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Gas Legislation on Front Burner in VA

Gas Legislation on Front Burner in VA

Legislation has been introduced in the Virginia General Assembly that would establish a framework for gas restructuring in the state, authorizing, but not mandating, utilities to implement statewide customer choice programs.

Columbia Gas of Virginia, the first LDC in the state to implement a gas supply choice program, is a main proponent of two companion bills, SB1105 and HB2722, which are being sponsored by State Sen. Charles Colgan (D-Manassas) and Del. Eric Cantor (R-Henrico).

"Columbia of Virginia thought it was important for the Virginia General Assembly to express their public policy and general interest in the subject," said Laura Bateman, vice president of public affairs for the utility.

She said different parties have different views on whether legislation actually is required for LDCs to move toward customer choice and increased competition. "We just thought if there was any uncertainty, it would be better to have legislation and a blueprint showing how to proceed. It gives more of a clear path for [the state corporation commission to implement customer choice]."

The most important aspect of the bill, according to Bateman, is that it does not mandate that LDCs unbundle or exit the merchant function. Gas companies that want to continue supplying gas to customers as they have in the past can continue to do so.

The legislation would require competing residential and small commercial suppliers to be licensed by the state. It also would provide that suppliers are not subject to state and local gross receipts taxes, but it would allow localities to impose a consumer utility tax on gas provided by gas suppliers so there would be no loss of revenue.

"We've been working very closely with the Virginia Corporation Commission on language [contained in the bill] and they are supportive.," she said. "We have talked to other Virginia gas companies, the attorney general's office and just innumerable parties. We really have tried to make this a collaborative process," said Bateman. "We certainly invited [gas marketers] into the process and have heard from a couple that are marketing in our pilot program."

Representatives of two major energy marketing firms lauded the legislative effort to install competition in the state's gas industry for the first time. "Columbia should be commended for its efforts," said Enron's Kathleen Magruder, director of government affairs. "They have a proven track record of moving this industry in the direction of competition and customer choice." Magruder said she was eager to fine tune the details with the other stakeholders in the coming weeks.

Statoil Energy's Martha Duggan, said while she was pleased the General Assembly is moving toward competition, more than just fine tuning will be required. "The bill as currently drafted won't meet [the goal of creating competition] for at least two reasons," she said. "First, the utilities are guaranteed recovery of 100% of not only stranded costs (and we would argue that there may not be any) but also, 100% recovery of costs incurred to support its merchant function! Because utilities will stay in the merchant function (competing with alternative suppliers) this means that the captive ratepayers will fund the utility's competing with suppliers."

A second problem is in the taxation area, according to Duggan. The bill as drafted would allow localities to assess a consumer utility tax on both customers of the utility and customers of alternative suppliers. "This could mean, although I hope it is an unintended consequence, that the locality might assess its tax on customers who chose an alternative supplier twice-once for the distribution service provided by the utility, and once on the commodity provided by the alternative supplier, in effect double taxing. This is a clear disincentive to choice. It also would add to the costs of alternative suppliers who will bear the administrative burden of dealing with numerous localities." She said to the extent that the creation of competitive markets necessitates a tax change, Statoil would rather see a state gross receipts tax or sales tax levied on all commodity sales. "That would create more of a level playing field between utilities and alternative suppliers."

A VCC spokesman said state regulators probably would stay out of the legislative battle this bill and the one on electric restructuring, SB1269, are likely to cause. "We've worked with them on some of the language," he said. "But the commission usually doesn't take positions on bills. We usually try to get them in a techinically proper direction, and the public policy decision as to where Virginia goes is up to the general assembly. If they want everybody on a level playing field they will have gas and electric [legislation] going at the same time, and I'm sure a lot of the [competitive] issues are going to be addressed." The general assembly adjourns at the end of February. Before that time, it has to pass or reject more than 3,000 bills, including gas and electric restructuring. It's a daunting task, but the "assembly always seems to get it done," said Duggan. Rocco Canonica

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