SB 501 - This act would allow investor-owned utilities (IOUs) to transfer existing generating facilities to an affiliated entity which shall operate as an Exempt Wholesale Generator (EWG) or GENCO as provided pursuant to the federal National Energy Policy Act of 1992.

TAXATION - "Distributable property" of electric corporations shall continue to be assessed and the values distributed as in the 2000 tax year, even if such property is transferred to an EWG. The State Tax Commission shall promulgate rules to accomplish this. Generation property placed into service after January 1, 2001 shall be considered "local property" of the electric corporation.

GENCO FORMATION - An IOU can apply to the Public Service Commission (PSC) for approval to form a GENCO. Asset transfer must be at book value. The PSC must conduct a full rate case for the utility and determine stranded costs created by the transfer. The Commission shall only approve the transfer if it makes the findings required by the National Energy Policy Act regarding such transfers: that the transfer of assets will benefit consumers, is in the public interest and does not violate state law and that the Purchased Power Agreement (PPA) is declared to meet the same criteria and will not provide the GENCO with any unfair competitive advantage.

The remaining portion of the IOU will be a local distribution utility (LDU). The LDU will enter into a 5-year purchased power agreement (PPA) with GENCO for power supply to be approved by the Federal Energy Regulatory Commission (FERC); 3- year renewals may be made at cost of service prices.

If FERC ceases to regulate the PPA on a cost-of-service basis, the PSC shall review cost of service rates of the PPAs. Generating plants may not be transferred from the GENCO to a non- affiliated entity without PSC approval.

RATE FREEZE AND OPTION TO CHOOSE SUPPLIER - If an IOU forms a GENCO, the utility's rates are capped at the levels in effect on January 1, 2001, for five years from the date of applying for the transfer.

Industrial and commercial customers with load greater than 2 million watts (megawatts or MW) will be eligible to enter into agreements with an energy provider other than their LDU. The LDU will purchase power from the provider selected by the customer and deliver it for resale at the customer-agreed price, plus transmission, delivery service and decommissioning charges and applicable taxes. Customers eligible to choose may aggregate load for a combined purchase. Transmission charges will be those set by FERC or the Regional Transmission Organization (RTO).

The Commission will retain authority for bundled service rate design. All customers with less than 2 MW of load will remain on bundled rates. Customers greater than 2 MW may remain on bundled service at frozen rates, or subsequent to the end of a rate freeze, at cost of service rates set by the Commission until they choose to purchase from another supplier. Customers may return to bundled rates one time.

Utilities may file tariffs with the PSC, and upon approval, may conduct experimental billing and pricing programs.

TRANSITION FOR EMPLOYEES - The act requires the GENCO to hire a sufficient number of the utility's non-supervisory workers to operate and maintain the transferred assets, under substantially the same terms of employment and continue such employment and terms for 30 months. The GENCO shall offer a transition plan for those non-supervisory workers not hired from the utility.

DECOMMISSIONING COSTS - Nuclear decommissioning costs shall be recovered through charges approved by the PSC.

COMPETITIVE PROCUREMENT - A utility which has a PPA with a GENCO may file a plan with the PSC, proposing to attempt to competitively procure electric power if it can do so cheaper than under the PPA and at equivalent reliability. The procurement shall not limit the future purchase of power under the PPA, or renewals of the PPA. The PSC shall approve if it finds the plan is consistent with all applicable laws and is likely to result in identifiable benefits to customers.

REGISTRATION OF SUPPLIERS - Suppliers providing service to customers eligible to shop must register with the Commission.
OTTO FAJEN