CUSTOMER CHOICE
On April 8, 1999, Maryland Governor Parris Glendening signed into law the Electric Customer Choice and Competition Act of 1999. As a result of this law, Maryland electric customers are now able to choose the supplier -- or generator -- of their electric power. The act includes several provisions sought by the state's utilities and has special exceptions for cooperatives and municipal utilities.
This fact sheet presents some of the act's highlights and how they affect SMECO.
All commercial and industrial customers of investor-owned utilities (IOUs) had the right to choose starting January 1, 2001. Some utilities started their customer choice programs even earlier.
SMECO offered choice to its largest customers on January 1, 2001, with choice available to all of its customers on November 1, 2001.
The act requires the PSC to adopt regulations or issue orders for competitive billing of electric service. Beginning on July 1, 2000, IOUs were required to allow other suppliers to bill for electric services if the customer so chooses. Co-ops and municipal utilities are exempt from these requirements.
Customers who cannot or do not want to switch electric suppliers will receive "standard offer" service. Also, if a supplier fails to deliver power, the standard offer service automatically takes over. Customers who do not make a choice will receive power from their current utility until at least 2003--or longer if the PSC so orders--with the PSC setting prices. After 2003, other suppliers may bid to become the standard offer service supplier.
Co-ops and municipal utilities may remain standard offer service suppliers until they decide otherwise. On your SMECO bill, the standard offer service is the "price to compare" for electricity supply.
Utilities will also continue to be responsible for the delivery of power and maintenance of the distribution system within their service areas.
A cap on total rates for all customers will be in place for at least four years after choice begins. Although the Customer Choice Act only required a four-year rate cap or freeze, each utility entered into a customer choice settlement that may have extended that period. For IOUs, residential rates were required to be reduced by 3 to 7.5 percent (determined by the PSC) before the rate cap or freeze was instituted.
Cooperatives are not subject to the rate reductions required by the legislature, but will be held to a four-year rate cap after their customer choice start date. For SMECO, the start date was January 1, 2001.
Beginning January 2005, SMECO will no longer have a full requirements long-term power contract with Pepco Energy Services. SMECO is currently working with ACES Power Marketing to select suppliers and signing contracts to purchase power on the open market for the electric energy our customers will use in 2005.
A Universal Service Program is available statewide for customers at or below 150 percent of the poverty level. The program provided $34 million each year for the first three years of customer choice; the funding may vary for later years. The money will go to bill assistance, weatherization assistance, and to help pay bill arrearages. The PSC has oversight of the program, which is administered by the state Department of Human Resources.
A three-year statewide education program, conducted under the direction of the PSC, was funded with $6 million allocated for the first year. The program expired after June 30, 2002. Each utility is responsible for informing its customers about changes specifically related to their utility, such as billing explanations, low income programs, the enrollment process, and implementation processes. Each utility is also responsible for coordinating its consumer education program with that of the PSC.
The act prohibits "slamming" - the switching of electric suppliers without customer consent - as well as fraud, deceptive practices, and unfair discrimination. The PSC, which will license all power suppliers, is authorized to punish suppliers for violations and can revoke a supplier's license. Customer information cannot be disclosed without customer consent except for bill collection and credit rating purposes.
Rates, charges, and services are separated, or unbundled, according to PSC guidelines. Customer bills show separate charges for 1) transmission and distribution; 2) transition charges*; 3) universal service program charges; 4) customer charges; 5) taxes; and 6) other charges identified by the PSC. The PSC regulates how electric bills are prepared.
*Transition charges will pay for costs that utilities may not be able to recover in a competitive market. Also, there could be a credit to customers and shareholders if a utility has transition benefits that are greater than transition costs. After conducting hearings, the PSC ruled on each utility's transition costs or benefits.
Aggregation is the group purchase of electricity by customers. Customers may join a voluntary association to buy cheaper power as part of a large group. The act requires aggregators to be licensed by the PSC and allows entities such as community associations and non-profits to become aggregators. Counties and municipalities can become aggregators only if the PSC determines there is not enough competition.
The act allows customers to choose power generated by environmentally friendly means. So-called "green power" could include the following: (1) solar; (2) wind; (3) tidal; (4) geothermal; (5) biomass, including waste-to-energy and landfill gas recovery; (6) hydroelectric facilities; (7) digester gas; and (8) a manufacturing or commercial waste-to-energy system or facility.
Electricity suppliers doing business in adjoining states cannot compete with Maryland utilities unless the Maryland utility can compete in at least a portion of the out-of-state service territories.