§ 17-190.4. Study of and development of framework for electric utility industry restructuring.

A.  To ensure an orderly and equitable restructuring of the electric utility industry in this state and achieve the goals outlined in Section 190.2 of this title, the Legislature hereby directs the Joint Electric Utility Task Force to undertake a study of all relevant issues relating to restructuring the electric utility industry in this state including, but not limited to, those issues set forth in this section, and develop a proposed electric utility industry restructuring framework for the State of Oklahoma.  The Joint Electric Utility Task Force shall address appropriate steps to achieve an orderly transition to a competitive market and may include in addition to the directives in this act other provisions as the task force shall deem necessary and appropriate to expedite the transition to full consumer choice.  The Corporation Commission shall assist the task force in achieving the goals outlined in the Electric Restructuring Act of 1997; provided, however, during the transition period to full consumer choice, the Corporation Commission is expressly prohibited from promulgating any rules or issuing any orders relating to the restructuring of Oklahoma's electric utility industry without prior express authorization by the Oklahoma State Legislature.

B.  It is the intent of the Legislature that the following principles and directives be adhered to in developing a framework for a restructured industry:

1.  Reliability and safety.  Appropriate rules shall be promulgated, in accordance with the provisions of this act, ensuring that reliable and safe electric service is maintained;

2.  Competition.  Competitive markets are to be encouraged to the greatest extent possible.  Regulation should serve as a substitute only in those circumstances where competition cannot provide results that serve the best interests of all consumers;

3.  Consumer choice.  Consumers shall be allowed to choose among retail electric energy suppliers to help ensure fully competitive and innovative markets.  A process should be established whereby all retail consumers are permitted to choose their retail electric energy suppliers by July 1, 2002.  Consumer choice means that retail electric consumers shall be allowed to purchase different levels and quality of electric supply from a variety of retail electric energy suppliers and that every seller of electric generation in the retail market shall have nondiscriminatory open access to the electric distribution system of every retail electric service distributor, subject to this act.  The Corporation Commission should ensure that consumer confusion will be minimized and consumers will be well informed about changes resulting from restructuring and increased choice;

4.  Regulation and unbundling of services.  Entities which own both transmission and distribution, as well as generation facilities, shall not be allowed to use any monopoly position in these services as a barrier to competition.  Generation services may be subject to minimal regulation and shall be functionally separated from transmission and distribution services, which services shall remain regulated.  All retail electric energy suppliers shall be required to meet certain minimum standards designed to ensure reliability and financial integrity, and be registered with the Corporation Commission;

5.  Unbundling of rates.  When consumer choice is introduced, rates shall be unbundled to provide clear price information on the components of generation, transmission and distribution and any other ancillary charges.  Electric bills for all classes shall be unbundled, utilizing line itemization to reveal the various component cost of providing electrical services.  Charges for public benefit programs currently authorized by statute or the Commission, or both, shall be unbundled and appear in line item format on electric bills for all classes of consumers;

6.  Open access to transmission and distribution facilities.  Consumer access to alternative suppliers of electricity requires open access to the transmission grid and the distribution system.  Comparability shall be assured for retail electric energy suppliers competing with affiliates of entities supplying transmission and distribution services.  The Corporation Commission shall monitor companies providing transmission and distribution services and take necessary measures to ensure that no supplier of such services has an unfair advantage in offering and pricing such services;

7.  Obligation to connect and establishment of firm service territories.  An entity providing distribution services shall be relieved of its traditional obligation to provide electric supply but shall have a continuing obligation to provide distribution service for all consumers in its service territory.  As part of the restructuring process firm service territories shall be fixed by a date certain, if not currently established by law in order to avoid wasteful duplication of distribution facilities;

8.  Independent system planning committee.  The benefits associated with implementing an independent system planning committee composed of owners of electric distribution systems to develop and maintain planning and reliability criteria for distribution facilities shall be evaluated;

9.  Consumer safeguards.  Minimum residential consumer service safeguards and protections shall be ensured including programs and mechanisms that enable residential consumers with limited incomes to obtain affordable essential electric service, and the establishment of a default provider or providers for any distribution customer who has not chosen an alternative retail electric energy supplier;

10.  Establishment of a transition period.  A defined period for the transition to a restructured electric utility industry shall be established.  The transition period shall reflect a suitable time frame for full compliance with the requirements of a restructured utility industry;

11.  Rates for service.  Electric rates for all consumer classes shall not rise above current levels throughout the transition period.  If possible, electric rates for all consumers shall be lowered when feasible as markets become more efficient in a restructured industry;

12.  Establishment of a distribution access fee.  The task force shall consider the establishment of a distribution access fee to be assessed to all consumers in the State of Oklahoma connected to electric distribution systems regulated by the Corporation Commission.  This fee shall be charged to cover social costs, capital costs, operating costs, and other appropriate costs associated with the operation of electric distribution systems and the provision of electric service to the retail consumer;

13.  Recovery of stranded costs.  Electric utilities have traditionally had an obligation to provide service to consumers within their established service territories and have entered into contracts, long-term investments and federally mandated co-generation contracts to meet the needs of consumers.  These investments and contracts have resulted in costs which may not be recoverable in a competitive restructured market and thus may be "stranded".  Procedures shall be established for identifying and quantifying stranded investments and for allocating costs and mechanisms shall be proposed for recovery of an appropriate amount of prudently incurred, unmitigable and verifiable stranded costs and investments.  As part of this process, each entity shall be required to propose a recovery plan which establishes its unmitigable and verifiable stranded costs and investments and a limited recovery period designed to recover such costs expeditiously, provided that the recovery period and the amount of qualified transition costs shall yield a transition charge which shall not cause the total price for electric power, including transmission and distribution services, for any consumer to exceed the cost per kilowatt-hour paid on April 25, 1997, during the transition period.  The transition charge shall be applied to all consumers including direct access consumers, and shall not disadvantage one class of consumer or supplier over another, nor impede competition and shall be allocated over a period of not less than three (3) years nor more than seven (7) years; and

14.  Transition costs.  All transition costs shall be recovered by virtue of the savings generated by the increased efficiency in markets brought about by restructuring of the electric utility industry.  All classes of consumers shall share in the transition costs.

C.  The study of all relevant issues related to electric industry restructuring shall be divided into four parts, as follows:  independent system operator issues, technical issues, financial issues and consumer issues.  All studies created pursuant to this section shall be conducted under the direction of the Joint Electric Utility Task Force.  The task force shall direct the Corporation Commission, the Oklahoma Tax Commission, any other state agency or consultant as necessary to assist the task force in the completion of such studies.

1.  The Commission shall commence the study of independent system operator issues no later than July 1, 1997, and provide a final report to the Joint Electric Utility Task Force no later than February 1, 1998.  Such report shall be in writing and shall make recommendations as the Commission deems necessary and appropriate regarding the establishment of an independent system operator in the State of Oklahoma or the appropriate region.

2.  No later than July 1, 1998, the Joint Electric Utility Task Force shall commence the study of technical issues related to the restructuring of the electric utility industry.  Such study shall include, but is not limited to, the examination of:

a.reliability and safety,

b.unbundling of generation, transmission and distribution services,

c.market power,

d.open access to transmission and distribution,

e.transition issues, and

f.any other technical issues the task force deems appropriate.

A final report shall be completed by the Joint Electric Utility Task Force no later than October 1, 1999.

3.  No later than July 1, 1998, the Joint Electric Utility Task Force shall commence the study of financial issues related to restructuring of the electric utility industry.  Such study shall include, but is not limited to, the examination of:

a.rates and charges,

b.access and transition costs and fees,

c.stranded costs and their recovery,

d.stranded benefits and their funding,

e.municipal financing,

f.cooperative financing,

g.investor-owned utility financing, and

h.any other financial issues the task force deems appropriate.

A final report shall be completed by the Joint Electric Utility Task Force no later than October 1, 1999.

4.  No later than September 1, 1998, the Joint Electric Utility Task Force shall commence the study of consumer issues related to restructuring of the electric utility industry.  Such study shall include, but is not limited to, the examination of:

a.service territories,

b.the obligation to serve,

c.the obligation to connect,

d.consumer safeguards,

e.rates for regulated services,

f.consumer choices,

g.competition,

h.licensing of retail electric energy suppliers, and

i.any other consumer issues the task force finds appropriate.

A final report shall be completed by the Joint Electric Utility Task Force no later than October 1, 1999.

D.  The Joint Electric Utility Task Force may, if it deems necessary, by a majority vote of the members combine or modify any of the studies required by this act.  Provided, however, the task force shall not eliminate any of the issues required to be studied herein.

Added by Laws 1997, c. 162, § 4, emerg. eff. April 25, 1997.  Amended by Laws 1998, c. 391, § 4, emerg. eff. June 10, 1998.