Assembly Bill No. 366

Assembly Bill No. 366-Committee on Government Affairs

April 15, 1997
____________

Referred to Committee on Government Affairs

SUMMARY--Revises provisions for regulation of electric service to allow customers direct access to alternative sellers of electric services. (BDR 58-1390)

FISCAL NOTE: Effect on Local Government: Yes.

Effect on the State or on Industrial Insurance: Yes.

EXPLANATION - Matter in italics is new; matter in brackets [ ] is material to be omitted.

AN ACT relating to electric service; revising provisions for the regulation of electric service to allow customers direct access to alternative sellers of electric services; requiring the central assessment of certain property; requiring the executive director of the department of taxation to submit a report to the legislature; providing a penalty; and providing other matters properly relating thereto.

THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS:

Section 1 Chapter 704 of NRS is hereby amended by adding thereto the provisions set forth as sections 2 to 23, inclusive, of this act.
Sec. 2. As used in sections 2 to 23, inclusive, of this act, unless the context otherwise requires, the words and terms defined in sections 3 to 11, inclusive, of this act, have the meanings ascribed to them in those sections.
Sec. 3. "Aggregation service" is the service of buying electricity and reselling or otherwise supplying electricity to a customer, but the term does not include the provision of basic electric service.
Sec. 4. "Alternative seller" means a seller, other than an electric utility, of any electric service. The term includes an affiliate of an electric utility.
Sec. 5. "Customer" means the retail purchaser of electric service.
Sec. 6. "Effective competition" means a market structure and a process under which, as a result of:
1. The number of sellers of the service;
2. The size of each seller's share of the market; and
3. The ability of the sellers to enter or exit the market,
an individual seller is not able to influence significantly the price of the service.
Sec. 7. "Electric service" includes generation service, aggregation service and any other service or function provided, as of December 31, 1996, by an electric utility.
Sec. 8. 1. "Electric utility" means any public utility in the business of supplying electricity or its successor in interest that, as of December 31, 1996:
(a) Held a certificate of public convenience and necessity issued pursuant to NRS 704.005 to 704.751, inclusive; and
(b) Had an annual operating revenue of $250,000,000 or more.
2. The term does not include a nonprofit cooperative which:
(a) Provides service only to its members; and
(b) Allows its members to obtain services from alternative sellers.
Sec. 9. "Generation service" means the sale of electricity or capacity by the owner of equipment that converts other forms of energy into electricity.
Sec. 10. "Noncompetitive service" means a transmission, distribution or other electric service determined by statute or regulation to be unsuitable for inclusion in a system under which the retail customer may purchase the service from an alternative seller.
Sec. 11. "Potentially competitive service" means an electric service determined by the commission to be suitable for inclusion in a system under which the retail customer may purchase the service from an alternative seller.
Sec. 12. 1. Not later than January 1, 1999, the commission shall set forth by regulation the date upon which customers may begin obtaining from an alternative seller generation, aggregation and any other service determined by the commission to be potentially competitive. The commission may:
(a) Establish different dates for the provision of different services by alternative sellers in different geographic areas;
(b) Authorize, in gradual phases, the right to buy from alternative sellers; and
(c) Authorize pilot programs that do not allow discrimination among the classes of residential, commercial and industrial customers.
2. The commission shall determine that an electric service is a potentially competitive service if the service provided by the alternative seller:
(a) Will not harm one or more classes of customers;
(b) Will decrease the cost of providing service to customers in this state or increase the quality or innovation of service to customers in this state;
(c) Is a service for which effective competition in the market is likely to develop;
(d) Will advance the competitive position of this state relative to surrounding states; and
(e) Will not otherwise jeopardize the safety and reliability of the electric service in this state.
3. In determining whether effective competition is likely to develop in a market for a potentially competitive service, the commission shall:
(a) Identify the relevant market;
(b) Identify the alternative sellers that participate in the relevant market; and
(c) Calculate the market share of each participant in the market and evaluate the significance of each share.
4. If the commission determines that a market for a potentially competitive service does not include effective competition, the commission shall, by regulation, establish the method for determining prices for the service and the terms and conditions for providing the service. The regulations must ensure that the pricing method, terms and conditions are just and reasonable and not unduly discriminatory. The regulations may include pricing alternatives which authorize the seller to reduce prices below maximum pricing levels specified by the commission or any other form of alternative pricing which the commission determines to be consistent with the provisions of this section. Upon a subsequent finding by the commission that the market for that service has become effectively competitive, the commission shall repeal the regulations which established the pricing method for that service and the terms and conditions for providing that service.
5. The commission may reconsider any determination made pursuant to this section upon its own motion or upon a showing of good cause by a party requesting a reconsideration.
Sec. 13. 1. It is unlawful for an alternative seller to sell any electric service to a customer for consumption within this state without having first obtained a license from the commission to do so.
2. Not later than January 1, 1999, the commission shall by regulation set forth the procedures and conditions that alternative sellers must satisfy before obtaining a license to sell services to a customer in this state, including, but not limited to, procedures and conditions relating to:
(a) Safety;
(b) Reliability of service;
(c) Financial reliability;
(d) Fitness to serve customers; and
(e) Billing practices and customer service, including the initiation and termination of service.
3. The commission may limit, suspend or revoke a license issued to an alternate seller if the action is necessary to protect the interests of the public or to enforce the provisions of sections 2 to 23, inclusive, of this act or of a regulation of the commission.
Sec. 14. 1. The commission shall prohibit a provider of a noncompetitive service from providing a potentially competitive service, except through an affiliate.
2. The commission shall require each provider of a noncompetitive service that is necessary to the provision of a potentially competitive service to make its facilities or services equally available to all alternative sellers.
Sec. 15. 1. The commission shall monitor the markets for electric services affected by sections 2 to 23, inclusive, of this act to identify, prevent, terminate and provide remedies for anticompetitive conduct. The commission shall:
(a) Establish standards of conduct related to activities that are anticompetitive, including penalties for violation of the standards; and
(b) Establish conditions and limitations on the ownership of the assets of a provider of an electric service to minimize the incidence of anticompetitive conduct, taking into consideration financial obligations that a provider of an electric service incurred before July 1, 1997, to carry out a statutory obligation of a public utility.
2. Upon a showing of good cause by a party requesting an investigation or upon a motion of the commission, the commission shall conduct an investigation of the operation of a market for an electric service in this state. The investigation must include, but is not limited to, the effect on the market of:
(a) Mergers, consolidations or acquisitions of the assets or the securities of providers of electric services;
(b) The disposition of ownership, management or operation of the assets of providers of electric services;
(c) Transmission congestion or constraints; and
(d) Anticompetitive or discriminatory conduct.
3. The commission may require an alternative seller or an electric utility to provide information, including documents and testimony, in accordance with the regulations of the commission relating to the discovery of information for a provider of electric service.
4. Upon a determination by the commission that anticompetitive or discriminatory conduct, including the unlawful exercise of market power, is denying customers the benefits of effective competition in a market for electric services, the commission shall inform the attorney general of a violation of the law of this state and inform the United States Department of Justice and any appropriate federal agency of a violation of federal law.
5. Statutory or regulatory provisions, including, but not limited to, NRS 703.196, relating to the disclosure of confidential, proprietary or trade secret information notwithstanding, the commission shall disclose information obtained pursuant to this section to the attorney general with an appropriate agreement regarding confidentiality. The commission may disclose information to federal officers upon a determination by the commission that disclosure is necessary to prevent or restrain a violation of federal law. Before making a disclosure pursuant to this subsection, the commission shall provide the author or owner of the information with reasonable notice of its intention to disclose and opportunity to prevent or limit the disclosure.
Sec. 16. 1. The affiliate of a provider of a noncompetitive service may provide a potentially competitive service upon a finding that:
(a) The affiliate will have, with respect to the provision of the services, an arm's length relationship with the entity that provides the noncompetitive service;
(b) The business or organizational relationship, or both, between the provider of the noncompetitive electric service and the affiliate providing the competitive service does not interfere with the development of effective competition; and
(c) The risk of anticompetitive behavior by the provider of a noncompetitive service or the affiliate providing the competitive service, or both, is minimal and the regulatory expenses to prevent the anticompetitive behavior are minimal.
2. The commission shall adopt regulations which specify the information which must be submitted and the procedure which will be used to process a request by an affiliate of a noncompetitive service for authorization to provide a potentially competitive service. The procedure must provide an opportunity for the affiliate to obtain a determination from the commission regarding its request to provide competitive services not later than 6 months before the date on which alternative sellers may begin providing competitive services.
3. If the commission determines that an affiliate of a provider of a noncompetitive service cannot provide a competitive service pursuant to the provisions of this subsection, and the provider of the noncompetitive service is an electric utility, the commission shall, pursuant to section 19 of this act, give the utility a reasonable opportunity to recover the costs incurred for the services the utility will not provide in the future.
Sec. 17. 1. An electric utility shall provide all noncompetitive services within its territory unless the commission authorizes another entity to provide the noncompetitive service.
2. Transmission service and distribution service shall be deemed noncompetitive services by the commission. Except as otherwise provided in subsection 3, a noncompetitive service is subject to NRS 704.001 to 704.655, inclusive, 704.701 to 704.751, inclusive, and 704.800 to 704.900, inclusive.
3. The commission shall adopt regulations that permit innovative pricing methods upon a finding that the innovative pricing, when compared to pricing pursuant to subsection 2, improves the performance of the service or lowers the cost of the service to the customer, or both. The regulations for innovative pricing must specify:
(a) The provisions that must be included in a plan of innovative pricing;
(b) The procedures for submitting an innovative plan for pricing to the commission for approval and implementation; and
(c) Which provisions of this chapter do not apply to pricing changes that are made during the period in which the innovative pricing plan is in effect.
4. The commission shall adopt regulations which ensure that a person who owns a transmission or distribution facility, or both, or a facility that provides access to a potentially competitive service shall make the facilities available, on a comparable basis, to all alternative sellers or to the customers of the alternative sellers, or both, as the commission may determine.
Sec. 18. 1. If customers are unable to obtain electric service or fail to select a provider of a potentially competitive service, the commission shall designate an electric utility to provide electric service to those customers. The provider so designated by the commission is obligated to provide service to the customers. Service provided by the utility pursuant to this subsection shall be deemed a noncompetitive service for which the utility may recover its costs pursuant to NRS 704.001 to 704.655, inclusive, 704.701 to 704.751, inclusive, and 704.800 to 704.900, inclusive.
2. Upon a finding by the commission that the public interest will be promoted, the commission may prescribe alternate methods for providing electric service to those customers described in subsection 1. The alternate methods may include, but are not limited to, the direct assignment of customers to alternative sellers or a process of competitive bidding for the right to provide electric service to the designated customers.
3. The commission shall establish minimum terms and conditions under which basic service must be provided, including a minimum period during which a customer must continue to take basic service. The price charged for basic service for a particular group of customers must reflect the incremental cost of serving the group.
4. If the provider of basic service is an electric utility, the utility shall provide the basic service through an affiliate whose sole business activity is the provision of basic service.
Sec. 19. 1. The commission shall fairly apportion between the shareholders and ratepayers the costs for assets that are documented in the accounting records of an electric utility as of July 1, 1997 which are properly allocable to a potentially competitive service taking into account:
(a) The extent to which the electric utility was legally required to incur the costs for the assets;
(b) The extent to which the market value of the assets of the utility relating to the provision of potentially competitive services exceeds the costs for the assets;
(c) The effectiveness of the efforts of the electric utility to increase and realize the market value of any assets associated with the provision of potentially competitive services;
(d) The extent to which the rates previously established by the commission have compensated shareholders for the risk of not recovering the costs for the assets;
(e) The effects of the difference between the market value and the cost documented in the accounting records for the assets on the taxes for those assets;
(f) If the electric utility had the discretion to determine whether to incur the costs, the conduct of the electric utility with respect to the costs for the assets when compared to other utilities with similar obligations to serve the public.
2. For the purposes of this section, the commission may impose a procedure for the direct and unavoidable recovery from ratepayers of a portion of the past costs which are determined by the commission to be owed by the ratepayers. The procedure must include a determination of:
(a) The period over which the recovery may occur; and
(b) Whether the costs are to be recovered from the customers or the sellers.
Such a determination must not discriminate against a participant in the market.
Sec. 20. 1. The commission shall establish procedures to ensure that a customer of an alternative seller is not switched to another alternative seller without a reliable confirmation of the customer's intent to make such a change and approval of the specific details of the change.
2. The commission shall establish minimum and uniform standards for the form and content of all disclosures, explanations or sales information disseminated by a person selling a potentially competitive service to ensure that the person provides adequate, accurate and understandable information about the service which enables a customer to make an informed decision relating to the source and type of service purchased.
3. The commission, before authorizing direct access to alternative sellers for an electric service, shall carry out an educational program for customers to:
(a) Inform customers of the changes in the provision of electric service, including, but not limited to, the availability of alternate providers of electric service;
(b) Inform customers of the requirements relating to disclosures, explanations or sales information for sellers of potentially competitive services; and
(c) Provide assistance to customers in understanding and using the information to make reasonably informed choices about which service to purchase and from whom to purchase it.
Sec. 21. 1. An electric utility shall submit to the commission, pursuant to a schedule established by the commission, a plan for compliance with the requirements set forth in sections 2 to 23, inclusive, of this act and the applicable regulations. The utility shall include with the schedule any information the commission needs to:
(a) Set rates for electric services, such as:
(1) A statement of costs of the utility to provide the service.
(2) An estimate of the revenue required by the utility.
(b) Allocate among customers the costs of service and the requirements for revenues for noncompetitive services.
(c) Adopt regulations for potentially competitive services if a market is not sufficiently competitive.
2. The commission may exempt an electric utility or an alternative seller, or both, from the strict application of any provision of this chapter, other than the provisions of sections 2 to 23, inclusive, of this act, upon a determination by the commission that the exemption is necessary to achieve effective competition within the electric industry.
Sec. 22. 1. The commission shall develop and publish a plan for the integration of services. The plan must:
(a) Be first published on July 1, 2000, and every third year thereafter.
(b) Be based upon the information filed pursuant to subsection 2.
(c) Include forecasts of electric capacity and energy.
(d) Identify and consider any present and projected reductions in the demand for energy that may result from the measures to improve energy efficiency in the industrial, commercial, residential and energy-producing sectors of the area being served.
(e) Evaluate the economic, environmental and other benefits to this state and to the customers of the electric utilities associated with the following possible sources of supply and methods to reduce demand:
(1) Improvements in the efficient production and use of energy;
(2) Pooling of power;
(3) Purchases of power from other states or countries;
(4) Facilities that operate on solar or geothermal energy or wind;
(5) Facilities that operate on the principle of cogeneration or hydrogeneration; and
(6) Other generation facilities.
(f) Identify the best combination of sources of supply and methods to reduce demands available to meet forecast requirements.
(g) Determine whether the combination of sources and methods described in paragraph (f) will be available to customers at a reasonable price and will be selected by customers after the commission has authorized direct access to potentially competitive service. If the commission determines that the combination of sources and methods will not be available to customers at a reasonable price, the commission may establish reasonable obligations for customers, electric utilities or alternative sellers to ensure that the optimal combination of sources of supply and methods to reduce demand is achieved. Any obligation that discriminates against or unduly burdens an electric utility, an alternative seller or a customer is not reasonable and may not be imposed by the commission. The commission may give preference to the source and methods identified in paragraph (e) that will provide the greatest economic and environmental benefits to this state and will provide adequate and reliable service.
2. Each entity providing a potentially competitive service or a noncompetitive service shall submit to the commission annually, commencing on March 15, 1999, in the format prescribed by the commission, information that the commission determines is necessary to:
(a) Monitor the development of competition to provide electric services;
(b) Ensure the availability of adequate, reliable, efficient and economic electric service; and
(c) Develop and implement the integrated resource plan pursuant to this section.
Sec. 23. The commission shall prepare a quarterly report for the legislature that assesses the developments in the electric industry in Nevada. The reports must be submitted to the director of the legislative counsel bureau for transmittal to the legislature and must include, but are not limited to, a discussion of:
1. Whether there is effective competition for each potentially competitive service;
2. The compatibility of direct access for retail customers to alternative sellers with environmental goals;
3. The effects of direct access for retail customers to alternative sellers on each class of customers, compared to the noncompetitive regulatory structure;
4. The opportunities to cooperate, formally or informally, with other states or the Federal Government in the implementation of effective competition; and
5. Further legislation necessary to achieve the goals of sections 2 to 23, inclusive, of this act.
Sec. 24. NRS 361.320 is hereby amended to read as follows:
361.320 1. At the regular session of the Nevada tax commission commencing on the [1st] first Monday in October of each year, the Nevada tax commission shall establish the valuation for assessment purposes of any property of an interstate and intercounty nature, which must in any event include the property of all interstate or intercounty railroad, sleeping car, private car, street railway, traction, telegraph, water, telephone, air transport, electric light and power companies, together with their franchises, and the property and franchises of all railway express companies operating on any common or contract carrier in this state. This valuation must not include the value of vehicles as defined in NRS 371.020.
2. Except as otherwise provided in subsection 3 and NRS 361.323, the commission shall establish and fix the valuation of the franchise, if any, and all physical property used directly in the operation of any such business of any such company in this state, as a collective unit. If the company is operating in more than one county, on establishing the unit valuation for the collective property, the commission shall then determine the total aggregate mileage operated within the state and within its several counties, and apportion the mileage upon a mile-unit valuation basis. The number of miles apportioned to any county are subject to assessment in that county according to the mile-unit valuation established by the commission.
3. After establishing the valuation, as a collective unit, of a public utility which generates, transmits or distributes electricity, the commission shall segregate the value of any project in this state for the generation of electricity which is not yet put to use. This value must be assessed in the county where the project is located and must be taxed at the same rate as other property.
4. The Nevada tax commission shall adopt formulas, and cause them to be incorporated in its records, providing the method or methods pursued in fixing and establishing the taxable value of all franchises and property assessed by it. The formulas must be adopted and may be changed from time to time upon its own motion or when made necessary by judicial decisions, but the formulas must in any event show all the elements of value considered by the commission in arriving at and fixing the value for any class of property assessed by it. These formulas must take into account, as indicators of value, the company's income, stock and debt, and the cost of its assets.
5. If two or more persons perform separate functions that collectively are needed to deliver electric service to the final customer and the property used in performing the functions would be centrally assessed if owned by one person, the Nevada tax commission shall establish its valuation and apportion the valuation among the several counties in the same manner as the valuation of other centrally assessed property. The Nevada tax commission shall determine the proportion of the tax levied upon the property by each county according to the valuation of the contribution of each person to the aggregate valuation of the property. This subsection does not apply to qualified facilities, as defined in 18 C.F.R. § 292.101, which were constructed before July 1, 1997.
6. As used in this section , [the word] "company" means any person, company, corporation or association engaged in the business described.
[6.] 7. All other property must be assessed by the county assessors, except as provided in NRS 361.321 and 362.100 and except that the valuation of land and mobile homes must be established for assessment purposes by the Nevada tax commission as provided in NRS 361.325.
[7.] 8. On or before November 1 of each year the department shall forward a tax statement to each private car line company based on the valuation established pursuant to this section and in accordance with the tax levies of the several districts in each county. The company shall remit the ad valorem taxes due on or before December 15 to the department which shall allocate the taxes due each county on a mile-unit basis and remit the taxes to the counties no later than January 31. The portion of the taxes which is due the state must be transmitted directly to the state treasurer. A company which fails to pay the tax within the time required shall pay a penalty of 10 percent of the tax due or $5,000, whichever is greater, in addition to the tax. Any amount paid as a penalty must be deposited in the state general fund. The department may, for good cause shown, waive the payment of a penalty pursuant to this subsection. As an alternative to any other method of recovering delinquent taxes provided by this chapter, the attorney general may bring a civil action in a court of competent jurisdiction to recover delinquent taxes due under this subsection in the manner provided in NRS 361.560.
Sec. 25. NRS 704.736, 704.741, 704.746 and 704.751 are hereby repealed.
Sec. 26. The executive director of the department of taxation shall, not later than January 1, 1999, submit to the director of the legislative counsel bureau for distribution to the legislature a report including, but not limited to:
1. An analysis of the effect of the tax policies of this state on:
(a) The potential for effective competition in providing electric services to customers; and
(b) The effect of competition in providing electric services to customers on the tax revenue of this state and local governments.
2. Recommendations for legislation that would advance the purposes of sections 2 to 23, inclusive, of this act and ensure a minimal effect on the tax revenue of this state and local governments.
Sec. 27. The provisions of subsection 1 of NRS 354.599 do not apply to any additional expenses of a local government that are related to the provisions of this act.
Sec. 28. 1. This section and sections 1 to 24, inclusive, 26 and 27 of this act become effective on July 1, 1997.
2. Section 25 of this act becomes effective on July 1, 2000.

LEADLINES OF REPEALED SECTIONS

704.736Applicability of NRS 704.741 to 704.751, inclusive.
704.741Plan to increase supply or decrease demands: Triennial submission required; contents prescribed by regulation.
704.746Public hearing on adequacy of plan; determination by commission.
704.751Order accepting plan or specifying inadequacies; recovery of costs from customers.