Dominion Power 2000 Annual Report Download - page 38

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Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
175,000 of Dominion’s Ohio customers were participating in this
open-access program.
West Virginia
At this time, West Virginia has not enacted legislation to require
customer choice in its retail natural gas markets. The West Virginia
Public Service Commission recently issued regulations to govern
pooling services; these services are one of the tools that natural gas
suppliers may utilize to provide retail customer choice in the future.
Virginia Retail Access Pilot Program
In 1998, the Virginia Commission issued an order instructing
Dominion and AEP-Virginia, Virginia’s two largest investor-owned
utilities, each to design and file a retail access pilot program relat-
ing to electric distribution in Virginia. During 1998 and 1999,
Dominion worked with the Virginia Commission Staff to develop
the plans for the size and scope of the program and the market
price methodology. In 2000, the Virginia Commission approved
Dominion’s retail access pilot program and issued a final order on
the interim rules governing pilot programs. Dominion began its pilot
program in September 2000. In January 2001, the Virginia Commis-
sion established a proceeding to determine the permanent rules for
retail access.
Separation of Electric Generation and
Delivery Operations in Virginia
The deregulation legislation requires functional separation of elec-
tric generation and delivery utility operations by January 1, 2002. In
November 2000, Dominion filed with the Virginia Commission an
application for approval of a functional separation plan for its regu-
lated electric utility operations. The plan provides for the following:
•transfer of generation assets into a separate legal entity,
Dominion Generation Corporation;
•transfer of rights and obligations under non-utility power pur-
chase contracts to Dominion Generation Corporation;
•retention of Dominion’s electric transmission and distribution
assets and operations, to be known as Dominion Virginia Power;
•collection of nuclear decommissioning funding costs and wires
charges from retail customers by Dominion Virginia Power on
behalf of Dominion Generation Corporation;
•Dominion Virginia Power to be responsible for providing capped
rate service until July 1, 2007 and default service obligations,
if any;
•Dominion Generation Corporation to supply Dominion Virginia
Power with electric power during and after the capped rate
period under a power purchase agreement to ensure that
adequate capacity and energy is available to meet Dominion’s
capped rate service and default supply obligations;
•upon expiration of the capped rate period, any power purchases
by Dominion Virginia Power from Dominion Generation Corpora-
tion to be at prevailing market prices;
•an index-based fuel cost recovery mechanism based on the fore-
casted generation by fuel type and projected fuel price indices
after January 1, 2002;
•unbundled rates to reflect the separation and deregulation
of generation;
•a wires charge, effective January 1, 2002, and subject to annual
adjustment, to be paid by retail customers choosing an alterna-
tive generation supplier during the capped rate period;
•proposed internal controls to prevent cross-subsidies between
regulated and unregulated entities and to ensure that the regu-
lated company does not give undue advantages to unregulated
affiliated generation companies; and
•planned allocation between Dominion Virginia Power and
Dominion Generation Corporation of payment responsibility for
existing Virginia Power debt with the objective that ratings on
outstanding debt will remain unchanged.
In October 2000, the Virginia Commission issued its final order
promulgating regulations governing the functional separation of
incumbent electric utilities’ generation, transmission, and distribu-
tion services. The order adopted rules for how Virginia’s existing
electric utilities should organize themselves to participate in the
competitive energy supply market, which begins a two-year phase-
in period in 2002. The rules govern how utilities which generate,
transmit and distribute electricity can separate operations so their
generating plants can participate in the competitive market without
raising anti-competitive and other concerns.
Regional Transmission Entities/
Regional Transmission Organizations
The deregulation legislation required that Virginia’s incumbent elec-
tric utilities join or establish regional transmission entities (RTE) by
January 1, 2001, and seek authorization from the Virginia Commis-
sion to transfer ownership or operational control of their transmis-
sion facilities to such RTEs. In July 2000, the Virginia Commission
issued regulations governing the transfer of ownership or control of
electric transmission assets to a RTE. In October 2000, Dominion
filed its application with the Virginia Commission pursuant to the
RTE regulations seeking authorization to transfer control of its elec-
tric transmission facilities to the Alliance Regional Transmission
Organization (Alliance RTO). As discussed below, the formation of
the Alliance RTO began according to FERC initiatives, but Dominion
expects it to satisfy the RTE requirements under the Virginia dereg-
ulation legislation.
In 1999, FERC issued regulations (Order No. 2000) to advance
the formation of Regional Transmission Organizations (RTO). The
regulations require that each public utility that owns, operates, or
controls facilities for the transmission of electric energy in
interstate commerce make certain filings with respect to operating
and participating in a RTO. Dominion, together with AEP, Con-
sumers Energy Company, The Detroit Edison Company and First
Energy Corporation, on behalf of themselves and their public utility
operating company subsidiaries (Alliance Companies), filed with
FERC applications under Sections 205 and 203 of the Federal Power
Act for approval of the proposed Alliance RTO. FERC approved most
aspects of the Alliance RTO in January 2001. Dayton Power and
Light Company, Illinois Power, Commonwealth Edison Company of