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.
Sec. 4. "Alternative seller" means a seller of any component of electric service other than a noncompetitive service. The term includes an affiliate of an electric utility. The term does not include an electric utility.
Sec. 5. "Customer" means the retail purchaser of electric service.
Sec. 6. "Effective competition" means, with respect to a particular service, 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;
3. The ability of the sellers to enter or exit the market; and
4. The price and availability of comparable substitutes for the service,
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 component provided, as of December 31, 1996, by an electric utility.
Sec. 8. "Electric utility" means any public utility in the business of supplying electricity or its successor in interest that, as of December 31, 1996:
1. Held a certificate of public convenience and necessity issued pursuant to NRS 704.005 to 704.751, inclusive; and
2. Had an annual operating revenue of $250,000,000 or more.
Sec. 9. "Generation service" means the sale of electricity or capacity from equipment that converts other forms of energy into electricity by the owner of the equipment.
Sec. 10. "Noncompetitive service" means a transmission, distribution or other component of electric service determined by statute or regulation to be unsuitable for purchase by customers from alternative sellers.
Sec. 11. "Potentially competitive service" means a component of electric service determined by the commission to be suitable for purchase by customers from alternative sellers.
Sec. 12. 1. The date upon which customers may begin obtaining generation, aggregation and any other potentially competitive service from an alternative seller must be no later than July 1, 2001, unless the commission determines that a different date is necessary to protect the public interest. If the commission has not authorized customers to begin obtaining any potentially competitive service from an alternative seller by February 1, 2001, the commission shall provide a report to the legislature on that date which:
(a) Explains the reason that the commission has not granted such an authorization; and
(b) States whether the commission will grant such an authorization by July 1, 2001.
2. The commission may:
(a) Establish different dates for the provision of different services by alternative sellers in different geographic areas; and
(b) Authorize, in gradual phases, the right to buy from alternative sellers.
3. The commission shall determine that an electric service is a potentially competitive service if provision of the service by alternative sellers:
(a) Will not harm any class of customers;
(b) Will decrease the cost of providing the service to customers in this state or increase the quality or innovation of the 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.
4. If the commission determines that a market for a potentially competitive service does not have 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 subsection. In determining whether a market for a potentially competitive service does not have effective competition pursuant to this subsection, the commission shall:
(a) Identify the relevant market;
(b) Identify, where feasible, the alternative sellers that participate in the relevant market; and
(c) Calculate, where feasible, the share of each participant in the market and evaluate the significance of each share.
The commission may reconsider any determination made pursuant to this subsection upon its own motion or upon a showing of good cause by a party requesting a reconsideration. Upon a finding by the commission that the market for a service previously found not to have effective competition 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. Commencing on the date on which customers are authorized to obtain a potentially competitive service from alternative sellers, an electric utility shall not provide the potentially competitive service except through an affiliate licensed pursuant to section 13 of this act.
6. The commission shall design, conduct and evaluate at least one pilot project regarding retail competition, which must commence not later than July 1, 1998. The commission shall design the project in such a manner that the project:
(a) Provides useful information to the commission, consumers and sellers of electricity regarding the carrying out of competition to provide potentially competitive services;
(b) Prevents any unfair advantage to a seller of a potentially competitive service;
(c) Ensures substantial participation by residential, commercial and industrial customers; and
(d) Prevents any unnecessary delay in the date on which customers may obtain potentially competitive services from alternative sellers.
With respect to a pilot project, the commission possesses all of the relevant powers and duties set forth in sections 2 to 23, inclusive, of this act. The commission shall treat any costs incurred by an electric utility before July 1, 1998, on behalf of customers who participate in a pilot project in the manner set forth in section 19 of this act.
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 deny the application of a prospective alternative seller for a license, or may limit, suspend or revoke a license issued to an alternative 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. In determining whether to take any of those actions, the commission may consider whether the applicant for or holder of such a license, or any affiliate thereof, has engaged in activities which are inconsistent with effective competition.
4. A city, county or other local governmental entity or a public utility, or any affiliate thereof, which is authorized to provide electric service within the State of Nevada on or before July 1, 1997, and which has an annual operating revenue of less than $250,000,000, is subject to the provisions of sections 2 to 23, inclusive, of this act and any regulations adopted by the commission that are in effect on the date on which the city, county or other local governmental entity or public utility, or an affiliate thereof:
(a) Applies to obtain a license as an alternative seller; or
(b) Directly or indirectly attempts to provide, or act on behalf of an alternative seller in the provision of, electric service in the territory served by another city, county or other local governmental entity or public utility, or an affiliate thereof.
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 and prevent activities that are inconsistent with the goals of sections 2 to 23, inclusive, of this act. The commission shall:
(a) Proscribe activities that are inconsistent with the goals of sections 2 to 23, inclusive, of this act, and establish penalties for such activities and procedures for imposing the penalties; and
(b) Establish conditions and limitations on the ownership, operation or control of the assets of a provider of an electric service to prevent activities that are inconsistent with the goals of sections 2 to 23, inclusive, of this act and to ensure the development of effective competition for electric service, including, but not limited to, limitations on the ownership, operation or control of:
(1) Transmission facilities; and
(2) Any generation facilities necessary to the reliable and economic operation of the transmission facilities.
In establishing such conditions and limitations, the commission shall consider the financial obligations that a provider of an electric service has, as of the date on which customers are authorized to obtain a potentially competitive service from alternative sellers, incurred 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 to determine whether the markets for electric service are functioning in a manner consistent with sections 2 to 23, inclusive, of this act. 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, operation or control 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, but not limited to, documents and testimony, in accordance with the regulations of the commission relating to the discovery of information relating to a provider of electric service.
4. If evidence is presented to the commission that anticompetitive or discriminatory conduct, including, but not limited to, the unlawful exercise of market power, is denying customers the benefits of effective competition in a market for electric services, the commission shall consult with the attorney general and transmit any evidence of a violation of the law of this state to the attorney general and, if appropriate, inform the United States Department of Justice and any appropriate federal agency.
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 potentially competitive services not later than 6 months before the date on which alternative sellers may begin providing potentially competitive services.
3. If the commission determines that an affiliate of a provider of a noncompetitive service cannot provide a potentially 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 it has incurred.
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 for noncompetitive services that allow 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 pursuant to which electric service must be provided, including, but not limited to, a minimum period during which a customer must continue to take electric service. The price charged for electric service for a particular group of customers must reflect the incremental cost of serving the group.
4. If the provider of such electric service is an electric utility, the utility shall provide the service through an affiliate whose sole business activity is the provision of that electric service.
Sec. 19. 1. For each electric utility, the commission shall determine the recoverable costs associated with assets or obligations that are documented in the accounting records of the electric utility and are properly allocable to a particular potentially competitive service as of the date on which customers are authorized to obtain such a service from alternative sellers. Shareholders of the electric utility must be compensated fully for all such costs determined by the commission. In determining the costs, the commission shall take into account:
(a) The extent to which the electric utility was legally required to incur the costs for the assets and obligations;
(b) The extent to which the market value of the assets and obligations of the utility relating to the provision of potentially competitive services exceeds the costs for the assets and obligations;
(c) The effectiveness of the efforts of the electric utility to increase and realize the market value of any assets and obligations 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 and obligations;
(e) The effects of the difference between the market value and the costs for the assets and obligations, including, but not limited to, tax considerations; and
(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 and obligations 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 the period over which the recovery may occur. 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 alternative sellers 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) 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 report which must:
(a) Be published not later than July 1, 2000, and every third year thereafter.
(b) Be based upon the information filed pursuant to subsection 3.
(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) Evaluate whether sufficient capacity will be available to customers at a reasonable price and will be selected by customers after the commission has authorized the provision of potentially competitive services by alternative sellers.
(h) Include a description of the facilities needed to meet future requirements.
(i) Evaluate the extent to which electric service is subject to competition and the actions necessary to accommodate or facilitate competition in the provision of electric services.
2. If the commission determines that sufficient capacity will not be available to customers at a reasonable price, the commission may establish equitable obligations for customers, electric utilities or alternative sellers to ensure that sufficient capacity is made available. 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 adopt regulations that specify the method or procedures which will be used to ensure the requirements for capacity are satisfied. The methods or procedures may include competitive solicitations to fill the requirements or any other procedures or methods deemed appropriate and necessary by the commission.
3. Each entity providing a potentially competitive service or a noncompetitive service shall submit to the commission annually, 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; and
(b) Ensure the availability of adequate, reliable, efficient and economic electric service.
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 customers to alternative sellers with environmental goals;
3. The effects of direct access for 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. 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. 26. The commission shall adopt regulations to carry out the provisions of this act not later than July 1, 1999.
Sec. 27. In the quarterly report for the first quarter of 1999, which must be submitted by the commission pursuant to section 23 of this act, the commission shall provide a comprehensive evaluation of the development of the markets for potentially competitive services since July 1, 1997.
Sec. 28. Any interim study conducted by the Legislative Commission regarding the provision of electric service in this state must include:
1. A recommendation regarding whether NRS 704.736, 704.741, 704.743, 704.746 and 704.751 should be continued, repealed or amended.
2. An evaluation of whether or the extent to which:
(a) Requirements should be established regarding the use of renewable resources and the creation of programs to improve energy efficiency; and
(b) The diversity of fuel, the diversity of generation resources or any economic or environmental factors should be considered in determining the optimal combination of generation resources necessary to meet the requirements for electric energy in this state.
Sec. 29. 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. 30. This act becomes effective on July 1, 1997.