Senate Bill 1888

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    Florida Senate - 1998                                  SB 1888

    By Senator Crist





    20-1296-98

  1                      A bill to be entitled

  2         An act relating to the restructuring of the

  3         electric power industry; making findings and

  4         declarations regarding the electric industry;

  5         defining terms; providing for a transition from

  6         a regulated to a competitive electric

  7         generation market; providing rulemaking

  8         authority for the Public Service Commission;

  9         requiring all electric utilities to file

10         restructuring plans; providing for retail

11         customer choice of electric generation

12         providers; requiring electric generation

13         providers to register and obtain a license;

14         requiring electric utilities to separate

15         generation facilities and operations from

16         transmission and distribution facilities and

17         operations; establishing an obligation for

18         utilities to connect customers to transmission

19         and distribution facilities; requiring

20         utilities to provide open access to

21         transmission and distribution facilities by

22         electric generation providers; providing for

23         regulation of rates for transmission and

24         distribution services; restricting the use of

25         eminent domain powers; establishing

26         environmental policies; requiring compliance by

27         municipal and cooperative electric utilities;

28         defining the term "stranded costs" and

29         providing a method of recovery of stranded

30         costs; establishing provisions for the

31         reliability and safety of electric service;

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  1         providing for noninterference with contract

  2         rights; limiting the liability of distribution

  3         companies; providing for severability;

  4         providing an effective date.

  5

  6  Be It Enacted by the Legislature of the State of Florida:

  7

  8         Section 1.  Florida Electric Industry Restructuring

  9  Act.--This act may be cited as the "Florida Electric Industry

10  Restructuring Act."

11         Section 2.  Legislative findings and intent.--The

12  Legislature finds that:

13         (1)  The generation of electricity is no longer a

14  natural monopoly. Regulation of the generation of electricity

15  results in noncompetitive rates that vary considerably among

16  electric utilities.

17         (2)  Noncompetitive rates and rate disparities hinder

18  the economic development of the state and its ability to

19  attract businesses and jobs. Restructuring of the electric

20  industry to provide greater competition and more efficient

21  regulation is a nationwide phenomenon and the state must

22  aggressively pursue restructuring and increased customer

23  choice in order to provide electric service at lower and more

24  competitive rates.

25         (3)  Competition is the most efficient way to lower

26  prices for electrical service to all consumers, improve the

27  quality and variety of generation services, stimulate

28  innovation in service and supply, and create a more diverse

29  and decentralized electricity supply system, thereby promoting

30  the public interest.

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  1         (4)  It is in the public interest to permit all retail

  2  electric consumers to choose their suppliers of electric

  3  generation and ancillary services in a competitive market and

  4  to continue to regulate electric transmission and distribution

  5  in order to provide safe and reliable electricity at the

  6  lowest possible prices for all consumers, while continuing to

  7  assure that electric service will be available to all

  8  consumers including those who choose not to participate in a

  9  competitive electric market.

10         (5)  Restructuring should recognize the benefits of and

11  provide appropriate encouragement to small power producers,

12  self-generation, co-generation, electric generation by highly

13  efficient processes, electric generation by renewable fuels,

14  and the use of cost-effective energy conservation measures.

15         Section 3.  Definitions.--As used in this act, the

16  term:

17         (1)  "Affiliated generation company" means any

18  generation company that controls, is controlled by, or is

19  under common control, ownership, or management with a

20  distribution utility. A 10-percent or greater voting or

21  ownership interest creates a rebuttable presumption of common

22  control.

23         (2)  "Commission" means the Florida Public Service

24  Commission.

25         (3)  "Distribution utility" means all owners,

26  operators, and providers of transmission or distribution

27  facilities or services to the public, including municipalities

28  and cooperatives.

29         (4)  "Electric utility" means any municipal electric

30  utility, investor-owned electric utility, or rural electric

31  cooperative that owns, maintains, or operates an electric

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  1  generation, transmission, or distribution system within the

  2  state; the term does not include small power producers or

  3  entities engaged in self-generation or co-generation.

  4         (5)  "Generation company" means a person, corporation,

  5  or other entity, wherever located, which generates, purchases,

  6  brokers, or markets electricity for sale at retail in the

  7  state, and includes market aggregators.

  8         Section 4.  Transition to competitive electric

  9  generation market.--

10         (1)  By January 1, 2001, electric generation and

11  ancillary services must be deregulated and subject to the

12  competitive market in accordance with the provisions of this

13  act.

14         (2)  The commission shall adopt rules to administer

15  this act using the procedures established in section

16  120.54(2)(d), Florida Statutes, for negotiated rulemaking. The

17  commission's rules must be consistent with this act and ensure

18  an orderly and timely transition to full customer choice. The

19  rules must include, but need not be limited to:

20         (a)  Appropriate steps to achieve an orderly transition

21  to a competitive electric generation market.

22         (b)  A program for making retail customers aware of

23  their new rights and the benefits of customer choice.

24         (c)  Procedures and criteria for generation company

25  registration and licensing.

26         (d)  Procedures and requirements for the separation by

27  electric utilities of generation facilities and operations

28  from transmission and distribution facilities and operations.

29         (e)  Requirements to ensure that all generation

30  companies may compete equally to supply power to retail

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  1  consumers and to mitigate concentrations of undue market

  2  power.

  3         (f)  Minimum terms and conditions for service by

  4  default providers.

  5         (g)  Minimum standards for contracts and agreements for

  6  the retail sale of electricity and ancillary services to

  7  residential customers.

  8         (h)  Information that investor-owned utilities seeking

  9  recovery of stranded costs must submit and criteria for

10  calculating stranded costs.

11         (3)  Notwithstanding section 350.128, Florida Statutes,

12  and section 366.10, Florida Statutes, challenges to commission

13  rules adopted under this act must be conducted according to

14  the procedures in section 120.56, Florida Statutes. The First

15  District Court of Appeal shall, upon petition, review any

16  order concerning the validity or invalidity of such rules.

17         Section 5.  Electric utility restructuring plans.--

18         (1)  By January 1, 1999, each electric utility shall

19  file a proposed restructuring plan with the commission. Each

20  plan must provide for customer choice and establish a protocol

21  for the disaggregation of services as set forth in this act

22  and must include, but not be limited to:

23         (a)  Provisions requiring the unbundling of prices for

24  generation, transmission, distribution, metering, and billing,

25  and specification of the charge for each such service on

26  customer bills by January 1, 2000.

27         (b)  Provisions specifying the manner in which it will

28  otherwise comply with each provision of this act and the

29  commission's restructuring rules.

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  1         (c)  In the case of investor-owned utilities,

  2  documentation of stranded costs if any, as provided by section

  3  15 of this act.

  4         (2)  Except as provided in subsection (3), the

  5  commission shall conduct a hearing under section 120.57(1),

  6  Florida Statutes, to determine whether each utility's proposed

  7  restructuring plan adequately complies with the provisions of

  8  this act and the commission's restructuring rules. The Public

  9  Counsel appointed under section 350.061, Florida Statutes,

10  shall be a party to all such hearings. The Attorney General

11  and any person whose substantial interest may be affected has

12  the right to intervene as a party. The commission shall issue

13  an order approving a utility's plan, directing the utility to

14  make specified changes to its plan, or rejecting the plan and

15  directing the utility to submit a new plan that complies with

16  this act and the commission's restructuring rules. In the case

17  of an investor-owned utility, the commission's order must make

18  a determination of stranded costs and transition charges as

19  provided in section 15 of this act.

20         (3)  In order to reduce the number of administrative

21  hearings conducted under this section, the commission in its

22  discretion may review any utility's proposed restructuring

23  plan to determine whether it adequately complies with this act

24  and the commission's restructuring rules. The commission shall

25  publish a notice of proposed agency action approving a

26  utility's plan, directing the utility to make specified

27  changes to its plan, or rejecting the plan and directing the

28  utility to submit a new plan that complies with this act and

29  the commission's restructuring rules, and advising all

30  interested persons that they have 45 days after publication of

31  the notice in which to file a request for a hearing under

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  1  section 120.57, Florida Statutes. Upon the petition of the

  2  Public Counsel, the Attorney General, or any person whose

  3  substantial interest may be affected, the commission shall

  4  conduct a hearing as provided in subsection (2). This

  5  subsection does not apply to investor-owned utilities.

  6         (4)  Notwithstanding section 350.128, Florida Statutes,

  7  and section 366.10, Florida Statutes, judicial review of any

  8  commission final order on an electric utility's restructuring

  9  plan or any other final order concerning the matters addressed

10  in this act shall be by petition to the First District Court

11  of Appeal. Any party who is adversely affected by the

12  commission order is entitled to judicial review.

13         Section 6.  Retail customer choice.--

14         (1)  All retail consumers must be permitted to choose

15  their provider of electric generation and ancillary services

16  by January 1, 2001. Customers may choose a generation company

17  through the following means:

18         (a)  Bilateral contract. Retail customers may negotiate

19  a bilateral contract with a generation company.

20         (b)  Market aggregator. Retail customers may choose to

21  receive generation and other energy services from a market

22  aggregator. Market aggregators may generate electricity

23  directly, buy and sell electricity, or enter into financial

24  contracts or otherwise arrange for electric generation

25  resources. Market aggregators may be brokers, marketers,

26  associations, cooperatives, buying clubs, municipalities, or

27  other entities that buy or arrange for electric generation

28  services.

29         (c)  Default provider. The commission shall select one

30  or more default generation companies to provide service to any

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  1  customer who does not choose a generation supplier. In

  2  selecting a default provider, the commission shall:

  3         1.  Establish by rule a level of basic service,

  4  including minimum terms and conditions, to be provided by

  5  default generation companies to customers who do not

  6  affirmatively choose their generation company.

  7         2.  With the assistance of the Department of Management

  8  Services, conduct a competitive bid and award customers to

  9  those generation companies willing to provide basic service at

10  the lowest prices.

11         (2)  The commission shall establish and oversee a

12  ballot procedure by which all retail customers may

13  affirmatively select their generation company. Balloting must

14  be completed and generation companies advised of the results

15  sufficiently in advance of January 1, 2001, to allow competing

16  generation companies to prepare for servicing their customers.

17  Electric utilities shall mail the ballots to their current

18  customers as directed by the commission. The ballot procedure

19  must not favor any generation company. The commission shall

20  assign customers who fail to select a generation company to

21  default providers.

22         (3)  The commission shall establish by rule minimum

23  standards for contracts and agreements for the sale of

24  electricity and ancillary services to residential customers,

25  including disclosure of pricing, term of service, and

26  termination provisions.

27         Section 7.  Generation company registration and

28  licensing.--

29         (1)  All generation companies must register with and

30  obtain a license from the commission. Applicants must provide

31  information to the commission to establish their financial,

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  1  managerial, and technical ability to provide the proposed

  2  services, including: a listing of the competitive electric and

  3  electric-related products and services to be provided and the

  4  locations in which such services will be offered; a

  5  description of the applicant's financial, managerial, and

  6  technical ability to obtain and deliver such products and

  7  services in a safe and reliable manner; a description of the

  8  form of ownership and organization of the applicant; a listing

  9  of officers and directors; the names and addresses of local

10  representatives for commission contacts; the names of any

11  affiliated generation company or distribution utility; and

12  such other information as the commission reasonably requires.

13         (2)  The commission shall register and issue a license

14  to any applicant who demonstrates the financial, managerial,

15  and technical ability to provide the proposed services, and

16  shall by rule, adopt guidelines for making such a

17  demonstration. Requirements for registration and licensing

18  must not be unreasonably restrictive or be used to deter

19  competition or market entry.

20         Section 8.  Unbundling of services.--The commission's

21  restructuring rules must require that all electric utilities

22  operationally and financially separate electric generation

23  assets and operations from transmission and distribution

24  assets and operations as described in this section. Employees

25  of a distribution utility may not be shared with and must be

26  physically separated from those of an affiliated generation

27  company. A distribution utility and its affiliated generation

28  company must keep separate records and books of accounts which

29  are subject to review by the commission and the Attorney

30  General.

31         Section 9.  Obligation to connect.--

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  1         (1)  Electric utilities shall be relieved of their

  2  traditional obligation to serve. Distribution utilities shall

  3  have an obligation to connect all customers within their

  4  service territory on nondiscriminatory terms and conditions.

  5         (2)  Consumers shall have the right to select their

  6  generation company and have nondiscriminatory access to

  7  interconnection with their host distribution utility, which

  8  distribution utility shall, in conjunction with any

  9  intermediate distribution utility, be required to transport

10  electricity from the point of generation to the consumer.

11         Section 10.  Open access.--

12         (1)  Distribution utilities must provide open access to

13  their transmission and distribution facilities and make

14  available ancillary services to all generation companies on

15  equal terms. The commission's restructuring plan must assure

16  nondiscriminatory, open access to all transmission and

17  distribution facilities for all wholesale and retail

18  transactions.

19         (2)  Distribution utilities must file with the

20  commission or other agencies, as appropriate, service tariffs

21  that provide open access for all competitors. The commission

22  shall adopt rules to ensure that distribution companies do not

23  favor or extend any unfair advantage to any generation company

24  in pricing, service, or obtaining access to transmission and

25  distribution facilities, and shall monitor distribution

26  utilities for compliance with such rules and this section.

27         (3)  In order to ensure fair competition among

28  generation companies and provide equal and open access to

29  transmission and distribution facilities, distribution

30  utilities and their employees:

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  1         (a)  May not sell or otherwise provide products or

  2  services to any affiliated generation company without posting

  3  the offering electronically or via facsimile tranfer to all

  4  licensed generation companies, or otherwise making a

  5  sufficient offering to the market for such products and

  6  services, and the commission shall oversee the establishment

  7  and maintenance of an electronic information network available

  8  to all generation companies and customers to assure that the

  9  intent of this subsection is implemented.

10         (b)  Shall process all similar requests for a product,

11  service, or information, and provide such product, service, or

12  information in the same manner and within the same period of

13  time for all generation companies.

14         (c)  May not condition or tie the provision of any

15  product, service, or rate agreement to the provision of any

16  product or service in which an affiliated generation company

17  is involved.

18         (d)  May not provide information to an affiliated

19  generation company without a request in cases in which the

20  information is made available to other generation companies

21  only upon request.

22         (e)  May not give any appearance of speaking on behalf

23  of its affiliated generation company, represent that any

24  advantage accrues to customers or others in the use of the

25  distribution company's products or services as a result of

26  that customer or others dealing with its affiliated generation

27  company, engage in joint advertising or marketing programs

28  with its affiliated generation company, or promote any product

29  or service offered by its affiliated generation company.

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  1         (f)  Shall annually provide to each distribution

  2  utility employee a copy of these standards or such restatement

  3  of these standards as the commission directs.

  4         Section 11.  Transmission and distribution pricing.--

  5         (1)  The commission shall to the extent of its

  6  jurisdiction establish just and reasonable rates for unbundled

  7  transmission and local distribution services. In setting

  8  rates, the commission shall consider, in addition to the

  9  criteria set forth in section 366.041, Florida Statutes, the

10  need to enhance reliability and safety, relieve transmission

11  and distribution congestion, and achieve the lowest possible

12  price for consumers.

13         (2)  Each distribution utility must file unbundled

14  service tariffs to provide services to all eligible purchasers

15  on a nondiscriminatory basis.

16         (3)  The commission has jurisdiction over all aspects

17  of transmission and distribution rates and services not

18  subject to the exclusive jurisdiction of the Federal Energy

19  Regulatory Commission.

20         Section 12.  Eminent domain.--Generation companies have

21  no right of eminent domain.

22         Section 13.  Environmental policies.--Electric industry

23  restructuring should recognize the benefits of and provide

24  appropriate encouragement to small power producers,

25  self-generation, co-generation, electric generation by highly

26  efficient processes and renewable fuels, and cost-effective

27  energy conservation measures.

28         Section 14.  Municipal and cooperative electric

29  utilities.--Municipal and cooperative electric utilities are

30  not subject to commission regulation of rates for transmission

31  and distribution services. With the exception of paragraphs

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  1  (5)(a)-(c), municipal and cooperative electric utilities are

  2  not subject to the stranded-cost-recovery provisions in

  3  section 15 of this act. Except as otherwise specifically

  4  provided in this act, municipal and cooperative electric

  5  utilities are subject to all requirements of this act.

  6         Section 15.  Stranded costs.--

  7         (1)  RECOVERY OF STRANDED COSTS.--Following the

  8  procedures and criteria established in this section,

  9  investor-owned utilities may seek to recover demonstrable

10  stranded costs. Stranded costs are the costs of

11  generation-related assets that an investor-owned utility

12  prudently incurred before July 1, 1998, that were being

13  recovered or were eligible for recovery in rates or charges

14  approved by the commission as of July 1, 1998, and that will

15  not be recovered due solely to the implementation of this act.

16         (2)  CRITERIA FOR DETERMINATION OF STRANDED COSTS.--

17         (a)  Stranded costs include:

18         1.  Costs meeting the criteria of this section and

19  arising under power purchase or qualifying facility contracts,

20  including associated fuel contracts, or associated with any

21  buy-out, buy-down, or renegotiation of power purchase or

22  qualifying facility contracts; and

23         2.  Costs meeting the criteria of this section and

24  associated with required environmental mandates currently

25  approved for cost recovery and power acquisitions mandated by

26  federal statutes.

27         (b)  Stranded costs do not include:

28         1.  Costs related to transmission and distribution

29  facilities and services.

30         2.  Costs for which the utility has previously been

31  compensated.

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  1         3.  Costs that the utility would not have recovered or

  2  that were not eligible for recovery under applicable

  3  regulation and rate tariffs in effect on July 1, 1998.

  4         4.  Lost revenues due to changes in usage occurring in

  5  the normal course of business, including those resulting from

  6  changes in business cycles; termination of operations;

  7  weather; reduced production; changes in manufacturing

  8  processes; energy conservation efforts other than as

  9  previously approved by the commission; installation,

10  expansion, or changes in the performance of self-generation,

11  co-generation, or small power producer facilities; or other

12  similar factors.

13         5.  Lost revenues due to the exercise of competitive

14  alternatives that were available before July 1, 1998,

15  including demand-side management, energy conservation

16  measures, co-generation, self-generation, and movement of

17  customers from the service area.

18         6.  Costs incurred for purposes other than to comply

19  with the utility's obligation to serve its customers within

20  its service territory in the state.

21         7.  Costs that were imprudently incurred or that the

22  utility failed to aggressively mitigate.

23         (c)  Stranded costs must be offset by stranded

24  benefits. Stranded benefits include:

25         1.  The amount by which the market value of any

26  retained asset exceeds book value.

27         2.  The amount by which the sale price, including the

28  total value of all consideration received, of any asset sold

29  in an arm's length transaction exceeds book value.

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  1         3.  The amount by which any bona fide offer to purchase

  2  a generation-related asset exceeds the market value claimed by

  3  the utility.

  4         (3)  DUTIES AND RESPONSIBILITIES OF INVESTOR-OWNED

  5  UTILITIES.--

  6         (a)  Duty to mitigate. Beginning on July 1, 1998,

  7  investor-owned utilities shall have the duty to prudently,

  8  thoroughly, and aggressively mitigate stranded costs.

  9  Mitigation measures may include, but are not limited to,

10  reduction of expenses, renegotiation of existing contracts,

11  refinancing of existing debt, divestiture of electric

12  generation assets, and sale, write-off, or write-down of

13  uneconomic or surplus assets.

14         (b)  Duty to cooperate. Investor-owned utilities shall

15  have a duty to cooperate with the commission in the

16  implementation of this act as a precondition for recovery of

17  stranded costs. Approval of a recovery plan and collection of

18  any stranded costs shall be deemed a settlement of all such

19  claims by an investor-owned utility. An investor-owned utility

20  seeking to establish claims for recovery of stranded costs

21  through any other means is ineligible for recovery of stranded

22  costs under the method provided in this act.

23         (4)  STRANDED-COST-RECOVERY PLAN.--As a component of

24  its restructuring plan submitted under section 5 of this act,

25  each investor-owned utility shall file a

26  stranded-cost-recovery plan with the commission. The recovery

27  plan must:

28         (a)  Identify, quantify, and document all requested

29  stranded costs.

30         (b)  Describe and document all mitigation efforts

31  undertaken, ongoing, and planned for the future.

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  1         (c)  Identify, quantify, and document all anticipated

  2  stranded benefits.

  3         (d)  Provide such other information as the commission

  4  requires to make its determination of stranded costs.

  5         (5)  RECOVERY OF STRANDED COSTS THROUGH TRANSITION

  6  CHARGES.--

  7         (a)  The recovery of stranded costs must be

  8  accomplished through a nondiscriminatory, appropriately

  9  structured transition charge that is fair to all customer

10  classes, lawful, limited in duration, and consistent with the

11  promotion of fully competitive markets.

12         (b)  Transition charges must apply only to customers

13  within an investor-owned utility's distribution service

14  territory in effect on July 1, 1998, must be separately stated

15  on each customer's bill, and may not disadvantage one class of

16  customer or supplier over another. The charges may not apply

17  to wheeling-through transactions, wholesale sales,

18  self-generation, co-generation, small power production, or any

19  competitive alternative that existed before July 1, 1998.

20         (c)  Recovery mechanisms that impede competition, such

21  as entry and exit fees, may not be used.

22         (d)  The commission shall establish a limited period,

23  not to exceed 10 years, for the fair and expeditious recovery

24  of stranded costs. The recovery period and the amount of the

25  transition charge must not cause the total price for electric

26  power for any customer to exceed the rate paid for electric

27  power on July 1, 1998. Any stranded costs not recovered under

28  these procedures by the end of the recovery period are not

29  recoverable by an investor-owned utility.

30         (6)  APPROVAL OF STRANDED-COST-RECOVERY PLANS.--

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  1         (a)  The commission shall review each

  2  stranded-cost-recovery plan and conduct a hearing under

  3  section 5 of this act to determine the amount of each

  4  investor-owned utility's stranded costs and an appropriate

  5  transition charge for the recovery of the stranded costs. In

  6  determining stranded costs, the commission shall consider

  7  whether the requested stranded cost amount is equitable,

  8  appropriate, in the public interest, and consistent with the

  9  intent of this act. The commission shall balance the interests

10  of consumers and utility investors and consider what portion

11  of stranded costs utility investors should bear. Any

12  investor-owned utility seeking recovery of stranded costs

13  shall have the burden of proving its stranded costs by clear

14  and convincing evidence.

15         (b)  No later than March 31, 2003, each investor-owned

16  utility shall submit a revised stranded-cost-recovery plan

17  that shall adjust the utility's estimated stranded costs to

18  reflect actual market conditions through December 31, 2002.

19  The commission shall review revised stranded-cost-recovery

20  plans and conduct hearings to determine revised stranded costs

21  and transition charges using the same procedures specified for

22  the original stranded-cost determinations. As part of such

23  proceedings, the commission shall raise or lower transition

24  charges, or require refunds if necessary, in order to reflect

25  changes in approved stranded-cost-recovery.

26         Section 16.  Reliability and safety.--All generation

27  companies and distribution utilities must have in place

28  sufficient measures to preserve the integrity, safety,

29  reliability, and quality of electric service, including, as

30  applicable, sufficient capacity reserves and spinning

31  reserves. The commission shall adopt rules ensuring reliable

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  1  and safe electric service and establishing minimum residential

  2  consumer service safeguards.

  3         Section 17.  Liability of distribution companies.--A

  4  distribution company is not liable for any damages to any

  5  current or future customer if the customer's chosen generation

  6  company fails to deliver the service in accordance with the

  7  terms of its agreement with the customer. This section may not

  8  be applied to relieve liability arising from the distribution

  9  utility's own actions or failure to act.

10         Section 18.  Severability.--If any provision of this

11  act or application thereof to any person or circumstance is

12  held invalid, the invalidity does not affect other provisions

13  or applications of the act which can be given effect without

14  the invalid provision or applications, and to this end the

15  provisions of this act are severable.

16         Section 19.  Antitrust laws.--This act shall not

17  operate to limit the scope or applicability of federal or

18  state antitrust laws.

19         Section 20.  This act shall take effect July 1, 1998.

20

21            *****************************************

22                          SENATE SUMMARY

23    Creates the Florida Electric Industry Restructuring Act.
      Provides that electric generation and ancillary services
24    must be deregulated and subject to the competitive market
      in accordance with the act by January 1, 2001. (See bill
25    for details.)

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