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<title>Connecticut: Retail Competition to Begin January 1, 2000</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>
May 1998</u><br>
</b><font size="6"><b>Connecticut: Retail Competition To Begin <br>
January 1, 2000<br>
</b></font><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><font SIZE="2"><p ALIGN="JUSTIFY"></font><font face="Arial">Recently, the State of
Connecticut passed legislation authorizing retail competition to begin on January 1, 2000.
On this date, approximately thirty-five percent (35%) of all ratepayers in certain defined
"economically distressed areas" will have the opportunity to select a
competitive power supplier. On July 1, 2000, retail competition will be opened to all
ratepayers.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">The legislation provides that, by October 1, 1998,
all electric utilities must submit plans to unbundle and separate their generating assets
from their transmission and distribution assets. While utilities are not required to sell
their generating assets, no utility will be able to recover stranded costs unless its
generating assets are sold through an auction process. Affiliates of the utility can
participate in the auction. In addition, the legislation provides that a utility may not
recover stranded costs unless it has mitigated these costs to the greatest extent
possible. The legislature identified the following as examples of mitigation: obtaining
written commitments from purchasers of generating assets that wages and overall
compensation to non-managerial employees working at the generating facilities will not be
reduced, and making good faith efforts to negotiate the buyout or buydown of independent
power producer contracts.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">The legislation authorizes the issuance of
"rate reduction bonds" as a means of financing stranded cost recovery
obligations and reducing retail rates. The bonds may be issued only if the utility can
prove that the savings attributable from the bond financing will be directly passed on to
ratepayers through lower rates and that the bond financing will not give any affiliate of
the utility an unfair competitive advantage. Under the legislation, the Connecticut
Department of Public Utility Control ("DPUC") must establish a code of conduct
applicable to each distribution company by January 1, 1999. The code of conduct must
include restrictions on the distribution company’s use of its information or revenues
to subsidize any affiliated generation entity and must generally ensure that all
competitive suppliers have non-discriminatory access to transmission and distribution
facilities.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">A consumer education advisory council will be
established to, among other things, promulgate uniform standards for the disclosure of
certain environmental information so that retail customers may easily compare air
emissions and the energy resource mix of competitive suppliers. In addition, all energy
obtained by competitive suppliers must comply with Connecticut environmental regulations.
This requirement applies to energy obtained from generating facilities located anywhere in
North America. Beginning on July 1, 2000, one-half of one percent (0.5%) of a
supplier’s total energy output must be generated from facilities defined as
"class 1 renewable energy sources", which include solar power, wind, fuel cells,
landfill gas or biomass facilities that began operation on or after July 1, 1998. An
additional five and one-half percent (5.5%) of the total energy output of each supplier
must be from either class 1 renewables or from "class 2 renewable energy
sources", which include waste-to-energy facilities, biomass facilities that begin
operation prior to July 1, 1998 or hydroelectric facilities. This renewable energy
requirement increases yearly so that, by July 1, 2009, six percent (6%) of each
supplier’s total energy output must be generated from class 1 renewable sources and
an additional seven percent (7%) of its total output must be from class 1 or class 2
renewable sources. From January 1, 2000 to January 1, 2004, each distribution company must
provide standard offer service to all customers in its service area which have not elected
to purchase energy services from a competitive supplier. The distribution company may
obtain the energy for this service from its affiliated generation company without having
to utilize a competitive bidding process. Beginning on January 1, 2004, each distribution
company will also be responsible for providing default service to any customer who does
not, or is unable to, obtain energy services from a competitive supplier. In providing
this default service, the distribution company must purchase generation services through a
competitive bidding process, but a generating affiliate of the distribution company may
participate in the bidding process.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">Each competitive power supplier must file an
application for a license with the DPUC. Among the information that must be submitted is a
scope of service plan which provides a description of the geographical area that the
applicant plans to serve. The supplier must update the plan on an annual basis. The DPUC
is also authorized to monitor competitive generation markets and to take action to prevent
unfair competitive practices and the unlawful exercise of market power. In addition to the
investigation of possible anti-competitive conduct, the DPUC may also investigate the
effects of mergers, asset acquisitions and asset dispositions involving competitive
suppliers.</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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