CONSUMER PROTECTIONS FOR ESSENTIAL UTILITY SERVICES: SOME BASICS AND SOME EMERGING (AND DISTURBING) TRENDS

Transcription

1 CONSUMER PROTECTIONS FOR ESSENTIAL UTILITY SERVICES: SOME BASICS AND SOME EMERGING (AND DISTURBING) TRENDS Barbara R. Alexander Consumer Affairs Consultant 83 Wedgewood Dr. Winthrop, Maine (207) NALEO August

2 UTILITY SERVICES: DIFFERENT FUNCTIONS Electric and Gas Utilities provide several functions and they may be regulated differently: Distribution or Delivery Service: the local poles, wires, pipelines, substations, and customer service functions (billing and collection) Generation Supply Service: electric power plants and natural gas supply delivered by the local utility Transmission Service and long distance pipelines: the transportation system for sending electricity and natural gas from its production facilities to local utilities NALEO August

3 FEDERAL-STATE JURISDICTION ELECTRIC AND GAS Federal Energy Regulatory Commission (FERC) regulates wholesale transactions: interstate transmission and pipelines; wholesale market sales Federal law sometimes announce policies [PURPA], but these are not mandates on states States regulate local utilities and the rates charged to retail customers Municipal Utilities; Rural Electric Cooperatives States regulate consumer protection policies, low income programs, efficiency programs, renewable energy mandates, rate of return or profits for utilities NALEO August

4 DUAL RETAIL MODELS FOR ELECTRICITY AND GAS Approximately 15 states are actively implementing electric and/or natural gas competition for the generation or supply portion of the customer bill Distribution or delivery services regulated as monopoly with traditional rate cases: poles and wires; customer service Generation supply is not controlled by the utility; prices set in wholesale market through regional organizations regulated by FERC All other states have retained their full cost of service regulation of utility generation as well as distribution services NALEO August

5 TRADITIONAL CONSUMER PROTECTIONS IN STATE REGULATIONS AND TARIFFS Application for Service; deposits Billing: disclosures; due date; late fees, rate structure Collections: payment plans, disconnection of service; weather related moratoria Special status rights: medical emergency; low income Complaints: where; how; remedies NALEO August

6 UNDERLYING CAUSE OF MOST ISSUES RELATING TO ACCESS TO UTILITY SERVICES Lack of affordability is key theme in many customer contacts and complaints: higher bills (family size; housing); deposits; payment plans; conditions for reconnection of service Insufficient funding for assistance programs: LIHEAP, WAP, Fuel Funds Insufficient or inefficiently administered ratepayer funded assistance programs RESULT: Consumer protection rights and policies are key to obtaining and maintaining essential electric and gas service NALEO August

7 EMERGING ISSUES Smart or advanced metering Utility mergers and consolidations Retail Competition Is bad debt or uncollectible expense too high? NALEO August

8 SMART METER CONSUMER PROTECTION AGENDA Rates will increase to pay for Smart Grid technologies and replacement of all meters and new communication systems Some want to change rate structures: Time of Use; Critical Peak Pricing; Peak Time Rebates; Prepaid Service Meters can be shut off remotely: eliminate premise visit for disconnection for nonpayment NALEO August

9 Who Owns Your Utility? The era of local utilities is over in many states and significant consolidation and mergers have been approved Exelon owns Commonwealth Edison in Illinois, PECO Energy in Pennsylvania, and Baltimore Gas & Electric in Maryland FirstEnergy purchased Allegheny Energy and owns utilities in Ohio, Pennsylvania, West Virginia, and Maryland Many utilities in New York and New England are owned by English, Spanish, and Canadian companies Southern Company owns electric utilities in Alabama, Georgia, MS, and Florida NALEO August

10 Implications of Mergers and Multi- State Ownership Generation supply costs are planned for entire system and costs distributed to customers in complex formulas that states typically cannot easily regulate Customer call centers are regional and the representative takes calls from many states; drive to unify and lowest common denominator on consumer protection policies The real authority is out of state; local managers are not in charge NALEO August

11 CONSUMER PROTECTION ISSUES IN RETAIL COMPETITION STATES Structure of Default Service: Every State but Texas mandates the utility to purchase default service in the wholesale market: pressure in several states to adopt shortterm and volatile pricing programs for this service. Licensing and regulation of competitive suppliers: prevent unfair and deceptive marketing conduct; regulate contract terms and disclosures; enforcement and remedies. Do residential customers save money when they leave default service? What about low income customers who receive a discount or subsidy paid by all ratepayers? NALEO August

12 HEIGHTENED ATTENTION TO REGULATION OF MARKETER CONDUCT Several studies of actual customer bills show majority of customers who selected alternative supplier pay more than default service, esp. low income (PA, IL, NY, Ohio, Ontario, CA) Significant rise in complaints and enforcement actions against door-to-door and telemarketing sales conduct Teaser rates Variable rate disclosures Additional fees and charges: Texas study NALEO August

13 ARE TRADITIONAL CONSUMER PROTECTION POLICIES UNDER ATTACK? Eliminate premise visit requirements and attempts to contact prior to disconnection of service Adopt a household rule to hold applicant accountable for bad debt by prior or current occupant Significant promotion for prepaid electric service appearing in several states: degradation for low income customers NALEO August

14 TRADITIONAL CONSUMER PROTECTIONS UNDER ATTACK Use credit scoring to charge deposits, thus using customer s credit history for non-utility transactions to trigger expensive deposits prior to granting service Adopt formula payment plan obligations and eliminate actual negotiation of payment plan based on customer s individual circumstances NALEO August

15 POTENTIAL OPPORTUNITIES FOR PURSUING CONSUMER AGENDA Does the utility implement a robust bill payment assistance program? (Discount; Reduced customer charge; Arrears forgiveness) These programs are vital to ensuring affordability of service. Use mergers and rate cases to ask for increased contributions to bill payment assistance and weatherization for low income. These proceedings are potential burdensome but opportunities for program funding are worthwhile. Engage in rulemakings to prevent degradation of existing protections and ask for more effective protections. Consumer protections need constant vigilance at Legislature and Commissions. NALEO August

16 ADDITIONAL OPPORTUNITIES Carefully evaluate new mandates for smart grid, efficiency, and renewable resources for their bill impacts on residential and low income customers; ask that proposed benefits be linked to cost recovery and shift risks to shareholders. Are state regulators empowered with sufficient statutory authority to properly regulate and enforce consumer protection requirements on retail marketers? Seek statutory reforms and upgrade commission oversight and enforcement activities, e.g., publish complaint data; pursue red flags ; take action to lift license and/or assess fines. NALEO August

17 ADDITIONAL RESOURCES Alexander, Barbara, An Analysis of Retail Electric and Natural Gas Competition: Recent Developments and Policy Implications for Low Income Customers (June 2013) [Contact for copy) Alexander, Barbara, Red Flags For Consumer Protection Policies Governing Essential Electric And Gas Utility Services: How To Avoid Adverse Impacts On Low-income Consumers (October 2005) [Contact for copy] Howat, John and Taormina, Philene, Home Energy Costs: The New Threat to Independent Living for the Nation s Low Income Elderly, Clearinghouse Review, Vol. 41, No (Jan.- Feb. 2010) Snyder, Lynne Page, PhD, MPH, Baker, Christopher, Affordable Home Energy and Health: Making the Connections, AARP Public Policy Institute (June 2010), AARP, Guide to Home Energy Consumer Rights, AARP, NASUCA, NCLC, Public Citizen, Consumers Union, The Need for Consumer Protections: Smart Meters and the Move to Time-Based Pricing (August 2010), AARP, Winter Heating Costs Report ( ), Texas ROSE study on fees charged by retail suppliers in Texas (2013): ROSE.pdf NALEO August