to the Federal EnergyRegulatory Commission's relicensing of hydroelectric facilities on the Missouri Riversystem. A question period devoted to electricity prices featured comments from amember of the Northwest Power Planning Council staff, another from the staff from theConsumer Counsel, and several individuals representing different electric cooperativesand energy supply firms. A similar period concerning water-related issues involvedtestimony from persons representing the state's Departments of Natural Resourcesand Conservation; Environmental Quality; and Fish, Wildlife, and Parks. An additionaltime slot was assigned to considerations of employment and revenue questions andinvolved personnel from the Montana AFL-CIO, the International Brotherhood ofElectrical Workers, an elected Commissioner from Rosebud County, the MontanaDepartment of Revenue, and local government officials from Helena and Great Falls.(See Appendix IV for a descriptive summary of the issues discussed at this meeting.)
APRIL 24, 1998, Great Falls
The Committee heard three presentations, one concerning the Clinton Administration'sproposal to offer consumer choice on a nationwide basis, another on California'sexperience to date with restructuring, and a third on a proposal from the MontanaLeague of Cities and Towns to facilitate electricity purchasing by municipalgovernments.
JULY 24, 1998, Sidney
Members of the public were provided an opportunity early in the meeting to makecomments on and ask questions about the restructuring process. The discussionevidenced diverse concerns about the situation in northeastern Montana, where localcooperatives have so far opted not to open their territories to competition and whereMontana-Dakota Utilities is not required, under SB 390, to offer customer choice inelectricity supply until 2006. The electrical power needs and interests of predominantlyrural agricultural consumers were the main focus of attention. In addition, a consultingeconomist from the National Rural Utilities Cooperative Finance Corporation made apresentation outlining the difficulties of "unbundling" metering and billing services fromthe distribution portion of a utility's service functions. The Committee later discussed alist of potential legislative recommendations prepared by staff.
SEPTEMBER 18, 1998, Helena
This penultimate meeting of the TAC was devoted primarily to discussions on how bestto wrap up the Committee's assorted tasks in advance of the November 1 reportdeadline prescribed in SB 390. Members provided updates on the status of MPC's saleof generation assets as well as some legal complications associated with PacifiCorp'sproposed sale of its transmission and distribution to Flathead Electric. Legislative staffsupplied a brief summary of optional approaches taken by the Revenue OversightCommittee to address potentially offsetting tax losses and gains resulting from theaforementioned sales and other aspects of restructuring. The Committee also heardreports and recommendations from the Education Subcommittee and the USBPSubcommittee (summarized elsewhere in this document). The possible reorganizationof interim committees following the 1999 session, and the effect this structural changemay have on the future composition and operations of the TAC was also discussedbriefly.
OCTOBER 23, 1998, Helena
The Committee was briefed on the status of MPC's pending negotiations with anunnamed prospective buyer or consortium of buyers. Because of the confidential natureof these negotiations, the most that the Committee could learn was that a purchase wasimminent and would be announced as soon as possible. Next, the Committee wasapprised by PacifiCorp attorneys and PSC staff of the legal dispute connected to theutility's surprise decision to sell its distribution system in Montana to Flathead ElectricCoop. The PSC takes the position that it has jurisdiction over the terms of the sale,especially with regard to the disposition of negative stranded costs (also known asstranded benefits). PacifiCorp claims that the PSC does not have jurisdiction. Thematter was referred to District Court, which at the time of this writing, had imposed aninjunction on the sale pending further negotiation between the parties.
The Committee heard a detailed explanation from staff and Rep. Bergsagel of draftlegislation to implement the USBP mandated by SB 390. Other TAC members andinterested persons who had participated in the subcommittee deliberations of this topicprovided further testimony and support for the proposed bill, which subsequently gaineda formal recommendation from the voting members of the TAC.
After a short introduction by staff of the draft final report on TAC's interim activities,several items in (or missing from) the draft were discussed; afterwards, staff wereauthorized to add to and complete the report, the published version of which will beprovided to each legislator and made available to interested persons on request.
Other substantive discussions touched on the possible establishment of a statewidepower purchasing cooperative to improve the leverage of small commercial andresidential customers as well as perform, possibly, as the default supplier of last resort. Legislation will be needed to authorize such a cooperative, especially if it is empoweredto take on former MPC customers who decline to exercise choice when that option isavailable in 2002 or sooner. The Committee voted to recommend repeal of thereciprocity provision of SB 390(5) and to combine all of the legislative recommendationsinto a single bill draft. Finally, the Committee agreed that the composition of the TACshould remain intact, notwithstanding any structural changes to interim committees as awhole that might result from actions taken by the 56th Legislature.
Other Related Events
A number of meetings pertinent to the Committee took place during the interim andwere attended by members and staff alike. For example, the Helena Citizens'Commission sponsored a seminar on related issues in November 1997. In February1998, the city of Great Falls held a day-long meeting to consider the feasibility ofmunicipal purchases of several of MPC's Missouri River hydroelectric plants, and theHelena City Commission also looked into the possibility of buying Holter and Hauserdams. On April 16, 1998, Governor Racicot sponsored a public forum in Helena for thepurpose of discussing the ramifications of MPC's decision to sell its generation facilitiesas well as other matters related to restructuring. Meanwhile, a number of statelegislators concerned about the consequences of unpredicted aspects of restructuringcalled for a 1-day special session in March, 1998, but failed to muster enough votes. Anumber of citizens' groups also proposed a ballot initiative that would have required thestate to use its powers of condemnation to buy MPC's water rights in order to keepthem subject to public, rather than private, control.
On July 1, 1998, large industrial customers of MPC and PacifiCorp were free, under aprovision of SB 390, to choose their electricity supplier.(6) Holnam Cement and ConocoPipeline switched from MPC to Villanova, while Stone Container opted to stay withMPC. At the time of this writing, a number of other large consumers are negotiating withlicensed power marketing firms for new supply contracts.
Following a period of temporary licensing procedures, the PSC established formalconditions. As of this writing, only four companies had become licensed. Uncertainties--the sale of MPC generation facilities, unresolved stranded cost issues and, supplier oflast resort--have effectively reduced suppliers' incentives to serve the Montana market.
IV. Abstract of Substantive Achievements & Works in Progress
For the sake of efficiency and effective analysis of key issue areas, the Committee wassubdivided into two subcommittees and two (smaller) working groups. The EducationSubcommittee was assigned the general tasks of monitoring and evaluating customereducation materials and pilot programs devised by utilities in accordance withprovisions in SB 390. This Subcommittee was responsible for reviewing each issue ofthe quarterly newsletter(7) before publication, and also later accepted the delegatedresponsibility to help inform the TAC as a whole about various restructuring issues,including water rights. The USBP Subcommittee was responsible for meeting thedetailed requirements in SB 390 regarding benefits and charges that will still berequired of utilities during the transition to a partially deregulated market environment.The bill established a USBP fund "to ensure continued funding of and new expendituresfor energy conservation, renewable resource projects and applications, and low-incomeenergy assistance during the transition period and into the future." The charge of theSubcommittee is to analyze the issues associated with the USBP fund and makerecommendations to the full TAC regarding fund implementation in order to fulfill theTAC's statutory requirements.
The Public Service Commission Liaison Group was assigned to monitor PSC activitiesas well as analyze the issues of customer aggregation, the licensing of electricitysuppliers, and the reciprocity provisions of SB 390. This group met twice during theinterim (November 21, 1997, and January 16, 1998) and reported to the full TAC. TheRevenue Oversight Liaison Group was established to maintain communication with theRevenue Oversight Committee (ROC), which under SB 390 undertook an analysis of"the amount of state and local tax revenue derived from previously regulated electricitysuppliers that will enter the competitive market and report to the legislature annually onhow revenue to the state or local government is changed by restructuring andcompetition." The ROC was further charged by SB 390 to recommend legislation, ifnecessary, to address possible revenue losses and tax shifting resulting fromrestructuring. (See forthcoming final report of the ROC for details.)
The Education Subcommittee
Members of this subcommittee are Dave Wheelihan, chair (Montana ElectricalCooperatives Association), Senator Fred Thomas, Bob Nelson (Consumer Counsel),Stephen Bradley (Crow Tribe), and Roma Taylor (citizens' advocate). The EducationSubcommittee met four times during the interim. A brief accounting of its activitiesfollows.(8)
January 22, 1998: The Subcommittee's first meeting took place in the State Capitol inHelena. The primary focus of the meeting was a preliminary education project calledThe Collaborative, which had been initiated in the fall of 1997 by the Montana PowerCompany. The Collaborative was facilitated by Gerald Mueller of ConsensusAssociates, and involved voluntary participation by representatives of the PSC, theBonneville Power Administration, the Department of Environmental Quality, theDepartment of Health and Human Services, PacifiCorp, the Montana ElectricalCooperatives Association, Energy Share, and the TAC staff. (To view the outcome ofthe Collaborative process, see Appendix VI.)
March 24, 1998: The Subcommittee met at the State Capitol in Helena to obtainupdated information on the status of the pilot programs and customer education plansmandated by SB 390. The members also explored the issues of "standard offer"provisions in contracts between licensed suppliers and customers and whethermetering and billing services would necessarily be offered to customers on acompetitive basis. Another topic of discussion was the need to better inform the publicabout the distinctions between wholesale electricity deregulation fostered by federallaws and policies and the partial deregulation of the retail electricity market under theprovisions of SB 390.
July 1, 1998: The Subcommittee met in Helena and discussed the continuinguncertainty regarding the practical ramifications of the TAC's self-imposed responsibilityto help educate beyond its members and the Legislature as well as a seeminglyinherent conflict arising from the difficulty of distinguishing education from marketingand other, more subtle, forms of self-dealing (which is proscribed by SB 390).
The Subcommittee resolved to serve as a clearinghouse for education materials.Utilities and Cooperatives were asked to supply the members (via staff) with samples ofall their relevant education materials (print and video) to date, so that the Subcommitteecould evaluate the effectiveness and fairness/neutrality of the information provided tothe public.(9) The Collaborative agreement on the basic education "message" and therelevant provisions of SB 390 will provide the basis for evaluation. Other evaluationtools gleaned from the literature and Subcommittee members' experience may be usedas supplements. The actual use of these collected criteria remained an open question.For example, the Subcommittee could find that the utilities' and opted-in cooperatives'messages are both fair and effective and therefore not make any recommendation tothe full TAC for any legislative modifications. Conversely, the materials may appearbiased or inadequate in some way, thereby compelling the Subcommittee torecommend to the TAC that a third party (such as the PSC or the Consumer Counsel)be designated in statute as taking responsibility for customer education during theremainder of the transition period. The Subcommittee acknowledged that anyrecommendation to alter the education mandate in the restructuring legislation wouldraise the issues of who would fund the effort, and how much funding would beadequate to the task.
September 17, 1998: The Subcommittee met in Helena to review utility educationmaterials and consider water rights issues. Chairman Wheelihan informed the membersthat the Montana Electric Cooperatives Association is considering the inclusion ofcustomer education efforts in its budget. MPC representatives brought samplebrochures (which were subsequently mailed to customers) containing information forprimarily residential consumers about how to get involved in the early (pilot) stages ofthe transition, and also brought as an example of an effective education campaign aseries of video clips that were used by a Pennsylvania utility. In addition, arepresentative from Xynergy Corporation (which contracts with MPC for research onretail choice and other services) was on hand as a resource person and providedmembers with a packet of educational materials.
The Subcommittee discussed a number of questions, including the following:
What needs to be contained in the media messages to customers?
What constitutes a fair, unbiased, message that nonetheless provides customerswith information specifically relevant to their choices now and in the future?
What are the principles and parameters that can best guarantee an effectivemessage--one that is clear, concise, memorable, attractive, and easy tounderstand?
Will MPC, PacifiCorp, and the Cooperatives continue to deliver the same kind ofmessages under changed circumstances, such as MPC's exit from power supplyand PacifiCorp's divestiture of distribution?
What do customers need to know now and in the months to come aboutrestructuring and, more specifically, about who their potential suppliers are andwhat sort of price/value comparisons can be made?
Given the nature and extent of unanticipated business decisions and consideringthe scope of unresolved issues surrounding restructuring, are the utilities still theappropriate responsible party for customer education?
On the subject of water issues, the Subcommittee heard a presentation by SenatorHurwitz and then invited comments and responses from representatives from theDepartment of Natural Resources and Conservation and MPC. (See Appendix VII forbackground information.) Members also noted that the Governor's Office has requestedthat the Federal Energy Regulatory Commission take into consideration, in the courseof its hydroelectric facilities relicensing procedures, the potential impacts of a newowner's assertion and actual use of senior water rights on the primarily agriculturaljunior water rights holders in the Missouri Basin.
In sum, without formalizing specific recommendations to the full TAC for legislativechanges, the Education Subcommittee intends to continue careful monitoring andevaluation of customer education materials produced by utilities and the cooperativesand will encourage both entities to cooperate with each other (and the TAC) to generatefair, accurate, and effective messages to the public about restructuring.
The Universal System Benefits Program Subcommittee
In enacting SB 390, the 1997 Legislature created a USBP fund. Annually, startingJanuary 1, 1999, each utility/cooperative must contribute 2.4% of its 1995 retail salesrevenue, which is established for each utility and cooperative as its annual USBP fundlevel. A utility's or cooperative's minimum annual funding requirement for low-incomeenergy and weatherization assistance is established at 17% of the utility's orcooperative's annual USBP funding level. SB390 provides for utility, cooperative, andlarge customer credits against their contributions to the USBP fund, and cooperativesmay collectively pool their statewide credits.
The purpose of the USBP fund, according to SB390, is "to ensure continued funding ofand new expenditures for energy conservation, renewable resource projects andapplications, and low-income energy assistance during the transition period and into thefuture." In addition to cost- effective energy conservation, renewable resource projectsand applications, and low-income energy assistance, SB 390 defines USBP to alsoinclude "research and development programs related to energy conservation andrenewables."
Under SB 390, the TAC is required to make recommendations before January 1, 1999,to the Governor, regarding the implementation of the USBP fund.
At its October 6 and 7, 1997, meeting, the TAC established the USBP Subcommittee.Representative Ernest Bergsagel was named Chairman. The other members are DonQuander (representing large industrial customers), Kathy Hadley (environmental andconservation interests), Gene Lewer (low income programs), and Perry Cole (investor-owned utilities). The charge of the USBP Subcommittee is to analyze the issuesassociated with the USBP fund and make recommendations to the full TAC regardingfund implementation in order to fulfill the TAC's statutory requirements.
TAC USBP Fund Statutory Directives :
Under 69-8-501(14), MCA, the TAC:
shall make recommendations to the governor, regarding theimplementation of statewide universal system benefits and universalenergy assistance funds, in time to allow for those funds to be created onor before January 1, 1999. This may include recommendations regardingthe assignment of an existing government agency or private, nonprofitentity as the fund administrator and administration guidelines for thefunds, including the means by which funds may be made available foruse.
Under 69-8-501(18), MCA :
On or before November 1, 1998, the transition advisory committee shallmake recommendations to the governor and the legislature regarding theprovision of low-income energy assistance programs in Montana by allenergy providers.
USBP Subcommittee Action:
The USBP Subcommittee met 11 times during the 1997-98 interim and hammered outthree comprehensive sets of recommendations:
(1) Guidelines on what should qualify for a USBP credit or expenditure (SeeAppendix VIII).
(2) Proposed legislation regarding the implementation of statewide universalsystem benefits and universal energy assistance funds and the enforceability of USBPcredits (See Appendix VIII).
(3) The USBP Subcommittee recommended the TAC pursue a method toassess a fee for all fuels during the 1999-2000 interim.
c25 8328smca
APPENDICES
Appendix I: TAC membership, 1997-99
Appendix II: Montana Electrical Industry Restructuring & Consumer Choice Act
(Senate Bill 390)
Appendix III: A Legal Analysis of the Electrical Utility Industry Restructuring & Customer Choice Act's Reciprocity Provision
Appendix IV: Electrical Industry Restructuring & Montana Power Company's Sale of Generation Assets
Appendix V: T.A.C. Reports
Appendix VI: The Collaborative on Customer Education and Pilot Programs
Appendix VII: Issues Concerning Water Rights Owned by Montana Power Company (Questions asked by Senator Hurwitz through LEPO)
Codified as Title 69, chapter 8 in the Montana Code Annotated.
Source: Energy Information Administration, U.S. Dept. of Energy: www.eia.doe.gov
See 69-8-501(13), MCA.
See 69-8-501(14) and 69-8-501(18), MCA.
See 69-8-411, MCA.
69-8-201, MCA provides that all customers with individual loads at a meter greater than 1,000 kilowatts and customers whose combined individual loads of 300 kilowatts or more each aggregate to a total of 1,000 kilowatts or more were entitled to choice on July 1, 1998.
The TAC Report was recommended by the Education Subcommittee and adopted by the full Committee as a means of fulfilling a quarterly reporting obligation established by SB 390. See Appendix V for the full text of each TAC Report.
For more detail, the minutes from each meeting are available from Legislative Services Division staff.
Materials from the Electrical Cooperatives were presented at this meeting, and a preliminary draft of an MPC brochure was also analyzed and discussed.
