The proposed staff schedule for the transition period calls for the investor-owned utilities to unbundle rates by January 2000. As of January 1, 2000, certified "energy service providers" could initiate the process of bilateral contracting. A bilateral contracts model is recommended by the staff as opposed to the creation of a statewide or regional independent system operator. Each of the investor-owned utilities would be required to divide into at least three functionally separate entities, including an energy services provider affiliate, a transmission and distribution affiliate and a system operator affiliate. Each companys affiliate system operator would manage its electric transmission system in a non-discriminatory and equitable manner. The various affiliates would operate under strict codes of conduct designed to prevent affiliate abuse in the sharing of information, cross-promotion, corporate identification and anti-tying. The distribution rates of the wires affiliates would continue to be regulated by the Public Service Commission according to the states performance-based rate regulation standards.
The staff is most concerned with the retail market power of Entergy and Mississippi Power, which it deems to be a "rebuttable presumption". The companies would be required to establish the absence of excessive market power within their respective service territories or to propose appropriate mitigation measures. If excessive retail market power cannot be mitigated by a company, then it would not be permitted to provide default standard offer service to retail customers within its territory and such service would be subject to a competitive bidding process.
Under the staff Plan, alternative energy service providers would be certified by the Commission, upon an adequate showing of reliability and creditworthiness, for which specific criteria are set forth in the Plan. In addition, the proposed Plan would require energy service providers to "commit reliable capacity to a minimum share of the small customer market before being allowed access to the large customer market." Energy service providers would also be required to comply with numerous consumer protection provisions.
Stranded cost recovery by utilities would be permitted by the Commission on a case-by-case basis upon petition by a utility. Recovery of "any net, verifiable, prudent, non-mitigable losses" would be effected through the collection of a "competitively neutral", non-bypassable wires charge during the transition period (expected to run from January 1, 2001 through December 31, 2004). Utilities would not be required to divest their generation assets through third party sales, but would be required to undertake all practicable steps to mitigate losses, including the exercise of any termination or release clauses in existing power contracts, the renegotiation or buyout of power contracts that do not have termination or release clauses or the auction of power purchase contract rights. The staff Plan maintains that "exit fees and securitization are recovery mechanisms that should not be adopted because of their anti-competitive characteristics."
The staff has set forth a detailed implementation schedule for its transition plan, with hearings and rulemaking proceedings to begin in late 1997 and run through 1999. The staff also indicates its belief that legislation is required to authorize the Public Service Commission to implement retail competition, and that such legislation must be enacted in 1999 in order for the schedule set out in the Plan to be followed.