PUBLIC UTILITY LAW SECTION2000 ANNUAL PUBLIC UTILITY LAW SPRING CONFERENCEPANEL 3

PUBLIC UTILITY LAW SECTION
2000 ANNUAL PUBLIC UTILITY LAW SPRING CONFERENCE
PANEL 3: "WHAT ISSUES WILL CUSTOMERS HAVE TO DEAL WITH
IN THE NEW ERA OF COMPETITION?"

April 4, 2000

Ami Morita, Staff Attorney
on behalf of
Blossom A. Peretz, Esq.,
Director

New Jersey Division of the Ratepayer Advocate

Good afternoon. It's a pleasure to be here today to offer you the Ratepayer Advocate's perspective on energy restructuring and the issues and challenges customers will have to deal with in the new competitive environment. With rapid change upon us, how can the utility professional ease the customer's transition into the "new era of competition?"

Customers are bombarded with energy restructuring information everyday. Information about their rights, their responsibilities and their choices. This information comes from various sources, such as New Jersey Board of Public Utilities and the Utility Education Committee ("UEC"), advertisements of various third party providers, newspaper articles, bill inserts from the utilities, etc. Depending on the source, the information provided may be relied upon with confidence or it may not. Quite frankly, customers I have talked to are feeling overwhelmed sorting through the new and often technical information about restructuring. Customers may not know how to obtain information that is relevant to them or there may be barriers to obtaining information that they need (i.e., can't understand their bill, cannot read English, regulatory barriers, lack of time, no Internet access, etc.) Barriers may be imagined or very real. Barriers may be created as a by-product of over regulation on the part of the government. So it is safe to conclude that there is an increase in customer apathy when:

A) There is voluminous information without some semblance of order;

B) The inability or perceived inability to obtain the type of information that is needed to make an informed decision; and

C) The perception that the time needed to make an informed decision is not worth the possible benefits such as savings or improved quality of service.

I'm going to narrow my focus on residential customers for a moment. Currently in New Jersey, residential customers are not switching at a high rate. The Electric Discount and Energy Competition Act (the "Act") mandated the start of electric competition in August of 1999 however, as we all know, customer choice was not honored by the utilities until November of 1999. Since then, 5 months have gone by. According to the Board's most recent estimates, as of March, 2000, approximately 61,000 residential electric customers switched to a third party supplier. Although this number does not reflect the number of customers that may have seriously considered other suppliers but decided to stay with the utility, approximately 61,000 customer switches means only a small percentage, 2% of the residential customers.⁽¹⁾ Let's compare New Jersey's data with those of Pennsylvania. It has been reported that as of 1/1/2000, a total of 408,414 Pennsylvania customers or 9 % of residential consumers switched to a third party supplier. From this comparison, it becomes clear that New Jersey can do better to encourage competition in the State. Although the Board's monthly updates on customer switches do not provide the number of switches by rate class, I assume small commercial customers have a correspondingly small percentage of customers switching as well.

As professionals in the new energy marketplace, it is important to encourage clear, concise information that is easily accessible. For example, the Ratepayer Advocate has a website that lists the licensed suppliers offering electricity in each utility territory and a short summary of the packages offered by those suppliers. Customers can go to one website and save countless research hours. Providing this type of information saves customers time, hopefully enough time to make exploring their energy options more worthwhile. I encourage your clients to compile similar data and distribute it, either through the web or other medium to save customers time and energy.

We also believe that to be able to make an informed choice, customers must know what their present status is before they can begin to search for better offerings. Therefore, it is imperative that we move forward with working group topics such as billing format. Billing format issues on the electric side still continues to be an open topic of discussion after competition has been in place for 5 months. It is difficult for customers to know how to compare prices and find more reasonable rates without understanding their own bills and electricity needs. Currently, there is no uniformity in the bill formats and the bills are long and confusing. Further, the shopping credit on some of the utility electric bills right now show either summer or winter shopping credit instead of the stipulated average shopping credit.⁽²⁾ This only adds to the confusion felt by customers.

Unnecessary barriers may exist as by-products of well intentioned but not very effective regulation to protect the consumer. As a consumer advocate agency, we are very concerned with protecting the public against unscrupulous businesses. The "wet signature" requirement is intended to protect consumers from slamming and other fraudulent activities. No one in this room, no matter who they represent, disagrees with the necessity to protect consumers from fraud, that is clear. But we must ask ourselves, is requiring "wet signature" the best way to protect the energy customers of New Jersey? We have repeatedly been told by experts in the area of consumer protection, and we have come to agree with the view, that independent third party verification is a better method of protecting consumers than the "wet signature" requirement. The argument is a convincing one, companies that are willing to slam customers are more likely to forge signatures. Conversely, it is very difficult to collude with an independent verification company to slam customers, especially if there is a screening process to serve as a verification company. Obtaining wet signatures is a time consuming expensive endeavor when compared with third party verification and not as effective a deterrent to slamming. The legislation does not require wet signature but instead leaves it to the discretion of the Board whether wet signature or "'such alternative forms of verification" is necessary and appropriate.⁽³⁾ I therefore urge the Board to re-visit the issue of requiring wet signature to stimulate the competitive market in New Jersey and entertain the possibility of permitting Internet enrollment and other forms of enrollment. A balance between protecting consumer interests which is unquestionably an important goal, with over protection to the point of deterring or undermining the competitive marketplace must be struck.

Similarly, recent government aggregation experience where Monroe Township was unable to obtain a customer list for notice purposes is another example of over regulation to the detriment of the well being of electric consumers. Customers' choice were unnecessarily limited. Specifically, the Electric Discount and Competition Act section 45 requires government aggregators organizing an Opt-out program to:

1) notify customers about the government aggregation program; and 2) determine the number and identity of its residential customers who did not affirmatively decline participation, before it may commence public bidding. The Board's interim standard requires that the customers be notified in writing. The government aggregator cannot notify all energy consumers within its jurisdiction or identify the customers who did not opt-out without the utility's customer list used for billing purposes. Therefore, the Ratepayer Advocate took the position that implicit in Section 45 a. of the Act is the utilities' obligation to assist the government aggregator obtain critical information they need to fulfill the intent of the law to allow municipal aggregation in New Jersey. The Board decided that the provision protecting consumer privacy in Section 36 of the Act applies to government aggregators and therefore prohibits release of customer information without written consent of the consumer. Here again we find a law, drafted with the best of intentions, creating a barrier to competition and choice. These barriers must be removed to bring competition to the state as mandated by the legislation.

Restructuring is still new to all of us. We applaud the legislature and the Board for taking on such a great undertaking for the benefit of consumers. However, as the impact of the restructuring legislation becomes clear, we see that there is room for improvement. Through dialogue and mutual cooperation, the Division of the Ratepayer Advocate believes that the members of the utility bar can be instrumental in bringing about this positive change.

Thank you.

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1. Calculated using data from 1998 FERC Form 1 for a electric utilities and number of residential switches as reported by Board Staff. _back

2. In the Board approved stipulations entered into in the Electric Restructuring proceedings, it was agreed that the utilities show an "average" of the winter and summer shopping credit so that price to compare remain the same throughout the year. _back

3. Section 36 a(1) Contract standards shall include, but not be limited to, ... the customer's written signature or such alternative forms of verification as the board, in consultation with the Division of Consumer Affairs, may permit for switching power suppliers or gas suppliers and for contract renewal...._back