(a)    (1)    Subject to subsection (b) of this section, the phased implementation of customer choice shall be implemented as follows:

(i)    on July 1, 2000, one–third of the residential class in the State of each electric company shall have the opportunity for customer choice;

(ii)    on January 1, 2001, the entire industrial class and the entire commercial class in the State of each electric company shall have the opportunity for customer choice;

(iii)    on July 1, 2001, two–thirds of the residential class in the State of each electric company shall have the opportunity for customer choice;

(iv)    on July 1, 2002, all customers of each electric company shall have the opportunity for customer choice; and

(v)    by July 1, 2003, under a separate schedule adopted by the Commission, all customers of each electric cooperative shall have the opportunity for customer choice.

(2)    (i)    In accordance with this paragraph, the Commission may adopt a separate schedule for municipal electric utilities for the implementation of customer choice.

(ii)    A municipal electric utility may not be required to make its service territory available for customer choice unless it elects to do so.

(iii)    If a municipal electric utility elects to allow customer choice, the municipal electric utility shall file a proposed plan and schedule with the Commission.

(iv)    The Commission may approve each municipal electric utility plan and schedule after considering the features that distinguish the municipal electric utility from other electric companies.

(v)    Nothing in this subtitle may be construed to require the functional, operational, structural, or legal separation of the regulated and nonregulated operations of the municipal electric utility.

(3)    If a municipal electric utility serves customers outside its distribution territory, electricity suppliers licensed under § 7–507 of this subtitle may serve the customers in the distribution territory of the municipal electric utility.

(b)    For good cause shown and if the Commission finds the action to be in the public interest, the Commission may:

(1)    accelerate or delay the initial implementation date of July 1, 2000 by up to 3 months; or

(2)    accelerate any of the other implementation dates and phase–in percentages in subsection (a) of this section.

(c)    (1)    Beginning on the initial implementation date, an electric company’s obligation to provide electricity supply and electricity supply service is stated by this subsection.

(2)    Electricity supply purchased from a customer’s electric company is known as standard offer service. A customer is considered to have chosen the standard offer service if the customer:

(i)    is not allowed to choose an electricity supplier under the phase in of customer choice in subsection (a) of this section;

(ii)    contracts for electricity with an electricity supplier and it is not delivered;

(iii)    cannot arrange for electricity from an electricity supplier;

(iv)    does not choose an electricity supplier;

(v)    chooses the standard offer service; or

(vi)    has been denied service or referred to the standard offer service by an electricity supplier in accordance with § 7–507(e)(6) of this subtitle.

(3)    (i)    Except as provided under subparagraph (ii) of this paragraph, any obligation of an electric company to provide standard offer service shall cease on July 1, 2003.

(ii)    1.    Electric cooperatives and municipal electric utilities may choose to continue providing standard offer service in their respective distribution territories and may cease offering that service after notifying the Commission at least 12 months in advance.

2.    On and after July 1, 2003, an electric company continues to have the obligation to provide standard offer service to residential and small commercial customers at a market price that permits recovery of the verifiable, prudently incurred costs to procure or produce the electricity plus a reasonable return.

(iii)    1.    On or before December 31, 2008, and every 5 years thereafter, the Commission shall report to the Governor and, in accordance with § 2–1257 of the State Government Article, to the General Assembly on the status of the standard offer service, the development of competition, and the transition of standard offer service to a default service.

2.    The Commission shall establish, by order or regulation, the definition of “default service”.

(4)    (i)    On or before July 1, 2001, the Commission shall adopt regulations or issue orders to establish procedures for the competitive selection of wholesale electricity suppliers, including an affiliate of an electric company, to provide electricity for standard offer service to customers of electric companies under paragraph (2) of this subsection, except for customers of electric cooperatives and municipal electric utilities. Unless delayed by the Commission, the competitive selection shall take effect no later than July 1, 2003.

(ii)    1.    Under the obligation to provide standard offer service in accordance with paragraph (3)(ii) of this subsection, the Commission, by regulation or order, and in a manner that is designed to obtain the best price for residential and small commercial customers in light of market conditions at the time of procurement and the need to protect these customers from excessive price increases:

A.    shall require each investor–owned electric company to obtain its electricity supply for residential and small commercial customers participating in standard offer service through a competitive process in accordance with this paragraph; and

B.    may require or allow an investor–owned electric company to procure electricity for these customers directly from an electricity supplier through one or more bilateral contracts outside the competitive process.

2.    A.    As the Commission directs, the competitive process shall include a series of competitive wholesale bids in which the investor–owned electric company solicits bids to supply anticipated standard offer service load for residential and small commercial customers as part of a portfolio of blended wholesale supply contracts of short, medium, or long terms, and other appropriate electricity products and strategies, as needed to meet demand in a cost–effective manner.

B.    The competitive process may include different bidding structures and mechanisms for base load, peak load, and very short–term procurement.

C.    By regulation or order, as a part of the competitive process, the Commission shall require or allow the procurement of cost–effective energy efficiency and conservation measures and services with projected and verifiable energy savings to offset anticipated demand to be served by standard offer service, and the imposition of other cost–effective demand–side management programs.

3.    A.    In order to prevent an excessive amount of load being exposed to upward price risks and volatility, the Commission may stagger the dates for the competitive wholesale auctions.

B.    By regulation or order, the Commission may allow a date on which a competitive wholesale auction takes place to be altered based on current market conditions.

4.    By regulation or order, the Commission may allow an investor–owned electric company to refuse to accept some or all of the bids made in a competitive wholesale auction in accordance with standards adopted by the Commission.

5.    The investor–owned electric company shall publicly disclose the names of all bidders and the names and load allocation of all successful bidders 90 days after all contracts for supply are executed.

(5)    An electric company may procure the electricity needed to meet its standard offer service electricity supply obligation from any electricity supplier, including an affiliate of the electric company.

(6)    In order to meet long–term, anticipated demand in the State for standard offer service and other electricity supply, the Commission may require or allow an investor–owned electric company to construct, acquire, or lease, and operate, its own generating facilities, and transmission facilities necessary to interconnect the generating facilities with the electric grid, subject to appropriate cost recovery.

(7)    (i)    To determine whether an appropriate phased implementation of electricity rates that is necessary to protect residential customers from the impact of sudden and significant increases in electricity rates, the Commission in the case of an increase of 20% or more over the previous year’s total electricity rates, shall conduct evidentiary proceedings, including public hearings.

(ii)    1.    A deferral of costs as part of a phased implementation of electricity rates by an investor–owned electric company shall be treated as a regulatory asset to be recovered in accordance with a rate stabilization plan under Part III of this subtitle or any other plan for phased implementation approved by the Commission.

2.    A deferral of costs under this paragraph must be just, reasonable, and in the public interest.

(iii)    The Commission shall approve the recovery of deferred costs under subparagraph (ii) of this paragraph as:

1.    long–term recovery in accordance with a rate stabilization plan under Part III of this subtitle; or

2.    short–term recovery through a rate proceeding mechanism approved by the Commission.

(iv)    The Commission may approve a phasing in of increased costs by:

1.    placing a cap on rates and allowing recovery over time; or

2.    allowing rates to increase and providing for a rebate to customers of any excess costs paid.

(8)    (i)    An electric cooperative that as of July 1, 2006, supplied its standard offer service load through a portfolio of blended wholesale supply contracts of short, medium, and long terms, and other appropriate electricity products and strategies, as needed to meet demand in a cost–effective manner, may choose to continue to use a blended portfolio:

1.    as approved and modified by the electric cooperative’s board of directors; and

2.    with appropriate review for prudent cost recovery as determined by the Commission.

(ii)    The Commission may not set or enforce a termination date for the procurement of supply through a managed portfolio previously approved by the Commission.

(9)    (i)    The Commission, on request by an electric cooperative or on its own initiative, shall initiate a proceeding to investigate options for a rate stabilization plan to assist residential electric customers to gradually adjust to market rates over an extended period of time.

(ii)    If an electric cooperative determines that total electric rates for residential customers are anticipated to increase by more than 20% in a 12–month period resulting from an increase in the cost of generation, the electric cooperative shall survey its membership to determine whether to make a request to the Commission to initiate a proceeding under subsection (a) of this section.

(iii)    Notwithstanding subparagraphs (i) and (ii) of this paragraph, as approved by the Commission, an electric cooperative may receive a modification in distribution and transmission rates.

(d)    Notwithstanding the dates set forth in this section or any other law, customer choice may not commence until legislation is enacted by the General Assembly to restructure Maryland taxes to address the State and local tax implications of restructuring the electric utility industry.

(e)    The Commission shall, by regulation or order, adopt procedures to implement this section, including the allocation of any unused opportunity for customer choice among customer classes.

(f)    A county or municipal corporation may not act as an aggregator unless the Commission determines there is not sufficient competition within the boundaries of the county or municipal corporation.