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<title>Proposed Legislation States Retail Competition Should be Implemented In Connecticut
Beginning July, 1999</title>
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<p align="left"><strong><small><font face="Arial">About The Author:</font></small></strong></p>
<p align="left"><font face="Arial" style="font-size: 9pt">Robert A. Olson is a partner in the law firm of
Brown, Olson & Gould, P.C. which maintains a nationwide practice in energy law,
public utility law and related commercial transactions.</font></p>
<p><small><font face="Arial"><font style="font-size: 9pt">He can be reached at:</font><br>
<br>
<b><font color="#0000FF">Brown, Olson & Gould, PC</font></b><br>
2 Delta Drive<br>
Suite 301<br>
Concord, NH 03301<br>
<a href="mailto:[email protected]">[email protected]</a><br>
(603) 225-9716<br>
<a href="mailto:[email protected]"></a></font></small></p>
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<td width="69%" valign="top"><img src="../images/statelin.gif" alt="STATELINE by Robert Olson" border="0" WIDTH="375" HEIGHT="75"><p><b><u>
<br>
<br>
March 1998<br>
</u>
</b><big><big><big><strong><font face="Arial">Proposed Legislation States
Retail Competition Should Be Implemented In Connecticut Beginning July 1999<br>
</font></strong></big></big></big><strong>by Robert Olson -- Brown, Olson and Wilson, P.C.<br>
</strong><font face="Arial" size="2">(<em>originally published by PMA OnLine Magazine:
05/98</em>)</font></p>
<p><font face="Arial" size="3">On
February 5th, 1998, proposed legislation to restructure the electric utility industry was
introduced in the Connecticut General Assembly. The proposal provides that, on July 1,
1999, thirty-five percent (35%) of Connecticut ratepayers will have the option to select
their electricity provider and that on January 1, 2000, all Connecticut ratepayers will be
eligible to participate in retail electric competition. The bill does not require public
utilities to divest their non-nuclear generating assets, but does state that a utility
cannot recover its stranded costs unless it sells its non-nuclear generating assets in a
commercially reasonable auction process.</font></p>
<p><font face="Arial" size="3">The proposal provides that by October 1, 1998, each utility
must submit a restructuring plan to the Connecticut Department of Public Utilities Control
(DPUC) indicating whether the utility’s non-nuclear generating assets will be
divested, or functionally separated and transferred to a corporate affiliate. If the
utility chooses to divest itself of its non-nuclear generating assets, then the
divestiture plan must include a detailed description of the sales process and the book
value of each asset. Under the divestiture option, utility affiliates are allowed to
purchase the generating assets. The bill provides, however, that the DPUC cannot approve
any sale unless the sale price equals or exceeds the book value of the assets. Regarding a
utility’s nuclear assets, the proposed law provides a similar process and requires
that these assets must be either sold or functionally separated by July 1, 2003.</font></p>
<p><font face="Arial" size="3">In addition to the public auction requirement, utilities
are required to mitigate their stranded costs to the fullest extent possible. The proposal
states that mitigation includes: obtaining commitments from purchasers of the generating
assets that the purchasers will hire the non-managerial employees working at the
generation facilities at the employee’s existing wage level, and efforts to negotiate
buyouts or buydowns of independent power producer contracts. The bill further provides
that if a utility can achieve a ten percent (10%) rate reduction, then certain of its
stranded costs can be recovered through a securitization process.</font></p>
<p><font face="Arial" size="3">The proposed law authorizes the DPUC to appoint an advisory
council charged with the task of analyzing environmental costs and benefits of various
categories of energy sources. The council will establish disclosure requirements for
competitive energy suppliers thereby allowing customers to compare the air pollutant
emissions and the resource mix of competitive energy suppliers. In addition, the proposal
requires that the Connecticut Commissioner of Environmental Protection establish
performance standards for generating facilities located in North America. The Commissioner
may also create a process for the trading of emissions credits.</font></p>
<p><font face="Arial" size="3">The proposed law requires licensing of competitive
suppliers and states that to obtain such a license, the potential competitive supplier
must demonstrate that no less than three percent (3%) of its total energy output will be
provided from "Class 1 Renewable Energy Sources". These sources are defined as
renewable energy from facilities that were in operation as of July 1, 1998. An additional
three percent (3%) of the energy mix must be generated from either Class 1 or Class 2
"Renewable Energy Sources," provided that such energy from Class 1 sources
cannot include energy from hydro-electric facilities. Class 2 sources are defined as
renewable energy from facilities that will commence operation on or after July 1, 1998.
Under the proposed legislation, the two-tiered renewable energy requirement increases over
time such that by July 1, 2009 not less than eight and one-half percent (8 1/2%) of the
energy mix must be generated by Class 1 sources and an additional four and one-half (4
1/2%) must be generated from either Class 1 or Class 2 sources provided that the
additional Class 1 energy cannot be generated from hydro-electric facilities.</font></p>
<p><font face="Arial" size="3">The proposed legislation provides that, from January 1,
1999 to January 1, 2003, the distribution company will provide standard offer service to
customers that do not affirmatively select a competitive energy supplier. The standard
offer must provide customers with at least a ten percent (10%) decrease in base rates. In
providing this service, the distribution companies are not required to select the energy
suppliers through a competitive process, but may obtain the energy through one of their
affiliated companies.</font></p>
<p><font face="Arial" size="3">The restructuring legislation has been assigned to the
Finance Committee for consideration.</font></p>
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<p align="left"><font face="Arial">
<small>Robert A. Olson is a partner in the law firm of Brown, Olson &
Gould P.C.
which maintains a nationwide practice in energy law, public utility law and related
commercial transactions. He can be reached at:</small></font><p align="center">
<font face="Arial"><small><font color="#0000FF"><b>Brown, Olson & Gould, PC</b></font><br>
2 Delta Drive, Suite 301<br>
Concord, NH 03301 <br>
<br>
<a href="mailto:[email protected]">[email protected]</a> | (603) 225-9716<a href="mailto:[email protected]"></a></small></font>
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