MY VIEW/Barbara Kessinger – Power surge

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On May 12, Gov. Timothy M. Kaine signed Senate Bill 596, which extended the life of the Commission on Electric Utility Regulation for another two years. Driving home the need for continued study of the evolving electric power scene, just days before, Dominion Virginia Power had applied to the State Corporation Commission ( SCC ) for an 18.3 percent increase in rates to offset higher fuel prices. Only a few days later, the SCC approved an interim fuel rate increase sought by Allegheny Power. 

SB 596 has not garnered the media attention that it warrants. Especially pertinent are provisions that provide for public education and awareness for the purpose of promoting electric conservation. 

SB 596 is a successor bill to last years SB 1416, most notable for its restoration of electricity regulation but secondarily for setting a goal of reducing statewide electricity consumption by 10 percent by the year 2022. That bill directed the SCC to conduct a proceeding to address the feasibility of achieving that goal cost-effectively through a mix of various programs.  

The SCC opened this proceeding in June 2007. The workgroup it established was divided into five subgroups tasked to explore general considerations, conservation/energy efficiency, demand response/peak demand, financial considerations, and consumer education.  

A diverse team of market participants converged in Richmond to participate in these subgroup discussions. The workgroup included energy industry experts, electric cooperative, municipal, utility company representatives, environmental group leaders; competitive service providers, as well as public servants and private citizens. I felt very privileged to be part of that team.  

The subgroups labored diligently for months before they made detailed, and in some cases unanimous, recommendations to SCC staff. The SCC submitted its report to the Governor and General Assembly in December and closed the proceeding at that time.  

Enter SB 596, which, from its inception, was a bill designed to continue but rename and redirect the Commission on Electric Utility Restructuring (CEUR), given the 2007 re-regulation legislation. As with many bills, amendments concerning related issues were proposed.  

The CEUR was the first legislative body to consider SB 596 at the end of January. This Commission was established in 1999 to work collaboratively with the SCC in conjunction with the phase-in of retail competition within the Commonwealth. As the CEUR considered SB 596, there was some discussion about adding consumer education provisions consistent with recommendations of Subgroup 5: Information/ Consumer Education from the previous SCC workgroup proceeding.

The Senate Commerce and Labor Committee considered the bill in mid-February. By this time, consumer education provisions had been added. Sen. Thomas K. Norment, R-Williamsburg, offered an amended bill in the nature of a substitute. The bill was unanimously referred out of committee.

SB 596 continued its journey through the legislative process as it passed unanimously in the senate, crossed over, and then passed unanimously in house committees and (save three abstentions) also on the house floor. So, for the most part, the bills trek was uneventful until Gov. Kaines proposed amendment drew attention to it.

One of the Governors recommendations was to add a goal to reduce the growth rate of peak demand for electricity (the amount required on the hottest day in the summer) by 40 percent over the next 15 years.  This commendable goal would have complemented the previous electricity consumption reduction goal stated in SB 1416, addressed concerns raised by Subgroup 3: Demand/Peak Reduction from the previous SCC workgroup proceeding, and incorporated the spirit of the Virginia Energy Plan.

However, other wording in the Governors recommendations proved controversial.  Some market participants felt strongly that a specific cost- effectiveness test should have been identified. Others objected that the amendment appeared to constrain how the SCC could assess the impacts of efficiency and peak reduction programs in evaluating the need for future utility plant or power line projects.

Both industrial customers and environmental organizations opposed Kaines proposed amendment, although for entirely different reasons, and it failed on the senate floor. A few weeks later, the Governor signed the bill passed previously by the General Assembly.

Of course the story doesnt end here. Commonwealth- wide electric energy education could be implemented by the SCC sometime later this year due to some of the provisions contained in SB 596. And that would be very beneficial and timely for Virginia ratepayers.

Consumer education is indeed appropriate given last years legislatively affirmed electricity consumption reduction goal, but it is critically important given the significant increases in electric rates that are on the horizon.

Fuel rate increases aside, capped base rates are due to expire automatically on December 31, 2008 . At some point in the not-so-distant future, we should expect the utility companies to apply for additional increases in electric rates. If approved by the SCC, those increases would affect base rates as opposed to fuel rates.       

Ratepayers really do need to augment their understanding of energy conservation and efficiency, demand-side management, demand response and renewable energy. And they need to do so soon, before rates start to rise significantly.

Looking forward, it is also imperative that a peak demand reduction goal be approved during next years legislative session and that a framework be established within which consumers at all levels can work together and with their utility companies to address peak usage challenges.

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