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Second Regular Session

Sixty-first General Assembly

LLS NO. 98­0880.01D DHG HOUSE BILL 98­1400

STATE OF COLORADO

BY REPRESENTATIVES Owen, May, Paschall, Pfiffner, Entz, George, S. Johnson, Pankey, Schauer, and T. Williams;

also SENATOR Ament.

BUSINESS AFFAIRS & LABOR

A BILL FOR AN ACT

CONCERNING RESTRUCTURING OF THE NATURAL GAS INDUSTRY.

Bill Summary

(Note: This summary applies to this bill as introduced and does not necessarily reflect any amendments that may be subsequently adopted.)

Permits natural gas public utilities to file voluntary plans, subject to the approval of the public utilities commission (PUC), for opening the market to competition in the supply of natural gas to consumers. Requires that any such plan contain specified provisions designed to preserve the integrity and reliability of service, unbundle transmission (i.e., pipeline) and delivery services from natural gas supply, prohibit "slamming", and continue until the end of calendar year 2005 the funding of existing low­income programs and the administrative costs of the PUC.

Allows natural gas public utilities to recover "transition costs", defined to include investments made and costs incurred that the PUC finds to have been reasonably and prudently made in the provision of natural gas service to the public before the effective date of a restructuring plan.

Authorizes the PUC to adopt additional rules as necessary to protect the public interest and foster competition. Requires PUC rules and requirements to be competitively neutral.

Be it enacted by the General Assembly of the State of Colorado:

SECTION 1.  Article 2 of title 40, Colorado Revised Statutes, is amended BY THE ADDITION OF A NEW SECTION to read:

40­2­122.  Natural gas ­ deregulation of supply ­ voluntary separation of service offerings ­ consumer protection ­ legislative declaration. (1)  THE GENERAL ASSEMBLY FINDS, DETERMINES, AND DECLARES THAT NATURAL GAS IS NOW TRADED IN COMPETITIVE MARKETS AND THAT THE PRICE CHARGED TO CONSUMERS FOR THIS RESOURCE SHOULD BE ESTABLISHED BY MARKET FORCES RATHER THAN BY REGULATION. THE GENERAL ASSEMBLY FURTHER FINDS, DETERMINES, AND DECLARES THAT:

(a)  AFTER A REASONABLE TRANSITION PERIOD TO EDUCATE CONSUMERS ABOUT THE CHOICES IN NATURAL GAS SUPPLY THAT ARE NOW AVAILABLE OR WILL BECOME AVAILABLE IN THE FUTURE, THE SALE OF NATURAL GAS MAY BE SEPARATED INTO NATURAL GAS DELIVERY AND NATURAL GAS SUPPLY AND, FURTHER, THE CHARGE FOR NATURAL GAS SUPPLY MAY BE DEREGULATED TO MAXIMIZE COMPETITION IN THIS MARKET.

(b)  NATURAL GAS PUBLIC UTILITIES SHOULD BE REQUIRED TO CONTINUE TO OFFER NONDISCRIMINATORY NATURAL GAS DELIVERY SERVICES OVER THEIR PIPELINES SO THAT INDIVIDUAL NATURAL GAS CONSUMERS IN COLORADO SHALL HAVE READY ACCESS TO NATURAL GAS SUPPLY FROM COMPETING SOURCES.

(c)  NATURAL GAS PUBLIC UTILITIES PROVIDING FOR INDIVIDUAL CONSUMER CHOICE BETWEEN COMPETING SUPPLIERS SHOULD BE AUTHORIZED TO CHARGE CONSUMERS, THROUGH A SEPARATELY STATED DISTRIBUTION CHARGE DENOTED AS A "PUBLIC BENEFITS CHARGE", THE COSTS ASSOCIATED WITH FUNDING LOW­INCOME PROGRAMS SUCH AS BILL ASSISTANCE AND WEATHERIZATION; EXCEPT THAT:

(I)  THE TOTAL AMOUNT COLLECTED ANNUALLY THROUGH SUCH PUBLIC BENEFITS CHARGE SHALL NOT EXCEED ONE­HALF OF ONE PERCENT OF EACH UTILITY'S 1996 REGULATED GAS REVENUES; AND

(II)  THE PUBLIC BENEFITS CHARGE SHALL BE SEPARATELY STATED ON EACH CUSTOMER'S BILL FOR NATURAL GAS DELIVERY SERVICE.

(2) (a)  THE COMMISSION IS HEREBY GRANTED THE AUTHORITY TO CONSIDER AND APPROVE OR REJECT A VOLUNTARY PLAN SUBMITTED BY A NATURAL GAS PUBLIC UTILITY, FOR ALL OR A PORTION OF ITS SERVICE TERRITORY, THAT PROVIDES FOR:

(I)  THE SEPARATION OF NATURAL GAS SERVICE INTO NATURAL GAS SUPPLY SERVICE AND NATURAL GAS DELIVERY SERVICE; AND

(II)  THE DEREGULATION OF NATURAL GAS SUPPLY SERVICE.

(b)  THE COMMISSION MAY ALSO CONSIDER AND APPROVE OR REJECT, AS A PART OF ANY PLAN SUBMITTED IN ACCORDANCE WITH PARAGRAPH (a) OF THIS SUBSECTION (2), THE PROPOSAL OF A NATURAL GAS PUBLIC UTILITY TO PARTICIPATE AS A COMPETING SUPPLIER OF NATURAL GAS ON AN UNREGULATED BASIS. IF THE COMMISSION FINDS THAT A UTILITY'S PLAN MEETS THE CRITERIA SET FORTH IN PARAGRAPH (c) OF THIS SUBSECTION (2) AND IS IN THE PUBLIC INTEREST, THE COMMISSION SHALL APPROVE THE PLAN. AFTER THE PLAN IS APPROVED, ALL NATURAL GAS SUPPLY SERVICE ESTABLISHED UNDER THE PLAN AS A COMPETITIVE SERVICE SHALL THEREAFTER BE SOLD ON AN UNREGULATED BASIS.

(c)  THE COMMISSION SHALL NOT APPROVE A PLAN SUBMITTED PURSUANT TO PARAGRAPH (a) OF THIS SUBSECTION (2) UNLESS THE PRICE CHARGED FOR NATURAL GAS DELIVERY SERVICE DOES NOT SUBSIDIZE NATURAL GAS SUPPLY SERVICE UNDER THE PLAN AND, IN ADDITION, THE PLAN:

(I)  PROVIDES FOR NONDISCRIMINATORY NATURAL GAS DELIVERY SERVICE OVER THE PUBLIC UTILITY'S PIPELINES SO THAT NATURAL GAS CONSUMERS COVERED BY THE PLAN SHALL HAVE READY ACCESS TO NATURAL GAS SUPPLY SERVICE FROM COMPETING SOURCES;

(II)  DOES NOT PRESENT ANY UNNECESSARY BARRIERS THAT PREVENT OR REDUCE READY ACCESS TO NATURAL GAS SUPPLY SERVICE FOR ALL CLASSES OF CONSUMERS;

(III)  PROVIDES FOR CONSUMER PROTECTIONS DEEMED NECESSARY BY THE COMMISSION TO ASSURE RELIABLE NATURAL GAS SUPPLY SERVICE, TAKING INTO CONSIDERATION THE NEEDS OF CONSUMERS, WHICH PROTECTIONS MAY INCLUDE BUT SHALL NOT BE LIMITED TO BACKUP GAS SUPPLY AVAILABILITY, EXCESS PEAK DAY SUPPLY MARGINS, STANDARDS OF CONDUCT, AND FULL­RATE RECOVERY OF ANY PRUDENT COSTS INCURRED BY A NATURAL GAS PUBLIC UTILITY RELATED TO ANY REASONABLE EFFORTS THE UTILITY MAY UNDERTAKE TO AVOID GAS SUPPLY INTERRUPTIONS TO CONSUMERS SERVED BY ITS DELIVERY SYSTEM;

(IV)  PROVIDES FOR A SUPPLIER OF LAST RESORT, WHICH MAY OR MAY NOT BE THE INCUMBENT NATURAL GAS PUBLIC UTILITY, OR OTHER PROTECTIONS TO ASSURE THAT NO COLORADO CONSUMER THAT IS CONNECTED TO A NATURAL GAS PUBLIC UTILITY DELIVERY SYSTEM IS LEFT WITHOUT A NATURAL GAS SUPPLIER;

(V)  PROVIDES FOR CONSUMER EDUCATION CONCERNING THE NATURAL GAS PUBLIC UTILITY'S RESTRUCTURING OF ITS RATES AND THE CHOICES THAT WILL BE MADE AVAILABLE TO CONSUMERS IN THE DEREGULATED SUPPLY MARKET;

(VI)  DOES NOT DEGRADE THE INTEGRITY OR RELIABILITY OF NATURAL GAS DELIVERY SERVICE OR OF ANY UPSTREAM THIRD­PARTY PIPELINE AND STORAGE SERVICES THAT MAY BE HELD BY THE PUBLIC UTILITY AS PART OF THE PLAN; EXCEPT THAT THIS SUBPARAGRAPH (VI) SHALL NOT PRECLUDE ASSIGNMENT OF UPSTREAM THIRD­PARTY PIPELINE AND STORAGE SERVICES TO OTHER ENTITIES UNLESS THE COMMISSION FINDS THAT SUCH ASSIGNMENT RESULTS IN A DEGRADATION OF THE INTEGRITY OR RELIABILITY OF NATURAL GAS DISTRIBUTION SERVICE;

(VII)  PROVIDES FOR FUNDING OF LOW­INCOME PROGRAMS SUCH AS BILL ASSISTANCE AND WEATHERIZATION THROUGH THE ASSESSMENT OF A SEPARATELY STATED DISTRIBUTION CHARGE, DENOTED AS A "PUBLIC BENEFITS CHARGE", SO LONG AS THE TOTAL AMOUNT COLLECTED ANNUALLY THROUGH SUCH PUBLIC BENEFITS CHARGE DOES NOT EXCEED ONE­HALF OF ONE PERCENT OF THE NATURAL GAS PUBLIC UTILITY'S 1996 REGULATED GAS REVENUES;

(VIII)  CONTAINS ALL TERMS AND CONDITIONS THAT THE COMMISSION DEEMS NECESSARY TO PROTECT THE PUBLIC INTEREST AND TO FOSTER COMPETITION FOR THE SUPPLY OF NATURAL GAS;

(IX)  PROVIDES THAT NO CONSUMER'S NATURAL GAS SUPPLIER, INCLUDING A NATURAL GAS PUBLIC UTILITY SUPPLIER, MAY BE CHANGED WITHOUT THE CONSUMER'S PRIOR EXPRESS CONSENT EXCEPT AS ORDERED BY THE COMMISSION AS AN ASPECT OF IMPLEMENTING THE PLAN; AND

(X)  PROVIDES FOR FUNDING OF THE COMMISSION BASED UPON A CHARGE PER UNIT OF GAS DELIVERED TO END­USE CUSTOMERS, AS A PART OF THE NATURAL GAS DELIVERY FUNCTION, REGARDLESS OF THE IDENTITY OF THE NATURAL GAS SUPPLIER. SUCH NEW FUNDING METHOD SHALL BE COMPETITIVELY NEUTRAL AND SHALL BE DESIGNED TO GENERATE ANNUAL REVENUES EQUIVALENT TO THE AVERAGE ANNUAL REVENUES GENERATED UNDER SECTIONS 40­2­109 TO 40­2­114 DURING CALENDAR YEARS 1993 TO 1997. WHENEVER SUCH NEW FUNDING METHOD IS INSTITUTED FOR ANY SPECIFIC GEOGRAPHIC AREA OR GROUP OF CUSTOMERS, THE NATURAL GAS PUBLIC UTILITIES SERVING SUCH AREA OR GROUP SHALL NO LONGER PAY THE FEES THAT WOULD OTHERWISE HAVE BEEN REQUIRED UNDER SAID SECTIONS.

(3)  THE COMMISSION MAY ESTABLISH, BY RULE OR BY ALTERNATIVE FILING BY NATURAL GAS PUBLIC UTILITIES OR BOTH, SUCH REQUIREMENTS FOR REGISTRATION, REPORTING, AND COMPLIANCE AS THE COMMISSION DEEMS NECESSARY TO PROVIDE COLORADO RETAIL CONSUMERS WITH RELIABLE NATURAL GAS SUPPLY SERVICE. SUCH REQUIREMENTS MAY INCLUDE, WITHOUT LIMITATION, COMPLAINT PROCEDURES FOR ENFORCEMENT OF THE COMMISSION'S RULES AND PROCEDURES FOR THE SUSPENSION OR REVOCATION OF REGISTRATION AND OPERATING AUTHORITY OF COMPETITIVE SUPPLIERS FOR VIOLATION OF COMMISSION RULES.

(4) (a)  THE COMMISSION SHALL PERMIT EACH NATURAL GAS PUBLIC UTILITY FULL RECOVERY, THROUGH ITS TARIFF RATES FOR DELIVERY OF NATURAL GAS, OF THE UTILITY'S TRANSITION COSTS.

(b) (I)  AS USED IN THIS SUBSECTION (4), "TRANSITION COSTS" MEANS ALL COSTS DETERMINED BY THE COMMISSION TO BE LEGITIMATE, VERIFIABLE, AND PRUDENTLY INCURRED IN THE PROVISION OF NATURAL GAS SERVICE TO CUSTOMERS IN COLORADO ON OR BEFORE THE DATE OF IMPLEMENTATION OF THE VOLUNTARY PLAN AND NO LONGER RECOVERABLE UNDER THE PLAN, WHETHER SUCH COSTS ARE IN THE FORM OF DIRECT EXPENDITURES FOR CAPITAL ASSETS, OPERATING EXPENSES, INVESTMENTS, LONG­TERM SUPPLY CONTRACTS OR OTHER FUTURE OBLIGATIONS, OR ANY OTHER FORM.

(II)  TRANSITION COSTS MAY INCLUDE, BUT ARE NOT LIMITED TO, THE FOLLOWING:

(A)  COSTS AND ADMINISTRATIVE CHARGES INCURRED BY A NATURAL GAS PUBLIC UTILITY RESULTING FROM THE DESIGN AND IMPLEMENTATION OF ITS VOLUNTARY PLAN;

(B)  COSTS RELATED TO PREEXISTING GAS SUPPLY, TRANSPORTATION, OR STORAGE SERVICE CONTRACTS, INCLUDING ANY CONTRACT BUYOUT OR BUYDOWN COSTS, CONTRACT REFORMATION OR TERMINATION COSTS, CONTRACT LITIGATION COSTS, FEES, JUDGMENTS, OR SETTLEMENTS;

(C)  INVESTMENTS IN ASSETS THAT ARE STRANDED BY COMPETITION FOR NATURAL GAS SUPPLY SERVICE;

(D)  INTERSTATE OR INTRASTATE THIRD­PARTY PIPELINE COSTS;

(E)  BALANCING COSTS;

(F)  UNDERGROUND STORAGE COSTS;

(G)  DEFERRED OR PRIOR­PERIOD GAS COSTS NOT YET RECOVERED AT THE TIME OF CONVERSION TO COMPETITION IN THE PROVISION OF NATURAL GAS SUPPLY SERVICE; AND

(H)  ANY OTHER COSTS THAT WOULD OTHERWISE HAVE BEEN RECOVERABLE IN RATES ABSENT THE UNBUNDLING AND DEREGULATION OF GAS SUPPLY PURSUANT TO THIS SECTION.

(III)  TRANSITION COSTS SHALL NOT INCLUDE:

(A)  COSTS THAT ARE OR COULD BE INCLUDED WITHIN THE EXISTING RATES OF THE NATURAL GAS PUBLIC UTILITY AND THAT WOULD RESULT IN DOUBLE RECOVERY OF SUCH COSTS IF THEY WERE SO INCLUDED; OR

(B)  COSTS COMMITTED TO OR INCURRED AFTER THE IMPLEMENTATION DATE OF THE VOLUNTARY PLAN UNLESS THE COMMISSION DETERMINES THAT ALLOWING RECOVERY OF SUCH COSTS IS IN THE PUBLIC INTEREST OR THAT THE INCURRENCE OF SUCH COSTS IS REASONABLE AND PRUDENT FOR THE PURPOSE OF RESOLVING OR MITIGATING OTHER TRANSITION COSTS.

(c)  A NATURAL GAS PUBLIC UTILITY SHALL NOT BE ENTITLED TO RECOVER ITS STRANDED COSTS UNLESS THE UTILITY HAS MADE REASONABLE EFFORTS TO MITIGATE TRANSITION COSTS. THE COMMISSION SHALL DETERMINE THE APPROPRIATE METHOD AND AMORTIZATION PERIOD FOR A UTILITY'S RECOVERY OF TRANSITION COSTS AND MAY ESTABLISH SUCH OTHER REASONABLE PROCEDURES AND CONDITIONS FOR THE RECOVERY OF TRANSITION COSTS AS THE COMMISSION MAY DETERMINE ARE CONSISTENT WITH THIS SECTION AND IN THE PUBLIC INTEREST.

(5)  THE COMMISSION SHALL NOT IMPOSE ON A NATURAL GAS PUBLIC UTILITY OR ITS AFFILIATE, WITH RESPECT TO DEREGULATED NATURAL GAS SUPPLY SERVICES, ANY REQUIREMENT THAT IS NOT IMPOSED UPON COMPETING, UNREGULATED PROVIDERS OF NATURAL GAS SUPPLY SERVICES UNLESS THE COMMISSION DETERMINES THAT THE IMPOSITION OF SUCH REQUIREMENT IS NECESSARY TO PROTECT THE PUBLIC INTEREST.

(6)  THE PUBLIC BENEFITS CHARGE AND FUNDING METHOD FOR THE COMMISSION CREATED BY THIS SECTION SHALL EXPIRE ON DECEMBER 31, 2005.

(7)  ON OR BEFORE DECEMBER 1, 1999, THE COMMISSION SHALL REPORT TO THE GENERAL ASSEMBLY ON ACTIONS TAKEN BY NATURAL GAS PUBLIC UTILITIES PURSUANT TO THIS SECTION AND MAY MAKE RECOMMENDATIONS FOR LEGISLATION TO FURTHER THE PROVISION OF NATURAL GAS TO CUSTOMERS BY COMPETITIVE SUPPLIERS.

(8)  THE COMMISSION IS SPECIFICALLY AUTHORIZED TO ADOPT ALL NECESSARY RULES IN FURTHERANCE OF THIS SECTION.

SECTION 2.  Safety clause. The general assembly hereby finds, determines, and declares that this act is necessary for the immediate preservation of the public peace, health, and safety.