Home > Initiatives > Energy and Utility > Mass. Department of Public Utilities Electric Industry Restructuring Rulemaking DPU 98-100 Low-income Comments (May 27, 1996)
THE DEPARTMENT'S ORDER IS A MAJOR STEP IN THE DIRECTION OF COMPREHENSIVE
RESTRUCTURING
THE PROPOSED RULE ON ENERGY EFFICIENCY RESPONDS APPROPRIATELY TO THE FACT THAT
MARKET BARRIERS WILL PERSIST, PARTICULARLY FOR LOW-INCOME CONSUMERS.
Keeping the Demand-Side Management Functions at the DISCO Level Makes Sense
for Massachusetts
Plan Submission Requirement at Five-year Interval is
a Good Tool to Achieve DPU Goals.
Provision For Use of Weatherization Assistance Program Subgrantees Is Excellent
The DPU Should Require Technical Potential Studies, And Periodically-Revised
Plans To Work Off All Unserved Potential
There Is No Need to Choose Between Efficiency And Discounts For Low-Income
Consumers: Both Are Effective, Both Are Needed.
WHOLESALE COMPETITION MUST BE WORKABLE AND IN PLACE NO LATER THAN THE INTRODUCTION
OF RETAIL COMPETITION
THE DEPARTMENT SHOULD ENSURE THAT A FULLY EFFECTIVE SET OF NORMS GOVERNING
RELATIONS BETWEEN ENERGY BUYERS AND SELLERS/BROKERS IS IN PLACE BEFORE OPENING
MARKETS TO RETAIL COMPETITION. THE RULE SHOULD CONTAIN NORMS TO GOVERN
CREDIT TERMS, DEPOSITS, BILLING (ACCURACY, TIMING, BASIS, CONTENT), COLLECTIONS
AND DISCONNECTIONS
A. Existing Credit Norms: Supplement and Enforce
1. Equal Credit Opportunity Act
2. Fair Credit Reporting Act
3. ECOA and FCRA Are Not Sufficient
B. Proposed Grounds For Extending/Denying Credit
C. Other Credit and Collection Rules Applying to Suppliers
1. State Sanitary Code
2. Protections for Tenants in Event of Landlord Default
3. Accuracy of Billing
4. Truth in Labelling - Green Pricing
5. Prohibition against late fees (now only applies to Basic Service).
6. Privacy/Value of Information To Consumer
7. Protected Customers
8. Supervision over reconnection fees should be maintained.
9. Complaint resolution
10. Right to Change Suppliers
11. DISCO Access vs. Non-DISCO Bills
12. Adequacy of notices of proposed termination, and its consequences.
13. Clarity on bill re: whose billing for whom and who owes whom, and consequences
of partial payment, nonpayment.
14. Price of DISCO B&C to Suppliers - Market-Based
D. Metering, Wholesale Settlements
II. PROPOSAL ON PRESERVATION OF DISCOUNTS ON BILLS IS GOOD START; NEEDS CLARIFICATION
AND STRENGTHENING; DPU SHOULD TAKE THIS OPPORTUNITY TO INTRODUCE PIPP
Proposed Rule Mechanics Require Clarification
Running all discounts through the DISCO makes sense, on balance, despite certain
problems.
1. Ease of administration: no separate fund.
2. It creates a level playing field for suppliers.
3. But Universal Service neither requires nor should be funded by "general
access charges."
B. Problems with running discounts through the distribution component
only
C. Restructuring is An Opportunity To Revisit Discount Design For Better
Targetting and Cost-Effectiveness
D. No Cap on Effectiveness of Low-Income Rate
E. Rule should specify statewide eligibility requirements.
II. SELECTION OF SUPPLIER FOR UNIVERSAL SERVICE AND BASIC SERVICE
A. Several Considerations, Some in Conflict
B. DPU should consider having DISCO bid out energy supply portion of Universal
and Basic Service.
III. PBR
A. Exogenous Costs should not include storm costs.
B. Inflation Factor
C. Service Quality Index (11.04(5)(b)) D. Universal Service Service
Quality
IV. DEFINITIONS
A. Electric Company and Electric Service
B. Low Income Customer
V. CONCLUSION
VI. ELECTRIC INDUSTRY RESTRUCTURING RULEMAKING DPU 98-100 LOW-INCOME
COMMENTS
THE DEPARTMENT'S ORDER IS A MAJOR STEP IN THE DIRECTION OF COMPREHENSIVE
RESTRUCTURING
The Department's Order addresses all the key issues in restructuring, some
to a great level of detail. It is clear that the Commission and staff labored
long and hard to produce this document, and the exercise has advanced the issues
greatly. In some areas, there is enough detail now proposed that, regardless
of the merits, the Department has an implementable proposal. On many issues,
the exercise of putting the policies into rule form has highlighted where more
thought is required to develop specific, implementable rules. In either case,
the proposed rule takes the Commonwealth another step in the direction of restructuring.
The Department's careful attention to universal service and Basic Service issues,
and energy efficiency and environmental goals, along with market power questions,
deserves particular appreciation. The risk of "deregulation without competition,"
and the reality that markets do not work well for all consumers, are key problems
to be solved as the Department moves towards retail competition. The proposed
220 C.M.R. chapter 11 makes responsible efforts to address these questions.
While we believe changes need to be made to the rule in a number of respects,
we appreciate the resolve of the Department to address these issues. The
need to reduce rates for all consumers cannot be addressed without tackling
the stranded cost question. The Department quite correctly rejected efforts
by utilities to include items of expense that were incurred after its policy
pronouncement on competition. While stranded cost recovery is a crucial issue,
the low-income comments will not attempt to add to what is being said on the
matter by other consumer groups, in particular the Attorney General. Similarly,
these comments will not go over ground previously trod in our comments on market
power issues, with the exception of a brief discussion of the order in which
restructuring is carried out. And we follow the lead of parties with greater
expertise in environmental issues on such topics as non-low-income DSM and renewables.
THE PROPOSED RULE ON ENERGY EFFICIENCY RESPONDS APPROPRIATELY TO THE FACT THAT
MARKET BARRIERS WILL PERSIST, PARTICULARLY FOR LOW-INCOME CONSUMERS.
Keeping the Demand-Side Management Functions at the DISCO Level Makes Sense
for Massachusetts Competitive suppliers can, do today and will under restructuring,
supply the energy efficiency that makes sense in a market. The role of utility-supplied
DSM is to overcome market barriers. Having the DISCO perform this function,
as the Department proposes, is a sensible solution for Massachusetts. Utilities
in Massachusetts have a long track record of DSM investment. While the experience
has not been without issues, it is not necessary in Massachusetts to create
a wholly separate institutional framework to deliver DSM services. The emphasis
in Massachusetts, unlike some other states, has been on avoiding the need to
develop wholly new institutional structures when possible. In light of this
history, and particularly in light of the proposed requirement of a plan and
a public review process, DISCO administration of these services makes sense
for Massachusetts.
Plan Submission Requirement at Five-year Interval is
a Good Tool to Achieve DPU Goals. The proposed plan concept permits DPU
supervision, but avoids the need for micromanagement. It permits a revisiting
of DSM investments to make sure that market transformation is captured in plan
modifications, and that progress towards goals is on track. It is a planning
process, but permits quick adjustments. And importantly, it provides a periodic
opportunity for public input. Provisions For Use of Weatherization Assistance
Program Subgrantees Is Excellent The low-income commenters applaud the
DPU's decision to require use of the services of Weatherization Assistance Program
subgrantees to deliver DSM services to low-income households. For all the reasons
in our April comments, we support this proposal. Such agencies have the following
qualities that make them uniquely suited to give reality to the policy in favor
of equity in the provision of DSM services:
Proven track record of
weatherization and efficiency services
Close to the community
being served
Used by many utilities
already
Overseen by EOCD
Synergies of delivery
- economies of scale in combining service with WAP and non-electric service
delivery.
As the gas industry moves to retail competition, the DPU should build on its
recognition of the positive role of Community Action Agencies, and consider
fostering a fuel-blind pool for low-income "whole house" weatherization,
with a pilot conducted now, to capture even greater synergies.
The DPU
Should Require Technical Potential Studies, And Periodically-Revised Plans To
Work Off All Unserved Potential To bolster the effectiveness of the rule,
without micromanaging the utilities, the DPU should require that DISCO plans
include an estimation of extent of technical potential for energy efficiency
in the homes of low-income customers, and a plan to "work off" the
backlog of homes over 10 years. This planning approach should not add work to
the jobs of the DISCOs, as it is the sensible approach to the issue. The
objective is to accelerate the progress in getting energy efficiency into the
homes of low-income consumers. The historic track record in Massachusetts has
been excellent policy, a number of different approaches to implementation, but
a spotty record of achievement. Identifying the inefficiencies yet to be captured,
and planning to capture them, is the sensible solution for the DISCO to pursue,
under DPU supervision. Requiring technical potential and work-off plans
will also provide an opportunity to set an end-goal, and show progress towards
that goal. While the technical potential may be a moving target, this exercise
of determining unmet potential and planning for the next five years the pace
of work will assist DISCOs, customers and the Department in ensuring that the
market barriers are identified and progress constantly made to overcome them.
And, while it is likely that new measures and needs will get added to the list
every five years, such a process will also capture changes in the market between
plan submissions that obviate the need for further DISCO investment above the
market.
There Is No Need to Choose Between Efficiency And Discounts For Low-Income
Consumers: Both Are Effective, Both Are Needed.
In footnote 62, the Department
suggested that a choice might be appropriate between energy efficiency and discounts
for low-income consumers, and that one or the other might be more effective.
There is no conflict between these two strategies. Both are effective for their
particular purposes. Both are required, as they address different aspects of
the problem. Discount rates address the immediate and chronic mismatch of income
and bill. DSM addresses part of the bill excess for some customers in the short
term, but only for those receiving the DSM service, and often not enough to
render the entire bill affordable. It addresses the comfort and safety of the
household served. And it addresses the resource costs and sustainability need
of the entire electricity system. The underlying problem from the perspective
of the low-income consumer is the chronic mismatch between funds and the bill.
Even assuming reductions in energy costs from competition, and perhaps even
hoping for moderation of distribution costs from PBR, there will be customers
who are paying too high a percentage of their income to sustain a healthful
use of electricity over the long term (more than a few months at a time, e.g.).
From the DISCO's perspective (and thereby from the point of view of all the
ratepayers who are asked to share the consequences of non-payment), the chronic
inability to pay prompts credit and collection activities, not all of which
are cost-effective given the underlying financial barrier. Given their druthers,
and adequate protection from risk, DISCOs and suppliers both do not want to
deny service or disconnect customers, on humanitarian as well as liability grounds.
They have an interest in their product being affordable. From the DPU's perspective,
all the above factors come into play. Discounted bills are cost-effective
tools to achieve universal service. As discussed below, the most cost-effective
technique of delivering discounts is to peg the bill to an affordable percentage
of income. Savings from bringing a bill to an affordable level include the following:
(a) avoided dunning letters and calls, (b) avoided termination notices, (c)
avoided terminations, (d) avoided reconnections, (e) avoided credit agency fees,
(f) avoided court costs and attorney fees, (g) working capital costs. The
credit and collection costs that are avoided via an affordable rate may not
equal the bill reduction provided via the discounted rate. However, it was never
the DPU's policy that low-income utility affordability be premised on internalized
cost-effectiveness grounds. Indeed, when the Department began visiting the issue
of low-income rates, the concept of avoided credit and collection costs had
not yet been enunciated. That there are offsetting savings is a newly-identified
benefit of making bills affordable. To the extent that in a retail competition
model these costs are split between those that the DISCO incurs on behalf of
all customers, and those that the supplier incurs or does not incur, the question
becomes more complicated, but the result should be the same. That is, on the
one hand the DISCO portion of the savings will be smaller than the level of
discount, and on the other the supplier may argue that it is not obligated to
serve, thus avoiding the problem in the first place. However, this analysis
would be only a partial analysis. In effect, it ignores the DPU's commitment
to universal service. In some cases, the unaffordable bill is higher than
it needs to be, because efficiencies of end-use have not been captured. Typically,
this is because the family cannot afford DSM measures, is ignorant of them,
or has no incentive to improve the landlord's property for benefits that will
not accrue to the tenant during a short tenure in the premises. DSM is intended
to overcome precisely these barriers to efficiency maximization. DSM investments
made as a result of this analysis will definitely assist the customer in the
short term, and thus benefit the DISCO and suppliers, and their other customers.
DSM to the extent it renders a bills affordable tends to capture similar credit
and collections savings, but has the added benefit of lowering system resource
costs. However, DSM cannot carry all the freight. The low-income customer
group is not a monolith, all with identical usage profiles, income profiles,
and bill-paying challenges. For a few low-income customers, DSM savings will
be big enough that the resulting drop in bill will be enough to render it affordable.
For most, DSM will help, but not obviate the problem. In addition, there
is a problem of institutional capacity to achieve 100% of all savings. Low-income
DSM is more likely to be limited to retrofit than for other customers where
new construction and new appliance purchasing are more common. Retrofit takes
time, and the budget constraints will probably not permit a pace faster than
the 10 years proposed by the low-income commenters. Even those customers whose
bills would be rendered affordable by DSM may not see the usage reduction for
some time. Discounts and DSM are not mutually exclusive; they are mutually reinforcing.
WHOLESALE COMPETITION MUST BE WORKABLE AND IN PLACE NO LATER THAN THE INTRODUCTION
OF RETAIL COMPETITION
As the Department states, the benefits of competition will not accrue absent
market structures that ensure fill and fair competition.
Absent full and
fair wholesale competition, retail competition will fail of its objectives.
Retail competition cannot cure defects in wholesale competition. Where the DPU
lacks jurisdiction to effect its vision of a robust wholesale market, it should
either delay retail competition pending action by entities with jurisdiction
or propose an alternative, workable vision that is within its jurisdiction,
together with a plan to promote sound policy by those entities with jurisdiction.
Areas where the DPUs jurisdiction over market structure is in doubt include
the creation of an ISO, a power exchange, and divestiture of generation.
THE DEPARTMENT SHOULD ENSURE THAT A FULLY EFFECTIVE SET OF NORMS GOVERNING
RELATIONS BETWEEN ENERGY BUYERS AND SELLERS/BROKERS IS IN PLACE BEFORE OPENING
MARKETS TO RETAIL COMPETITION.
Market forces are not used exclusively in any business. All businesses have
norms of conduct that have developed over time. Electricity is a necessity,
and the Department has a public service obligation to ensure that the market
norms work to serve all Massachusetts residents. Consumers, particularly residential
consumers, must be protected by "Rules of the Road." However, the
rule as drafted appears to contemplate no access, billing, collection or termination
regulations for any but the DISCO in its Basic Service Capacity.
While
the DPU may not wish to incorporate 100% of the current consumer norms to suppliers
(including marketers, aggregators, etc.), nor should it leave the relations
between customer and supplier merely to what bargains will be struck in the
market. Reliability is a major concern of the public around restructuring.
Reliability does not only mean enough capacity, but also the ability to obtain
supplies. Market norms do not typically insist that all suppliers are obliged
to serve everyone, but the DPU rightly recognizes that maintaining no protection
for supply access is a non-starter in the context of the supply of electricity.
Thus, the barriers to access that can be thrown up by unwilling suppliers if
the DPU's customer service rules are not applied to them must be addressed.
Exempting competitive suppliers from all consumer protection norms will also
stifle competition. Customers will stick with a firm that is under supervision
and subject to basic norms of sound dealings. Rogue or Fly-by-Night competitors
encouraged by the lack of oversight will also threaten competition, by discrediting
the concept. In Toronto, gas marketers went door-to-door offering toasters to
sign up residential customers. Some of these outfits could not deliver on their
promises, and the former merchant LDC had to cover for them. COCOTs operators
flout the DPU's authority, leaving illegal pricing, illegal charging, and high
rates in place in their machines, and leaving customers "stranded"
at any given street corner where they may need to make a call. Hotels incur
ill will among their customers by tacking on surcharges for phone calls made
from the room - the cost is not high enough to use a different hotel, but the
customer is captive, so the practice takes advantage of a loophole in the market,
in the absence of regulatory oversight. There are other utility-specific
forms of customer service abuses that the Department can anticipate if we go
to unfettered competition. Slamming, the involuntary switching of suppliers,
will happen in electric service as it has in long-distance. The Congress has
just tightened up again on the anti-slamming rules, but slammers are clever
and resourceful, and vigilance must be maintained to keep on top of the latest
dodge. Market rules are needed as well because markets do not function
well in serving small customers with low incomes, particularly in minority neighborhoods.
It is by now well documented that the poor pay more for services and goods that
are often of inferior quality. Redlining has been documented in the banking
and insurance industries, and can be expected in the electric industry. Discrimination
in sales to minorities and women has been documented in the automobile industry.
Reverse redlining is another risk of an unsupervised market where unscrupulous
actors prey on unsophisticated consumers. An electron is an electron, but the
price and availability may not be there when the customer is a low-income family.
THE RULE SHOULD CONTAIN NORMS TO GOVERN CREDIT TERMS, DEPOSITS, BILLING (ACCURACY,
TIMING, BASIS, CONTENT), COLLECTIONS AND DISCONNECTIONS
The primary way that suppliers will avoid seek to avoid service to customers
they have privately labelled "not worth the bother" is by imposing
credit hurdles too high for low-income customer to overcome. The Department
should reinforce the anti-discrimination provisions of current law, should limit
certain credit practices, and should require reporting to permit monitoring
and head off abuses. Existing Credit Norms: Supplement and Enforce
1. Equal Credit Opportunity Act
Some uses of credit barriers by suppliers will be illegal under the Equal
Credit Opportunity Act (ECOA), 15 U.S.C. § 1601-1681t(1974), as amended by P.L.
No. 94-239, 90 Stat. 251 (March 26, 1976). See also Regulation B, 12 C.F.R.
§ 202. The ECOA applies to any grant of "credit." Credit is broadly
defined in the Act. Under the ECOA, credit is extended when the agreement contemplated
deferred payment for the obligation (e.g. paying for electric service based
on metered sales), whether or not a finance charge is in place, and even if
the deferral is for a short time period.
The ECOA prohibits discrimination
in the granting of credit on the basis of race, sex, marital status, familial
status, religion, national origin, age, handicap, public assistance status,
and exercise of rights under federal consumer protection statutes. This prohibition
includes not only denial of credit, but the granting of credit on differing
terms, e.g. deposits, payment terms, meter requirements, etc. The prohibited
factors cannot be explicitly relied on by the creditor even if one or more of
the factors correlate positively with poor credit risk. This aspect of the law
is the prohibition on "disparate treatment." Thus, if a supplier requires
that AFDC recipients pay to have a prepayment meter installed before extending
service, this distinction in whether or not credit is granted on the basis of
receipt of public assistance is a violation of the Act. The ECOA goes further.
It also prohibits conduct that results in disparate impact on the members of
the protected groups. This is the "effects test." If a customer can
prove that the zip codes of the areas where a supplier proposes to do business
include only predominantly white areas, and do not include predominantly African-American
areas, this redlining would be prohibited by the ECOA, even if no animus or
discriminatory intent is present. Similarly, if the percentage of welfare recipients
in the non-served areas was disproportionate to the percentage of welfare recipients
in the population as a whole, a case could be made of discriminatory impact.
The Federal Reserve Board Official Staff Commentary puts it this way: The act
and regulation may prohibit a creditor practice that is discriminatory in effect
because it has a disproportionately negative impact on a prohibited basis, even
though the creditor has no intent to discriminate and the practice appears neutral
on its face, unless the creditor practice meets a legitimate business need that
cannot reasonably be achieved as well by means that are less disparate in their
impact.
2. FRB Official Staff Commentary, § 202.6(a)-
The effects test was developed under federal employment discrimination cases.
Griggs v. Duke Power Co., 410 U.S. 424 (1971) and Albemarle Paper Co. v. Moody,
422 U.S. 405 (1975). The Federal Reserve Board's Regulation B explicitly states
that Congress intended to apply this test to the ECOA.
Some examples of
discrimination that would be illegal if done with discriminatory intent or purpose
include: a) pre-application discrimination (offices in white neighborhoods only)
b) applications proceedures favoring or disfavoring customers based on prohibited
bases, Reg. B, 12 C.F.R. § 202.2(m). c) Credit evaluation and denial of credit
(cannot use any prohibited bases in a credit evaluation system; a utility or
supplier cannot deny service on credit, or require a deposit, on grounds that
applicant's spouse or former spouse owes a delinquent utility bill, or a consumer
is a welfare recipient, e.g.). d) Discrimination in requirement of immediate
payment (e.g. prepayment meters for some customers only). e) Discrimination
in credit limits (e.g. service limiters, length of time of nonpayment before
credit action, amount of bill outstanding before credit action, etc.). f) Discrimination
in authorized users of credit. g) Discrimination in required deposits, collateral,
guarantors, other security. h) Discrimination in payment terms. i) Discrimination
in price of underlying good or service. j) Discrimination in changes to account
status. k) Discrimination in treatment in event of default. Federal law
does not preempt a state from augmenting these provisions, or adding its own
enforcement procedures to the purposes of the statute. Fair Credit Reporting
Act
The FCRA, 15 U.S.C. §§ 1681 -1681t (1971), primarily regulates creidt reporting
agencies. However, it imposes a duty of disclosure when a creditor makes use
of a credit report in making an adverse credit action.
Actions would include
denial of credit, requirement of a deposit, change in credit terms, etc. The
law applies to utilities, and would certainly apply to retail electricity suppliers.
However, it does not prohibit the use of credit reports. It would be legal under
FCRA (assuming no violation of ECOA), to seek credit reports on all applicants,
and impose deposits based on an interpretation of poor creditworthiness.
That is, customers may be denied electric service based on the failure to pay
a Sears bill any time in the period for which a credit reporting agency keeps
data, without violating the FCRA. Thus, the Act provides some protections for
payment-risk customers, but does not in and of itself protect them from denial
of service for non-payment of non-utility bills. Studies performed by Hydro-Quebec
and the Pennsylvania Public Utilities Commission Bureau of Customer Service
have established that most customers who are struggling to pay their energy
utility bills pay their shelter costs first, and then their energy utility bills,
with all other bills paid in lower priority. Thus, risk of non-payment should
be put in context, and weighed against the risk of denial of service for non-payment
of non-utility bills. Note that if a DISCO supplies credit history to a
supplier, who uses it to deny or condition credit, the FCRA disclosure requirements
are triggered and the DISCO has become a "consumer reporting agency"
within the meaning of the statute. This fact has caused utilities not to share
credit history between themselves, because of the required disclosure, and the
potential liability to which they are subjected.
ECOA and FCRA Are Not Sufficient
Unless the Commission, or some similar regulatory body, has independent jurisdiction
to prevent unfair credit practices, enforcement of the principles of the ECOA
will lag. Few dispute that discrimination among customers accepted by suppliers
will emerge unless monitored and prevented via oversight. Indeed, some argue
that markets should discriminate and that this is a positive aspect of the move
to markets. This view is honest, but ignores the impact of unfettered discretion
in agreement to serve customers.
Absent DPU oversight, the remedy for a
consumer who has been denied in violation of the ECOA is a lawsuit. Marketers
may well prefer the deft hand of DPU oversight to the blunderbuss of a class
action. Also, the federal laws do not go far enough in the types of customers
they protect. They do not establish affirmative duties or obligations in
the process of applying for electric service. And they leave too wide a range
for discriminatory denial or conditioning of credit. Unless further enforcement
is undertaken, and further norms are established and enforced, customers will
be denied service on grounds that have not been permitted historically and that
are unfair in dealing with a necessity.
Proposed Grounds For Extending/Denying Credit
The entire exercise of moving to competition is to find the right balance
between complete discretion on the part of the supplier, and limits on the exercise
of that discretion to protect access to a necessity and fairness between customers.
While some picking and choosing of customers must be tolerated in a competitive
market, it is possible to put reasonable boundaries on such choices, and still
attract suppliers ready, willing and able to serve the Massachusetts retail
market.
With this in mind, the following provisions should be added to
the Rule:
A retail energy supplier
may not take adverse credit action based on any of the bases prohibited
by the Equal Credit Opportunity Act.
A retail energy supplier
must maintain written policies on applications for service and the basis
for its determination of credit. The supplier must make this written policy
available to any consumer on request. The policy must describe the criteria
for becoming a customer of the supplier. These criteria must be filed with
the Department upon application for license/registration, and the filing
must be updated as they change. No policy may be applied that has not been
first filed with the Department. The change in policy may take effect the
next business day after filing, unless otherwise ordered by the Department.
A retail energy supplier
may hold itself out as serving customers with a particular set of end-uses
or load curves, or who meet other criteria related to the generation source
and pricing policy of the supplier, so long as such criteria do not have
the effect or intent of discriminating among customers on the grounds prohibited
by the ECOA.
A retail energy supplier
may demand a deposit of any customer on the basis of the customer's history
of payment of utility bills in the last 24 months, as a condition of service,
but the deposit shall not exceed the average of two monthly bills for service
by that supplier. A retail energy supplier may not require a deposit in
any other circumstance.
A retail energy supplier
cannot require payment of any unpaid bill to other energy suppliers as a
condition of granting service to a prospective customer, or demanding a
deposit or other security, nor can the supplier require payment of any prior
unpaid bill owed by any other member of the household.
A retail energy supplier
must maintain a map showing the geographic area in which it proposes to
seek customers. This map must be filed with the Department as part of the
license/registration application, and must be updated as conditions change.
A retail energy supplier cannot discriminate against any customer in this
geographic area unless the supplier determines that the applicant is not
creditworthy within the meaning of the supplier's written credit policies.
A retail energy supplier may not discriminate in pricing or access to services
based on location within the geographic area identified on the map.
A retail energy supplier
may not deny energy service for non-payment of the non-energy portion of
a bill (e.g. merchandizing and jobbing, efficiency services, etc.).
Definition of "Customer"
and Associated Bill Responsibility: Third-Party Billing and imputed responsibility
for roommates and family members should be prohibited, as a violation of
implied contract law, as well as, in some cases, ECOA. Especially if the
suppliers claim the right to apply credit screens not permitted to regulated
utilities, they should not then be able to claim a reasonable expectation
of payment from a non-customer or former customer as a condition of serving
a current applicant for service. To permit otherwise is to violate the common
law of contracts.
Upon a complaint of
prohibited discrimination, and after notice and hearing, a finding of probable
cause by the Department, and Order of the Departmenta retail energy supplier
shall provide service to the complainant on the same terms and conditions
as offered and provided to similarly situated customers. The Department
may order that the supplier survey a random sample of its customers to determine
the extent to which its customer base includes representative numbers of
customers in a class or classes protected from credit discrimination by
the ECOA. Upon further hearing and a finding of prohibited discrimination,
the Department may make such orders with respect to the supplier's credit
practices as are necessary to prevent further such discrimination.
All retail energy suppliers
must keep records of the number of residential applications for service,
the number denied on account of poor credit (broken down into reasonable
categories of risk), the number from whom deposits were received, and the
average and total amount of deposit. These records must be made available
to the DPU on request.
Prepayment meters and
service limiters: Suppliers (and DISCOs) should not be permitted to insist
that customers with poor credit history take service under such meters and
limiters. France's experience shows that these devices turn into self-executing
disconnection devices, with no supervision nor opportunity to head off the
consequences of disconnection.
B. Other Credit and Collection Rules Applying to Suppliers
Abuses of the fact that consumers require electricity will not be limited
to credit discrimination. Less elastic customers will see fewer options among
suppliers as to credit, billing and collection terms. Unless there is some control
over these terms, the market will not prevent gouging of consumers, or protect
against lack of control over electricity choices.
To respond to these concerns,
the rule should cover the following topics:
State Sanitary Code
The Rule apparently does not apply to any customer not taking Basic Service
the provisions of 220 CMR c. 29 (billing procedures for residential rental property
owners cited for violation of State Sanitary Code) to suppliers. This provision
must be applied to entire bill, not just distribution component, and protect
all customers, not just Basic Service customers. Protections for Tenants in
Event of Landlord Default.
Most premises where bill not in landlord's name will not be on Basic Service
(i.e. commercial landlords will choose a service) and as rule is now written,
protections of rule for notice to tenant and opportunity to take over as customer
in own right are dropped (sub silentio). The tenant "notice and right to
take service" rule is statutory and should be restored to the regulation
applying to all suppliers. It is good policy, too. It makes no sense to deprive
tenants of protections of rule and opportunity to avert disconnection and become
customers because of a landlord's choice of supplier, over which the tenant
had no choice.
Accuracy of Billing
There must be recourse for claims of inaccurate billing, and a prohibition
of termination during period of dispute.
Truth in Labelling - Green Pricing
Standards should be developed to determine the veracity of claims that power
is supplied from renewable sources. A standard definition of green power will
spur this market on, and head off controversies concerning the bona fides of
claims that power being delivered to end-users is green power.
Prohibition against late fees (now only applies to Basic Service).
Typical commercial late fees overcharge customers. A flat fee, for example,
is imposed without regard to the underlying cost to the supplier. They are ineffective
in motivating timely payment behavior in customers without sufficient funds
or customers with large amounts of funds. For low-income customers, they only
compound the sense that there is no point trying to make the payments. Competitors
do not in fact compete over late fee terms - thus the market does not discipline
these practices, and regulation must continue to protect consumers from this
inefficient overcharging.
Privacy/Value of Information To Consumer
Not only should DISCOs not be permitted to give information on customers to
any supplier without advance permission from the customer on a case by case
basis, but the DISCO should sell the information rather than give it away for
free. The rule should also clarify or specify further the types of information
that are subject to the confidentiality protections. Name, address, telephone
number, meter number, load, usage, load profile, and payment history are the
minimum types of information that should be kept confidential. This information
is property that rightfully belongs to the customers. The affiliate transaction
rules should prevent unauthorized access of affiliate marketers/suppliers as
well. DISCOs should be required to report to the Department the circumstances
of delivery of this type of information to suppliers.
A complaint mechanism
and penalties for breach of confidentiality should be set up. The DPU should
not assume that customers want marketers to have this information so as to better
market their services to the customers. Indeed, the DPU should assume the contrary
- customers assume the privacy of this information, and will be angry to learn
that at government instance it is being freely given out to competitive companies.
Protected Customers
G.L. ch. 164, Sections 124A-124I, 125 [statutory recognition of winter disconnect
rule, infant and elder hardship rule, no disconnection for non-payment of a
collateral matter, reconnection upon payment of bill, etc.] cannot be waived
by DPU. In addition, it would be poor policy to apply these rules only to customers
taking Basic Service. As with other exemptions for suppliers serving non-Basic
Service customers, the result is a "Basic Service ghetto" of the elderly,
the ill, those with infants, the poor, and any others with special protections
by statute or rule.
These customers will be denied competitive energy service
or discouraged from obtaining competitive service by suppliers once they have
self-identified or taken advantage of the protections afforded. They will be
"stuck" in Basic Service and not be able to take advantage of the
market. Thus, the rules should apply to all suppliers. To give effect to
these statutes, a "pay or play" rule should be adopted. This provision
would allow a supplier to comply by applying the statutory standards to qualifying
customers. A supplier without such customers would pay an access fee to the
DISCO that would reduce the Basic Service revenue requirement.
Supervision over reconnection fees should be maintained.
Especially in case of low-income payment-troubled households, pancaking disconnection
and reconnection fees on to past-due charges only makes it more difficult to
restore service, but does not expand the amount of funds available to pay the
bill. If suppliers exact separate reconnection fees, the level of these should
be controlled by the DPU. Reconnection fees may also be used as a device to
eliminate payment-risky customers from service without triggering application
of the credit policy, and this practice should be prevented.
Complaint resolution
The DPU should clarify that it retains complaint resolution authority over
energy portions of the bill. The alternative is to push disputing parties into
the courts. The DPU has a nationally recognized and effective Consumer Assistance
Division, that counsels tens of thousands of consumers a year, handling all
but the tiniest fraction of disputes via advice and informal mediation. This
process is a great resource for all disputing parties, and should not be withheld
from disputants with issues about energy supply agreements. Note that in the
telephone industry, disputes that are not jurisdictional to the DPU are still
FCC jurisdictional, but that this will not be the case in electric service.
Right to Change Suppliers
The rule allows customers to change suppliers (Section 11.05(9)(a)), but the
proviso "subject to any contractual obligation to a supplier" negates
the right, at least in the case of small customers who will be taking service
under generic terms not negotiated on an individual basis.
In addition
to notifying the DISCO of a discontinuance of the supply relationship, even
if voluntary, the supplier should be required to notify the consumer, so that
the consumer can verify his or her status, and mistakes can be remedied.
The rule should provide for a convention (e.g. midnight of the date stated on
the agreement for termination) for the "cutover" from one supplier
to another. This is needed for wholesale settlement purposes, and clarity about
responsibility when energy relationships change but energy continues to flow
throughout.
DISCO Access vs. Non-DISCO Bills
There should be no denial of DISCO access for non-payment of a non-DISCO bill.
The language of the rule suggests the DISCO can deny access for ANY unpaid bill,
§ 11.05(7)(a)(1). This provision must be eliminated, and denial of access restricted
to customers who have not paid a bill owed to the DISCO itself. It is anti-competitive
to enable a creditor (a given supplier) to use the threat of denial of essential
service (not only access, but supply by a competitor of the creditor in question)
as a tool to collect competitively-accrued debt. Particularly where there is
no DPU-supervised dispute resolution, it is unfair to use DPU-approved access
denials to enforce a private debt.
Adequacy of notices of proposed termination, and its consequences. Notices
under the new system will have to be revamped to track the different relationships
and rules that apply to different situations. If a DISCO bills and collects
for a supplier, the notices must spell out carefully the consequences of partial
payment and non-payment. Customers will assume they could be disconnected
for non-payment even of the competitive portion of the bill. Notices should
advise them of the Basic Service provisions. The notice from a supplier (whether
given by the DISCO on its behalf, or separately in the case of separate B
&C), should specify a new situation, called here inelegantly the "End
of Electricity Supply Contract with Company X." This notice should be
given 14 days in advance, time enough to line up a new supplier if need be.
The notice should specify the reason for the termination of the supply relationship
(better language needs to be found for this event, to avoid confusion with
disconnection), with reference to the credit policy on file with the DPU.
The notice should spell out the terms of Basic Service and the fact that Basic
Service will kick in if no arrangements are made with supplier "X"
before the expiration of the notice period. It should remind customers of
their right to contract with another supplier at any time.
Clarity on bill re: whose billing for whom and who owes whom and consequences
of partial payment, nonpayment. All who engage in billing and collection should
be required to make plain on the bill which entities are the parties in interest
on the bill, and the relationship between the entity tendering the bill
and the entities on whose behalf the billing party is collecting. A rule
is need on the allocation of partial payments in the case of joint billing.
In the absense of explicit instructions from the customer, the DISCO should
assume that the priority is to retain service, and apply the payment to DISCO
charges first. In the case of Basic Service, as disconnection presumably will
be permitted if partial payment of the total bill reaches the regulatory thresholds,
allocation is not required from the point of view of determining disconnection
policy. But a rule may be required if Basic Service energy is provided directly
by a third party, and the debt for that portion of the bill is owed not to
the DISCO, but to that third party. The rule should be clarified to spell
out the relationship between the provision stating that the distribution company
shall remain a billing authority, and proposed 11.05(b)(b), which provides
that a supplier may request separate billing for generation service.
Price of DISCO B&C to Suppliers - Market-Based While the rule does not
require use of the DISCO service, and should not, it is likely that most suppliers
will opt for the DISCO billing and collection service. There are risks to
customers, and benefits to suppliers, that must be properly managed. Customers
must be advised that they cannot lose service for non-payment of the supplier's
bill, unless they are receiving Basic Service. However, even this notice will
be ineffective in practice, and customers will be frightened into giving competitive
suppliers preference over other creditors (such as telephone companies, gas
companies, landlords, and the like). This is anticompetitive. To the extent
competitors want the benefits of a competitive market, to the same extent
they should not be able to piggyback on the utility protections of competition.
At the very least, in addition to the notices, the DISCO should be reimbursed
(and required to flow through to customers) the value to the supplier of the
joint billing. Indeed, in addition suppliers should pay up to $1 and transaction
costs less than the cost of billing and collecting on their own. That is,
DISCOs should drive hard bargains for their billing and collection service
on behalf of the distribution customers. Failure to do this should result
in imputation of income. Metering, Wholesale Settlements
The rule presently lacks the provisions necessary to prevent customers from
being required to invest in real-time meters in order to obtain service. This
issue cannot be left to the competitors, as it requires a wholesale settlements
process (the issue is the divvying up of cost responsibility between all those
with retail customers and with supply going into the system, not divvying
up responsibility between retailer and customer). Either the Norway method
or the MECO proposal should be adopted. However, it should be spelled out
in the rule, and not left to later or left to chance. In addition, the
DPU should look at the meter accuracy statutes, and determine its jurisdiction
over accuracy of meters, particularly if it is contemplating opening up the
provision of meters to competition. The foundation of the billing and collection
system is the accurate meter.
Also, before opening up the metering business to competition, the DPU should
consider the implications of competitive metering on its ability to administer
sound termination policies. If the meter is pulled, the customer is disconnected.
The Department should prevent this occurence when not authorized by the provisions
of its comprehensive restructuring rules.
PROPOSAL ON PRESERVATION OF DISCOUNTS ON BILLS IS GOOD START; NEEDS CLARIFICATION
AND STRENGTHENING; DPU SHOULD TAKE THIS OPPORTUNITY TO INTRODUCE PIPPS
Proposed Rule Mechanics Require Clarification
The present rule language
is not clear on the mechanics of the new discounts. It appears to say that the
percentage discount on the distribution component of a combined total bill will
be increased to the point that the resulting percentage decrease from the new
combined bill will be equal to the percentage decrease formerly resulting from
the application of whatever percent discount was available to customers on whatever
portion of their bills the discount in effect as of the date of restructuring.
This may sound complicated, but it's actually clearer than present formulation
in proposed rule. This formulation could be cleaned up to be less convoluted,
but it should be possible, when reading the rule, to develop an algorithm that
expresses what is multiplied by what and subtracted from what in order to arrive
at the actual bill.
Running all discounts through the DISCO makes sense, on balance, despite certain
problems.
Ease of administration: no separate fund.
The proposal to have a discount applied entirely to the DISCO component of
the bill is easier to administer than any system involving the energy portion
of the bill. Any system involving the charges levied by suppliers would have
to require the offering of the discount by all suppliers for any low-income
customer, or develop a funding pool to reimburse suppliers to the extent they
had and honored discounts to eligible consumers. Not only would a fund have
to be gotten up via a pooling of some kind of contribution, but any supplier-involved
method would require some basis for applying the discount. That is, it would
be necessary to determine the base to which the discount is applied. This
in turn would force a choice between use of the actual rates offered by the
supplier to non-eligible customers (balkanization) or some statewide average
(resulting in uneven levels of discount).
It creates a level playing field for suppliers.
All suppliers would sell into markets where low-income customers were treated
identically based on similarity of circumstance, and not accident of which
supplier provides the electricity.
1. But Universal Service neither requires nor should be funded by "general
access charges." The DISCO-administered discount provides the complete
mechanism to "collect" funds to cover the cost of the discount. There
is no need to set up a surcharge to pour moneys into a separate fund, if the
discount is internalized to the DISCO's rates. The Department should permit
the DISCO to recover these charges as it does today - rolled into the revenue
requirements allocated to classes [per relative rate base, as proposed] and
spread through the rates, rather than appearing in a separate access charge.
So long as the costs are internalized to the distribution company, and its functions
are non-bypassable, the charges will be non-bypassable as well, and no separate
levy is required to accomplish that result. This is not only administratively
more convenient, it maintains the recognition that these are functions of an
integrated electric utility industry, that are assigned to one component as
a convenience of the restructuring process. Providing for universal service
guarantees and environmentally sound electric service are not distinguishable
in principle from other aspects of the functions of entities providing electric
service. They are not add-ons, but rather integral components of service provision.
In any event, such charges should not appear separately on the bill. The Rule
is silent on this, but it should be clarified. Making any given charge a line
item on the bill attracts disproportionate attention to that cost. These charges
are likely to be small relative to other components of the bill, but history
shows that consumers focus on any separately stated component of the bill. Other
components of the bill and thus of the distribution companies' service to the
public, all of greater fiscal impact, will not receive the same attention by
virtue of not being separately stated on the bill. If the Department chooses
to isolate the access charges on the bill, it should require further disaggregation
of the other components of the bill. Thus, line items should be created for
other costs that have a large dollar impact, or an equal public relations impact,
such as the cost of storm damage, or executive salaries, or profit margins.
To the extent the DISCO bills and collects for suppliers, the suppliers' costs
from nuclear power and fossil fuel sources should be stated separately too.
Problems with running discounts through the distribution component only:
1. This method does not require contribution from suppliers to this function.
Suppliers will have completely unregulated profits as a result of the creation
of the new system. They should contribute (as via access charges for putting
their supply into the distribution system) to the preservation of a sound system.
2. More importantly, depending on the relationship of the distribution component
to the supply component, the level of discount on the distribution component
of the bill could become quite large.
a) Using rough numbers readily available from MECO shows that after the stranded
cost component (using the MECO stranded cost proposal for example purposes
only) is worked off, if supplies tighten or fuel prices spike, and supply
costs increase 30%, the R2 discount as a percentage of DISCO charges would
be as high as 72%.
b) At some point, then, and perhaps now, before the system is put in
place, a mechanism to spread the cost responsibility beyond the DISCO billings
to end-users should be developed. Access charges to suppliers could provide
a supplier contribution to the discount.
B. Restructuring is An Opportunity To Revisit Discount Design For Better
Targetting and Cost-Effectiveness
The DPU should take advantage of this opportunity to revisit how discounts
are provided, to better target them for achieving universal service goals. The
burden a household bears for electricity costs [expressed as a percent of income,
or better, percent of Federal Poverty Level Income] is the best gauge of affordability
of necessary services.
Many utilities around the country administer bill
relief via PIP programs that incorporate the burden concept. PIPs have many
benefits:
Better targeting - better uses scarce dollars.
Also greater reduction
in credit and collection problems because reaches the most burdened customers
and tailors discount to customer circumstances. Provides for manageable
but real responsibility on part of customer - not a "hand-out"
Several types of PIPPS - straight PIPPs, PIP credits, tiered discounts, Percent
of Bill.
a) Best is Percent of Bill - shares usage difference impacts between customer
and utility.
b) But flat PIP credits would be most workable in DISCO situation.
(1) Like Central Maine Power Program
(2) Could be individualized deterimination of burden and associated credit.
(3) If administrative costs are a worry [should not be], then use tiered
matrix of credits, so customers are bunched by percent of income and range
of usage, and credit for that cell of matrix is applied to bill.
(4) Flat credit PIP puts all risk of increased use between reevaluations
on customer, and thus fosters conservation.
(5) Deals with problem that grandfathering current rate designs results
in statewide patchwork of discounts and resulting bill impacts.
a) Disparity in discount level is more important issue than bill impacts, as
DPU had worked to keep bill impacts modest throughout the state.
b) A statewide standard pegged to customer's burden, rather than to existing
rate, would put all customers on an even footing.
c) Switch to new approach, if made now, would be experienced as part of entire
switch in approach to provision of electricity, rather than isolated event.
Easier to explain to customers who might no longer be eligible for discount
on grounds that combination of income and bill means burden not high enough
to require credit, despite income below cut-off.
B. No Cap on Effectiveness of Low-Income Rate
Rule Section 11.05(3)(a) should not cap the effectiveness of the affordability
rate to the level of protection now in effect. This can be remedied by stating
that the level of protection shall be "no less than" the level in
effect as of the present time. This general rule, of course, should be supplemented
ideally by the PIPP approach, or at the least the more detailed description
of the mechanics of the rate protection the DPU has in mind. Note that the California
Commission did not cap the amount of the fund for low-income programs in its
April 1996 Order.
Other means to augment the funding available for these purposes can be implemented,
as well, since the balance between ratepayer impact and adequacy of the fund
is likely always to put pressure on the size of the fund. Refundable deposits
not claimed by the customer should be paid over to a fund maintained by the
DISCO for assistance to low-income customers with energy efficiency. Some states,
such as Colorado, have employed a system in which customers are notified when
a refund is available, and given the opportunity to designate payment of the
refund to the low-income DSM efforts. This could be employed in the case of
PBR refunds, for example.
Rule should specify statewide eligibility requirements.
The list included in Order did not include those provisions that allow customers
to qualify for discount rate on account of low-income, while not receiving means-tested
aid (e.g. Commonwealth Electric - 175% of FPL).
SELECTION OF SUPPLIER FOR UNIVERSAL SERVICE AND BASIC SERVICE
Several Considerations, Some in Conflict
There are several parameters that the Department rightly identified as bounding
the determination of how to provide Universal Service and Basic Service. It
is not possible to maximize policy against all of these parameters simultaneously,
so balancing and choices must be applied.
Some of the considerations
in determination of the energy portion of supply to Universal Service and
Basic Service customers are listed below:
Universal Service and
Basic Service customers, perhaps more than customers who can and do choose
competitive alternatives, require stable rates that do not fluctuate seasonally,
much less monthly, weekly, daily, or even hourly. They comprise the customers
with the least ability to adjust to sudden or large variations in bills.
This is so because of the low incomes and fixed incomes of Universal Service
customers, and the desire for stability that is the hallmark of the Basic
Service "choose not to choose" customer. This makes the use of
Power Exchange spot prices a particularly unsuitable choice for supplying
these customers.
Similarly, both sets
of customers, more than other customers, need lower priced supplies, not
higher priced "assigned risk pool" prices. To the extent that
the costing of energy for such customers leaves them with the least desirable
underlying energy cost structure, then the benefits of Universal Service
discounts and Basic Service stability will be seriously undermined.
DISCO ownership of supply
(and resale) raises concerns of self-dealing and the monopolization of large
portions of the newly competitive market, at least at the beginning, when
more customers are in the "choose not to choose" mode.
The traditional rate
case method of supplying these customers (alternative 2, Section 11.05(4)(b))
does not prepare customers for competition, and does not relieve the DPU
of regulatory responsibility.
B. DPU should consider having DISCO bid out energy supply portion of Universal
and Basic Service.
The Department has signaled an interest in exploring alternative mechanisms
to meet the needs of a stable, low-cost supply for Basic Service and Universal
Service. Holding an auction for the right to provide this service (as a package)
could provide many benefits, without involving the Department in the determination
of specific rates.
The Universal Service/Basic Service supply contract
with DISCO would be for all Basic Service and Universal Service requirements
-it will be possible to anticipate what these are, and to provide a service
with prices comparable in stability to those provided to competitive. RFPs should
specify that bid awards will favor suppliers who offer stable predictable prices.
While some customers individually will have payment risks, the group of customers
as a whole will be:
large enough to have
great diversity and thus a better load factor.
stable in its usage,
as residential customers.
comprised mostly of customers
who pay on time - even Universal Service customers and customers terminated
by one supplier, once on the basic service terms, will have every incentive
to pay on a timely basis, and
if Universal Service
rates are well-structured, such customers will have improved payment histories.
Thus, this will be an attractive load for a supplier, who could lock up a considerable
portion of the market by winning the bid, and would stand to keep many of these
customers when then went off Universal Service or Basic Service. A properly
conducted bid process would not eliminate DISCO-affiliate self-dealing, but
would be more manageable than other alternatives.
In sum, such a method
would be superior to the vagaries of Pool pricing (which doesn't exist now in
any event), and the headaches of a rate case, and might bring forth truly economic
rates for this group of customers. GTE has been describing a similary proposal
for Universal Service in the telephone system, which can be referenced for more
details, and a copy will be made available on request.
PBR
Exogenous Costs should not include storm costs.
New England is known for storms. They are infrequent, but over a period of
years some level of storm damage can be anticipated, and prudent utilities will
plan for these events. Storms affect the general economy and competitive businesses
when they strike, but such firms have no captive customers to cushion their
losses. The purpose of the exogenous factor adjustment should be limited to
those events which cannot be anticipated and which affect electric utilities
uniquely. Storms do not qualify on either count.
If the concern is that
the outage feature in the Service Quality Index is triggered for major storms
or hurricanes, that is a separate issue that can be dealt with in the SQI itself.
However, the DPU should remember that utility slowness in mobilizing to meet
the perils of storms and informing customers of the status is one of the items
of service quality that angers consumers the most. They are helpless without
electricity and information, and rightly expect utilities to plan for these
eventualities. Further, anecdotal reports of cuts in tree-trimming and storm
repair part inventories suggests that some Massachusetts utilities may be hard
pressed when the next prolonged Noreaster hits. This failure to plan, or economizing
at the expense of prudent preparation, should not be rewarded in the SQI or
the cost-adjustment formula.
Inflation Factor
The proposed rule would allow electric-industry-specific price changes to control
the price cap index. This approach does not seem reasonable in light of the
tremendous uncertainty about the industry given restructuring. Utilities going
through a particularly costly and inefficient transition to competition should
not be a benchmark for the economical and forward-looking utility. The inflation
factor should be tied to the general economy, and not the electric industry.
Any price cap index should have some stability over the term of the plan.
Service Quality Index (11.04(5)(b))
The rule presently only provides the general categories to be covered by the
index. The commentary does propose that a uniform set of measurements be identified
and litigated for each company in the first PBR filing. However, some SQI factors
should apply to all companies. Such factors should be provided for in rule,
and not litigated in a case in which other utilities and their ratepayers may
not be present. The specific list of factors should be set out in the rule.
More importantly, the rule provides that companies shall propose measures to
be weighed against "target levels and standard levels," determined
by the Department. This provision is unclear and insufficient. It is not clear
what the DPU means by target as opposed to standard levels. The language does
not make it clear what exactly the DPU will predetermine. And the use of both
target and standard levels is an invitation to game the index to the detriment
of customers. There is no reason for two "acceptable" levels of service
quality. If service quality is below par, it should be brought to acceptable
levels. The target for improvement would be built into the index, but not as
a basis for additional incentives. The rule should require the DISCOs to
submit data on recent historical performance for all measures proposed for the
SQI. The SQI should contain a baseline of acceptable performance reflecting
actual recent performance in all areas. If the performance has been sub-par,
the index should include a schedule for necessary improvements. The penalty-only
approach is the correct approach. Acceptable behavior should be considered the
baseline. However, the penalty is turned into an increase in the productivity
offset. While this is not unreasonable, a more effective method for maintaining
service quality in the face of the pressures of cost-cutting and the protection
of DISCO monopoly is to require a rebate or credit to consumers in the event
the penalty is triggered. The reduction in productivity is a hidden service
quality penalty, and can be traded off for superior financial results accruing
as a result of too much cost-cutting at the expense of service quality. Its
financial impact will not be felt between price changes. However, a public
return of penalty money via rebate or credit will immediately pass through to
customers the financial compensation for the poor service quality, and provide
public reminders of the failure of the DISCO to meet its service obligations.
This alone will be a powerful incentive to maintain quality service. Other
forms of redress include free installations for missed appointments (with two
parents working, missed appointments are expensive to the customer, in addition
to being rude and inconvenient), bill-specific credits for failure to respond
to a complaint in a timely manner, and so forth. High service quality standards
are not the enemy of the regulated company. Customers may put up with much in
the way of high rates, but ineffective customer service will turn the public
against a company quickly. DISCOs should not actively oppose these proposals
for strengthening the service quality index.
Universal Service Service Quality
The Low-Income commenters renew the call made in their last set of comments
for tracking of bill affordability and DSM programs in the PBR, for the reasons
stated previously.
DEFINITIONS
Electric Company and Electric Service
The terms Electric Company and Electric Service should be defined to cover
firms that provide generation, transmission or distribution services. The use
of the word "and" appears to restrict the coverage of the term to
entities that provide all these services. This is contrary to the statute, and
needlessly ties the Commission's hands.
Low Income Customer
The definition of Low Income Customer should be consistent statewide. Presently
the rule simply carries forward the existing patchwork of definitions that have
evolved over time. While they are reasonably consistent, this is a good time
to bring statewide consistency into the definition. Note also that the categories
listed by the Department in the Order do not capture all the categories used;
some companies have a guideline of 175% of the Federal Poverty Level. To the
extent this requires adjustments to discount programs, the rule should provide
for an evolution to a statewide standard of qualification of customers.
CONCLUSION
Much work remains to be done to create a workable structure for retail
competition. The Department is taking the right course in doing the hard work
of sorting out the regulations BEFORE embarking on competition, rather than
seeing what kind of a mess is created and then trying to go back to fix it.
The Low-Income commenters commend the Department on its commitment to energy
efficiency services and to universal service. The concepts set forth in the
proposed rules are generally workable in the areas of DSM and discounts. Several
proposed improvements are suggested. A technical potential report and plan to
work off the unmet potential for efficiency in the homes of low-income consumers,
as well as pilot "whole house" programs, are proposed. Use of statewide
eligibility standards and percentage of income payment formats for discounts
are two key suggestions for the discount programs. Similarly, the Basic
Service concept may be the best compromise between competing values in the effort
to fashion a way to protect customers from falling through the cracks, without
leaving them at the mercy of unfiltered market forces, given the Department's
intention to move to retail competition. An auction to select the Universal
and Basic Service provider should be considered to minimize the disruption to
such customers from higher underlying energy rates. The Low-Income commenters
press again for the Department to consider their proposed PBR provisions for
universal service, presented in their April 12 comments. Several detailed
recommendations are advanced to bound the unfettered discretion of suppliers
in picking and choosing among customers. These provisions will not only help
to enforce existing statutes against discrimination, but will create a workable
balance between discretion and equity. They will also give the Department the
information it needs to monitor the roll-out of competition and head off abuses.
Respectfully Submitted,
The Low Income Commenters
Nancy Brockway
National Consumer Law Center
18 Tremont Street
Boston, MA 02108
and NCLC