1.1 Creating This Report
On September 12, 1996, following the release of the August 30
Report to the CPUC of the Direct Access Working Group (DAWG),
the entire DAWG held a meeting in Oakland to consider its next
steps. The most obvious and compelling next step was to complete
its report on Consumer Protection and Education, which the Commission
had ordered in Decision 96-03-022 to be delivered on October 30.
Parties to the original Subgroup D of DAWG, which focused on Consumer
Protection and Education, were joined by several other DAWG participants
in this effort, and held a series of meetings to develop the present
report.
Most of the topics in this report were already covered to some
extent in the August 30 Report, but nearly all topics stood to
benefit from further work. In addition, AB 1890 was signed into
law after the August 30 Report went to print, so there was a need
to revise some material based on the contents of that legislation.
At the same September 12 meeting of the entire DAWG, the process
for review and completion of this report was decided. It was decided
that an intermediate version would not be sent to the entire DAWG
participant list nor the Commission's Restructuring service list.
Instead, a letter was sent to the parties on those lists informing
them of the intention to release a draft on October 8, of which
they would be sent a copy upon request. Following the October
8 draft, parties would have until October 15 to send comments
or additional material to designated lead authors of the various
chapters. Another full DAWG meeting was called for October 22
in San Diego, to allow a final opportunity for interested parties
to review the latest changes and make comments. New drafts dated
10/22 were available at that meeting.
Following the October 22 meeting, the lead chapter authors incorporated
the final comments and dealt with any issues that arose at that
meeting, and then turned over their chapters to the editor-in-chief
for assembly of the final product. The editor-in-chief was selected
by consensus among the participants in the process. As was the
practice for the August 30 DAWG Report, positions discussed in
this report and authorship of specific sections are not attributed
to specific parties.
The major contributors to this report were as follows:
1.2 Key Issues for Commission Decisions
Parties to the DAWG process and the other stakeholder working
groups dealing with electric industry restructuring are acutely
aware of how rapidly January 1, 1998 is approaching and how much
remains to be done to have a well-functioning competitive marketplace
for electric service operational on that date. Although we have
not chosen to try to create a comprehensive critical path for
the implementation of direct access, we have learned much about
the interdependencies among different elements of the new structure.
We are therefore able to indicate those areas where Commission
decisions are needed in the near future so that progress towards
the new market may continue at a rate rapid enough to maintain
the feasibility of the target date. This section provides a survey
of those crucial areas.
1.2.1 Direct Access Program Decisions
By now the Commission is undoubtedly quite familiar with the major
direct access issues that require decisions, having had two months
of review process including comments and reply comments and a
full day's hearing on the subject. We will just mention the three
issues that will have the greatest impact on consumer protection
and education activities: phase-in of direct access, load profiling
for small customers, and access to customer information by competitive
retailers.
Phase-in. The content of an effective consumer education
program must be shaped by knowledge of which consumers and consumer
groups will be eligible for direct access in 1998. Although there
are certain messages that need to be conveyed to all consumers
regardless of whether they will see new electric service options
during the first year, there is also a need for messages that
are targeted to those customers who will be eligible for direct
access and who therefore need to be able to make good choices
for themselves. We may take a modest risk in assuming that large
customers can take care of themselves in the new marketplace,
but we take an enormous risk in opening the market to small customers
without adequately preparing them for "shopping" there
successfully. As soon as possible, then, we must know which customers
will be eligible in 1998, so that the scope of education and marketing
efforts can be fixed.
Load profiling. The ability to use statistical load profiles
to estimate the hourly consumption of small customers, instead
of requiring interval meters for all direct access contracts,
will have large implications for prospective small-customer aggregators
and their customers. Electric Service Providers (ESPs) interested
in serving small customers will face quite different markets depending
on how this decision is made, and some potential providers who
have participated in the DAWG have argued that without load profiling
small customers become much less economically attractive. Although
most parties support the load profiling concept as a transitional
measure pending universal implementation of interval metering,
there are sharp differences of opinion regarding how load profiling
should be implemented. Meanwhile, consumer education content and
timing decisions cannot be made until the Commission decides whether
load profiling will be allowed and, if so, how it should be done.
Access to customer information. Decision D. 95-12-063 observed
that the playing field for competitive generation would not be
level without equal access by all competitors to utility-held
customer data bases. The Decision therefore ordered that such
access be implemented subject to appropriate protection of customer
privacy. The details of implementation are controversial, however,
as the August 30 DAWG Report (Chapter 7) and subsequent filings
and testimony clearly show. A primary issue is the relative sensitivity
of certain basic customer data, specifically customer identification
and contact information plus metered electricity consumption for
at least one year. To classify this information as sensitive and
subject it to a strong consumer consent requirement will reduce
the amount of information available to competitive providers.
At the same time, to classify it as non-sensitive and subject
it to a weaker consent requirement may be detrimental to customer
privacy. A Commission position on this issue is essential at this
time.
1.2.2 Consumer Education Plan
We have proposed the creation of a Consumer Education Plan (CEP), a comprehensive program that takes a statewide approach to consumer education and maps out strategies, messages, special needs of certain populations, educational media, costs and funding, and many more details. The Commission should review the proposals in Section 5.2 and decide quite soon:
ï approximately when consumer education activities should begin;
ï which entity or entities will be responsible for developing the CEP;
ï whether it will authorize funding for an independent consultant to help create the CEP;
ï on what timetable the CEP should be developed;
ï funding amounts and sources for developing the CEP; and
the timetable for resolving implementation funding issues, so
that education can begin well in advance of the start of direct
access.
1.2.3 Registration of Electric Service Providers (ESPs)
AB 1890 provides relatively minimal registration requirements
for ESPs. Many DAWG parties feel these requirements are too weak,
but the group was not able to assess whether AB 1890 gives the
Commission leeway to enact stronger requirements. In the very
near future the Commission should decide whether it wishes to
go beyond AB 1890, to develop stronger registration requirements
and to implement some enforcement mechanisms that will deter undesirable
business practices by ESPs. If the Commission decides this is
a desirable approach, then it will need to decide which party
or parties should draft such requirements and mechanisms, and
it may need to develop legislative proposals that would ensure
its authority in this area.
1.2.4 Reliable Market Information for Consumers
No one disagrees with the concept that consumers need reliable
market information in order to be able to make good choices about
electric service contracts and consumption. The key point of disagreement
is whether they should get most of that information on their own,
through market mechanisms, and rely on public agencies only for
general education about the industry and useful tools for evaluating
alternatives, or whether they should be aided by a significant
programmatic effort that collects and disseminates a wealth of
information about prices, terms, conditions and qualities of service
options, as well as the track records of the market participants.
The Commission should decide soon which way it will lean in this
debate, and should designate the entity or entities that will
perform whatever level of information gathering and dissemination
it deems appropriate, keeping in mind the idea that consumers
need a neutral source for market information if that information
is to be perceived as trustworthy.
1.2.5 Other Consumer Protection Issues
Market monitoring and oversight. These are complex
activities that require many decisions about what variables to
monitor, how to collect and interpret information, what kinds
of data bases to compile, etc. The Commission need not decide
all these details now, but it should act promptly to set in motion
a process to work out the details of a monitoring and oversight
process that must be operational in advance of 1/1/98. At a minimum
it must designate who will be responsible for developing the relevant
procedures.
Resolution and redress of customer complaints. A fair and
efficient procedure needs to be operational by 1/1/98. As in the
case of the previous item, the Commission must promptly initiate
a process and designate a responsible entity to develop a system
that can function efficiently when the market opens.
Third-party verification of change of provider. This anti-slamming
provision of AB 1890 gives the CPUC the responsibility of developing
a workable mechanism. The process for developing such a mechanism
must be initiated without delay.
1.2.6 Restructured Electric Service Education Trust (RESET)
Section 5.4 of this report discusses the need for timely Commission
decisions regarding various aspects of the structure and functioning
of the RESET, which is the model developed by DAWG parties to
fulfill the requirement expressed in D. 95-12-063 to create a
new Consumer Education Trust. Clear Commission guidance is needed
at this juncture for this concept to move closer to realization.
1.2.7 Funding Issues
Guidance is needed from the Commission regarding funding sources
for RESET (see Section 5.4), for a consultant to assist in developing
the Consumer Education Plan (see Section 5.2) and for a potentially
wide range of education efforts to be conducted by the utilities.
In addition, some parties have raised the issue of intervenor
funding for consumer advocacy organizations. Until the funding
for these functions is resolved, it is difficult for consumer
education efforts to progress.
1.3 How This Report is Organized
Following this Introduction and Executive Summary are six additional
chapters.
Chapter 2 presents a set of fundamental principles the DAWG parties
believe should guide the industry restructuring. Some parties
call these a consumer bill of "rights," while others
prefer to call them simply "principles." Under either
label, they provide guidelines about how we believe consumers
should be treated under the new marketplace if that marketplace
is to be considered well-functioning, societally efficient and
equitable. This chapter is largely taken from Chapter 2 of the
August 30 DAWG Report. The set of basic principles has not changed,
but some new material has been added in the form of alternative
interpretations of the principles and arguments for and against
those interpretations.
Chapter 3 describes aspects of market behavior and elements of
electric service that may suggest a need for new consumer protection
measures. We describe actual abuses that have occurred in other
industries and could be applicable here, as well as unique features
of electric service that, when opened to diverse unregulated firms,
may likely provide opportunities for abuse. Most of this discussion
is new since August 30.
Chapter 4 describes the potential institutions and mechanisms
of consumer protection, beginning with a non-rigorous review of
what AB 1890 says about Commission authority over ESPs, thus updating
the corresponding passage in the August 30 Report, Chapter 6.
Borrowing heavily from the August 30 Report, Chapter 4 discusses
CPUC regulation of competitive local telephone service as an illustrative
example. It then provides some alternative approaches to the principal
elements of consumer protection identified by the DAWG parties:
registration of ESPs, the right to redress, consumer advocacy
and market monitoring.
Chapter 5 deals with consumer education and goes substantially
beyond the August 30 Report, Chapter 11, particularly with regard
to the Consumer Education Plan (CEP). Borrowed largely from the
earlier report is the discussion of the Restructured Electric
Service Education Trust (RESET).
Chapter 6 deals with access to customer information. Information
access issues were fully treated in Chapter 7 of the August 30
DAWG Report and, in contrast to many other subjects the DAWG addressed,
the restructuring bill AB 1890 was silent in this area. Parties
to this report therefore felt there was no need to add to the
earlier effort. As a result, Chapter 6 of the present report simply
refers the reader to the August 30 DAWG Report rather than duplicate
material that has already been distributed.
Chapter 7 deals with some implementation issues and is completely new to this report. Its specific concerns are twofold:
ï the timely development of registration requirements for ESPs and the implementation of those requirements in time to allow marketing activities well in advance of 1/1/98; and
ï the development of a Consumer Education Plan, including
the roles of various participants and the required funding, that
may be implemented in time to ensure that consumers are prepared
to deal with ESP marketing activities when those activities begin.
1.4 Participants in DAWG Subgroup D