3.1 Introduction

This chapter discussed the practices of Utility Distribution Companies (UDCs) and other Electric Service Providers (ESPs) with regard to marketing, enrolling customers into, delivering, and discontinuing direct access service. The chapter describes some specific forms of unfair trade and marketing practices that may occur, and that should be considered when establishing education plans and enacting new regulations. Some of these unfair practices will be fraudulent and clearly illegal under existing law and regulation. In such instances, consumers have some established paths to pursue to achieve redress. In other instances, trade and marketing practices may not be illegal, but could still cause harm to unsuspecting consumers. These practices must also be addressed in consumer education and protection measures.

Because many of the anticipated unfair trade and marketing practices are already addressed by existing laws and regulations, a major concern for the Commission is to determine how best to minimize the potential for consumer harm arising from unfair trade and marketing practices that are not illegal. The Commissionís primary tools to address this concern will be (1) establishing effective consumer education and awareness programs, (2) establishing an effective registration procedure to prevent unscrupulous ESPs from operating in California, and (3) creating an accessible forum in which consumers can resolve complaints. These tools are discussed in detail in Chapters 4 and 5.

Parties to this report expect that unfair practices will most frequently be perpetrated against small customers, who will be easier targets due to their relative lack of knowledge and sophistication in the area of electric service. Larger customers generally have the resources and expertise to do their own market analysis and comparison shopping, and hence will not be the attractive targets of disreputable ESPs. Therefore, the types of abuses described below should be considered primarily in connection with smaller customers and the ESPs that will be marketing services to them.

As a general principle of electric industry restructuring, the provision of UDC service will remain subject to terms and conditions specified by the Commission and incorporated in utility tariffs and service agreements. These terms and conditions will apply to all customers who receive UDC distribution service, whether they are full-service UDC customers or direct access customers of other ESPs. Thus the UDC will maintain an operational relationship with all customers to ensure continued quality of service and the integrity of the distribution network. For direct access customers, this relationship should be delineated in a distribution service agreement that covers activities and mutual obligations associated with metering, meter-reading (for distribution-system operational purposes), notification of changes in customer load, and other relevant functions. Moreover, this relationship should be maintained regardless of the billing relationship between the UDC and the customer, i.e., regardless of whether an ESP or a third-party billing agent provides a consolidated bill to the customer.

Parties expect that a customer will be physically disconnected according to Commission-approved procedures, only for violation of its obligations to the UDC and not for violation of its contract with an ESP. Thus, the UDC should not be the disconnection agent for disputes between ESPs and their direct access customers. Rather, those ESPs should only be allowed to cease providing energy service after following Commission-specified procedures and providing adequate notice to the UDC or any alternative default provider.

Another key principle is that standards for credit, deposits, billing disputes, cessation of service, and so forth, should be the same for the UDC and for other ESPs. This is necessary to prevent redlining and other undesirable selection or rejection of customers by non-UDC providers.

3.2 Specific Areas Requiring Consumer Protection

Unfair practices, of both the illegal and legal varieties, will typically occur within three distinct phases of electric service provision: (1) marketing; (2) enrollment, or the process leading up to enrollment; and (3) the so called revenue cycle, which includes metering, billing, and collections. The following discussion suggests some but not all of the activities the Commission needs to be concerned about in each of the three phases.

The Commission should be aware that limited-English communities are of special concern with regard to unfair practices. Cultural differences combined with language limitations make these communities attractive targets for such practices, as has been well demonstrated with the practice of "slamming" in telecommunications. One advantage of a strong registration or certification program for ESPs is that certification could be suspended or revoked when there is evidence of abusive marketing practices. The mere existence of such a penalty might minimize the extent of the problem, which would be far better than having to resolve thousands of individual complaints.

3.2.1 The Marketing Phase

3.2.1.1 Illegal Practices

1. Misrepresenting Services. There are three examples of how ESPs could misrepresent their services to consumers, all of which are illegal.

Using another firmís names or trademarks. ESPs could represent themselves as another, more reputable firm. If a well-known company name is used by a disreputable firm, customers may be misled into believing they are establishing service with the well-known company.

Using another firmís product names, descriptions, or copyrighted materials. Substandard service providers may use product names or descriptors that consumers associate with higher quality products than what is actually being provided.

Inaccurate or misleading information about services or terms and conditions of sale. Providers may use marketing materials that describe services or terms and conditions of sale that the service provider has no intention of providing.

2. Misrepresenting Prices. Service providers may fraudulently promote prices in marketing materials that do not accurately reflect actual prices consumers will pay.

3. Offering Inadequate Information. Service providers may fail to adequately disclose fees, charges, conditions or risks, so that the consumer does not have adequate information upon which to make an informed choice. Also, information provided may be so complex as to make it indecipherable to the average consumer. Plain-English contract requirements, standardized forms and other consumer protections partially address this problem.

4. Biased or Undisclosed Information. Information may be technically accurate but may conceal a bias in the information. For example, an ESP may indicate that an interval meter and time-of-use rates will help customers control their consumption so as to reduce their bills. If, however, it is given to a homebound senior citizen who is living in Palm Springs and unable to modify consumption, that interval meter and pricing plan may cause the monthly bills to skyrocket during the summer months.

3.2.1.2 Unfair ó But Not Illegal ó Practices

In a competitive electric industry, customers may be exposed to complex products and services whose price and quality differences are not easily distinguishable. Most of the practices identified here exist within every industry. However consumers in most industries have the understanding and resources available to make competent decisions and to avoid making bad choices. For the electric industry, some parties believe it will be feasible and adequate to empower consumers to make good purchase decisions. Others believe it will be necessary to establish enforceable retailer codes of conduct that cover these activities.

1. Aggressive Sales. Service providers who aggressively pursue customers may become intrusive in their sales approach. Customers who are unaware of the recourse available to them to prevent continued aggressive practices may feel intimidated into purchasing the supplierís services. An educated populace, with resources available to it to stop such sales tactics, provides the usual counterbalance .

2. High Priced Services. Some service providers will charge more than others for the same or similar services. That is a natural consequence of a free market and should not be prevented. However if customers have no means to compare prices and other service offerings, a less-than-efficient market will evolve.

3. Unsolicited Marketing. It is reasonable to assume there will be unsolicited marketing in the restructured electric industry. In most markets this is an essential element of economic efficiency. However, phone calls, particularly at inopportune times, can be annoying or abusive to some consumers.

4. Target Marketing. Marketing to a specific group of customers who have an identified set of needs met by the service providerís products is a form of target marketing, and is practiced in every industry. As long as the target marketing practices are not discriminatory, they are legal for retailers to pursue. However some parties have expressed concerns that such targeted practices may result in inadequate consumer choice for some communities.

5. Exploitative Marketing. Marketing inappropriate services to particularly vulnerable classes of customers is a very real concern. In telecommunications, certain ethnic, low-income and senior customers have been targeted and sold over-priced long distance services. In health care and other insurance services, vulnerable seniors are frequently targeted for sales of inappropriate services by unscrupulous companies because of some seniors' relative unsophistication, their access to cash and their heightened desire for security.

3.2.1.3 Discriminatory Marketing Practices

Generation service providers should not be permitted to engage in discriminatory marketing practices. In recent years these practices have become widespread in the telecommunications industry, and they may easily arise in the competitive electric industry as well. Electric service by any ESP should be equally available to all similarly-situated potential customers. The CPUC has an interest in controlling discriminatory cherry-picking and in preventing redlining. Rules against such discrimination would not, of course, prevent customers from bearing the appropriate costs of capacity expansion for relevant customer information activities.

3.2.2 The Enrollment Phase

AB 1890 Sec. 366(d) establishes the procedures for service enrollment. Service may be initiated based on a written agreement between the ESP and the customer. Prior to the signing the agreement, the customer shall be informed in writing of: the customer's right to change back; all rates and charges for the services customer desires; material terms and conditions, and any other conditions of service; required ESP information (discussed below); and any other rates or charges that will appear on the customer's first bill. The customer and the ESP must notify the UDC in writing of a change in supplier. Potential customers who are denied service for failure to establish credit or pay deposit must be given the reason for denial promptly and in writing.

Two of the most significant types of fraudulent behavior encountered within other industries are slamming and redlining, which are discussed in the next two subsections. Following these are discussions of customer credit and deposit requirements, landlord-tenant issues and some areas not circumscribed by law that are potential problems.

3.2.2.1 Slamming

Slamming. Slamming is the unauthorized, unwanted, unsolicited switching or connection of a customer to a service provider without the knowledge or approval of the customer. Techniques used by disreputable service providers include (a) forged authorizations (by a prospective service provider), and (b) use of promotional schemes and written materials or forms that consumers sign without the knowledge that they are actually authorizing a switch. AB 1890 established regulations protecting electric customers from slamming (PU Code Section 366).

Solicitations by service providers or their agents of customer authorization for termination of service with an existing service provider and the subsequent transfer to a new service provider must include information on current rates and service terms and conditions with the new provider. Solicitations by service provider or their agents must conform with newly adopted provisions of AB1890, Sec. 366. All solicitations sent by service providers or their agents to customers must be legible and printed in a minimum point size of type of at least 10 points.

A service provider will be held liable for both the unauthorized termination of service with an existing provider and the subsequent unauthorized transfer to their own service. Service providers are responsible for the actions of their agents that solicit unauthorized service termination and transfers. A provider who engages in such unauthorized activity shall restore the customer's service to the original provider without charge to the customer. All billings during the unauthorized service period shall be refunded to the customer. A penalty or fine of $5,000 to $20,000 payable to the Commission may apply to each violation of this Rule. As prescribed under PU Code §§ 2107-8, each day of a continuing violation shall constitute a separate and distinct offense. The service provider responsible for the unauthorized transfer will reimburse the original provider for reestablishing service at the tariff rate of the original service provider.

3.2.2.2 Redlining

Redlining is the practice of offering the same service at different prices, or offering no service at all, based solely upon illegal discriminatory criteria; for example, discriminating based on geographic location when location is not a factor affecting the cost to provide service. Existing California law embodied in the Unruh Act prohibits all business establishments from engaging in any form of arbitrary discrimination whatsoever, and the intent of the law has been liberally construed both as to types of prohibited discrimination and protected groups. Vulnerable consumers, including the poor, small residential and language and racial minorities, have been found to fall under the Unruh Act's purview.

There is concern that certain new providers to the market may choose not to offer energy services to residential and small commercial customers with load demands less than 20 kW, who are in certain geographical areas. Similar circumstances were experienced in California's insurance industry. While it is permissible to limit services to large industrial customers, for example, it is not legal to exclude certain classes of customers because of geographical areas coinciding with racial/ethnic concentrations.

ALTERNATIVE: Proposal

The Commission should require providers to submit data both at the time of their registration with the Commission, and on an annual basis, on customer applications for service and the basis for credit determination. Further, the Commission should promulgate regulations analogous to those adopted by the Insurance Commissioner and the Federal Community Reinvestment Act, which require all providers whose business revenue in California exceeds a given amount to file information by zip code, including:

ï the number, percentage, race or national origin, and size of customers (residential, small business or industrial) served in various communities accompanied by a map showing those customer concentrations and the rates being offered to each;

ï the number and percentage of direct mail and telephone solicitations for new business in various communities, including zip code and racial/national origin identification of the customer; and

ï the number and percentage of applications, with zip code and race or national identification, for which the energy provider declined to provide direct access service.

Alternative 3.2.2.2 PRO

These data would enable the Commission to ensure that all customers benefit from deregulation through access to choices about their electricity provider and/or aggregator. Additionally, it will ensure that certain geographical locations are not charged higher rates than others for like services. Finally, it will minimize the likelihood that certain groups of customers, such as the poor or racial minorities, will by necessity be captive customers of the local utility by virtue of not having access to similar choices offered to other like customer groups. Requiring providers upon initial licensing to specify what types of customers they intend to serve will assist the Commission in monitoring that unlawful redlining does not occur. Additionally, retail energy suppliers must maintain with the Commission written policies on applications for service and the basis for its determination of credit. The policy must describe the criteria for becoming a customer of the supplier, and the criteria must be filed upon application for license/registration and kept updated at all times.

A retail energy supplier, including aggregators and meter suppliers, may hold themselves 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 grounds prohibited by the Unruh Act or Equal Credit Opportunity Act.

Alternative 3.2.2.2 CON

The reporting requirements proposed in this section are unrealistic and counterproductive to those constituencies they are designed to protect. While well meaning, some fundamental realities are ignored. It is therefore recommended that the Commission not adopt the proposed reporting requirements.

The burden of these proposed requirements are quite onerous. Information must be gathered on a variety of consumer characteristics that may not even be of interest to the retailing firm, and the information must be plotted on a map showing concentrations of customers. The burden this creates on a retail business may inhibit any activity in the residential market due.

A fundamental problem with the proposal is that the comparison of requirements is to insurance companies, which have cost-of-service based ratemaking under regulation by the state, and to the Community Reinvestment Bank where applicants ask for government money. The competitive retail business is not a cost-of-service business and is not subsidized by the government. These are competitive businesses and, in the case of residential customers, ones that will likely have to compete for extremely small margins. Erosion of those small margins to obtain comprehensive census-tract data is overkill.

The proponents would require that every customer denied service be listed by zip code and ethnicity, regardless of reason denied. Of course, a firm that was not interested in ethnicity and did not consider that in its decision-making would be violating these requirements. The proponents also want retailers to determine the ethnicity of customers in areas targeted for marketing, even if the ethnicity is not known before marketing. For example, if a marketer wanted to approach every consumer in San Francisco by mail, the firm would be required to obtain ethnicity data to comply with these requirements. One implication of these requirements is that ethnicity must be a factor in any marketing and business decision.

The proponents would require that all prices be disclosed to the Commission. But prices will vary across customers based on service quality, cost of providing service, success at major penetration of local and neighborhood markets, and a host of other reasons. Further, the PX price will be available daily for anyone to see. The proponents need to make a stronger case for the value of this data being compiled and sent to the Commission before the Commission should consider ordering another compliance filing.

The proponents assert that this information will ensure certain desirable outcomes, but there is no explanation of how this would work. Is this to be a Commission staff enforcement function? Or is the information to be made public? If the information is made public, how are the business plans of competitive retailers to be protected?

There is also silence on the venue for alleged violations. The activities that are targeted are illegal already. Such acts are not generally not prosecuted before the CPUC. The proponents need to explicitly state what role the CPUC is to play in this process.

Here the Commission faces a difficult choice. Having committed California to a competitive future, the Commission has also opened up opportunities and risks for consumers and retailers. The decision the Commission must now confront is whether it is desirable and feasible for the Commission and its limited resources to substantially insert itself in these competitive markets, or to follow through on the promise of competition and allow the market to function to the extent possible. This latter approach is probably acceptable given the three major differences between the Commissionís experience with telecommunications deregulation and electric deregulation.

The first is the AB 1890 requirement that changes in electric service require written validation from the consumer, which protects against the slamming issues which have caused most of the consumer complaints in the telecommunications arena. The second is a Commission directed, comprehensive education program in advance of the electric deregulation, an approach that allows consumers to protect themselves. The third is the creation of a visible electric service price for consumers through the PX and published UDC tariffs. This allows all consumers to compare their prices with the market price. There is no required reporting of information to a central government bureaucracy to protect informed consumers.

The proper role for the Commission is to register retailers, and to expeditiously impose appropriate sanctions when illegal or unethical behavior is detected. The Commissionís role cannot be to assume that every retailer is evil and impose draconian sanctions in advance.

3.2.2.3 Non-Discriminatory Credit and Deposit Rules

Discrimination in the granting of credit based on race, sex, marital status, religion, national origin, age, handicap, familial status, or public assistance status must be illegal. Discrimination in the terms of granting credit, such as different deposits, payment terms, meter requirements, credit limits, amount of deposits, etc., must also be prohibited (see Equal Credit Opportunity Act (ECOA) 15 U.S.C. section 1601 et seq). The Fair Credit Reporting Act mandates, as set forth in 15 U.S.C. sections 1681 et seq, do not resolve the problem of a past, unrelated credit problem, such as failure to pay a store bill, precluding an electricity customer from receiving service or subjecting him/her to onerous terms to secure it, such as prepayment or adverse terms.

Direct access and retail restructuring in general will create confusion about appropriate credit and deposit rules. The unusual feature of electric and natural gas service ó the required payment for consumption is determined after the fact of consumption ó suggests, properly, that deposits have been a reasonable practice. This is likely to be the case in the restructured industry as well. Deposit practices should not, however, be a means of discriminating against communities. Personal credit histories may be a legitimate consideration, but cultural or language affiliation are not. Two alternative views of appropriate mechanisms to govern terms and conditions are shown below to illustrate the disparity of views.

[1] CPUC Supervision of ESP Offerings. All ESPs should be required to offer publicly-supervised, non-discriminatory terms and conditions of service. For UDCs, which are subject to high standards already for regulated monopoly activities, such Terms and conditions would be subject to significantly less regulation than regulated monopoly services since they are voluntary contractual agreements.

[2] Reliance on the Marketplace. Except in the areas of public safety, terms and conditions of service between an ESP and customers need not and, for competitiveness reasons should not be publicly-supervised. In an open market, there is no need to regulate what services are packaged with the electricity commodity sale or the terms and conditions surrounding that sale. Regulation will only stifle the emergence of creative customer solutions and diminish the competitiveness of those with new ideas.

ALTERNATIVE: Proposal

Following is one proposal for credit and deposit rules. They assume that the same credit and deposit requirements shall apply to Energy Services Providers and UDCs alike.

Credit Requirements

Each applicant for service shall provide credit information satisfactory to the service provider or pay a deposit. Credit information contained in the applicant's account record may include, but shall not be limited to, account established date, "can-be-reached" number, name of employer, employer's address, customer's driver's license number or other acceptable personal identification, billing name, and locations of current and previous service. Credit cannot be denied for failure to provide social security number.

A cosigner or guarantor may be used provided the cosigner or guarantor has acceptable credit history with the service provider.

The UDC has the ability to use a customer's back payment record with an ESP against the customer upon return to bundled service.

Deposit Requirements

Deposits shall not be required if the applicant provides credit history acceptable to the service provider. In the event the customer fails to establish a satisfactory credit history, deposits are a form of security that shall be required from customers to ensure payment of bills.

Each energy service provider can require a deposit. Deposits are not transferable when changing from ESP to UDC service or from a UDC to ESP service.

Return of Deposits

1. The UDC will refund the supply portion of a customer's deposit upon customer change from UDC to ESP as a provider of supply subject to conditions in Rule X. The UDC may refund a customer's deposit by draft or by applying the deposit to the customer's account; the customer will be so advised. If the customer establishes service at a new location, the UDC may retain the deposit for such new account, subject to the conditions following.

2. Upon discontinuance of service, the UDC will refund the customer's deposit or the balance thereof which is in excess of unpaid bills for service furnished by the UDC.

3. Once the customer's credit is established in accordance with the rules for Establishment and Re-establishment of Credit, the UDC will refund the deposit either upon the customer's request for return of the deposit or upon review by the UDC.

3.2.2.4 Landlord-Tenant Issues

Electric Service is regarded by law as an absolute necessity for all residences. Real property owners are legally required to have electric service installed at their property before it may be occupied, whether by the owner or by any other person (Civil Code Sec. 1951.5). However in a restructured industry, there are legitimate questions as to who would own the electric meter or be responsible for the meter in a rental arrangement.

Currently, electric service is often provided to the property owner, not the property tenant. Tenants, of course, enjoy certain rights in billing if they, in fact, are specifically charged for electric service used. But owners exercise reasonable control over the nature of that electric service, including the decision whether they or their tenants are to be the customer of record. In many cases, property rights in a premises tend to determine control over goods and services appurtenant to the premises, regardless of whether those appurtenant facilities are owned or not.

With the deregulation of telephone maintenance, customers were put in a position to choose whether to own the phone and type of phone service. The landlord is responsible only for the inside wiring, but nothing else. Similarly, choice of electric service brings with it the opportunity for the customer to choose the type of electric service and the meter to be used. In master-metered arrangements, clearly this choice will be limited. In individually metered arrangements, however, it would seem that each customer should have the choice of meter and the responsibility for maintenance of that meter. The landlord should not be able to impede this choice. For example, with communal ownership properties such as condominium complexes, individual owners or tenants of units should be able to select a different ESP than the one chosen by the majority ownership for the communal property. Although the majority will have control over communal areas, individuals must maintain control over the property only they use.

This issue is a compelling one due to the possibly illegal tie-in arrangements that have developed in the provision of Cable TV and other telecommunications services. Telecommunications providers have entered into arrangements where they install wiring and infrastructure for a residential or small business complex in such a way as to preclude other providers from offering service to those residents. In fact, many providers have entered into written contracts expressly excluding other providers from serving the complex and requiring property managers to enforce this provision. Such arrangements are probably illegal and should not be tolerated in the nascent electric industry.

3.2.2.5 Legal Enrollment Practices That Could Be Harmful

High Cost Exit Terms. Some service providers may offer contracts that require lump sum payments upon either the consumerís or retailerís termination. Although some may consider these contracts to be unreasonable, they may provide the greatest value to others. When comparing these types of contracts with others, consumers must have the knowledge and resources needed to make rational decisions.

Long Term Contracts. Length of contracts is a consideration consumers have to make when acquiring many products. Unsuspecting consumers may be harmed if a contract term is longer than ultimately desired, and an advance payment attached to it makes it costly to cancel. For example, lifetime contracts in the health club industry were banned by law in the 1970s because of high up-front costs paid by consumers to acquire lifetime membership, which were lost when a substantial number of firms discontinued business. However, lifetime memberships still exist in many other industries such as for airline club room use.

Unexpected Price Volatility. Service providers may provide energy services at prices which appeared to be stable when the contract between customer and supplier was signed, but because of changes in the environment become volatile. These services are analogous to variable rate mortgages sold to homeowners in a time of stable interest rates. Those homeowners may find their mortgage payments changing significantly if there is a significant rise or fall in the index rate. Energy service contracts tied to historically stable energy price indexes may experience similar volatility. Consumers should have access to information allowing them to make informed decisions when choosing between variable and fixed energy service contracts.

3.2.3 Metering, Billing, and Revenue Collection

3.2.3.1 Metering Problems

Tampered Meters. Service providers may sell or use tampered meters which report higher or lower than actual energy consumption.

Defective or Non-Performing Meters. Service providers may knowingly use defective or non-performing meters with the intent of defrauding customers.

Chronic bad meter readings or billing inaccuracies cause consumers to incur higher monitoring and correction costs. Using improperly trained personnel, or inadequate procedures are examples of many possible causes.

Energy Theft. Energy theft can include intentional diversion of electric current to an alternate meter with the intent of billing customers for higher than actual usage.

Service Limiters. In countries where energy services have been deregulated, some energy service providers have moved to service limiting meters as a means of reducing delinquencies and collection costs. These meters come in different variations and have varying cut-off mechanisms, but all have one common characteristic: they facilitate pre-payment for electric service.

If these kinds of meters were required for certain customer groups, a significant change in the quality of service currently enjoyed by Californians would result. Currently, all electric customers are entitled to render payment after having received service. Where a customerís credit is at issue, several months deposit may be required. However, because energy demands are difficult to predict, prepayment for electric service has traditionally not been required because of the risks that anticipated demand may be wrong, leaving customers without service when their usage exceeds the prediction. For that reason, all parties to these workshops agree that California should avoid requiring any customer to use service limiting meters.

As an option controlled by the customer, however, service limiting meters should be allowed. Customers who have proven to be credit risks are today required to pay a deposit equal to two months expected bills. That money is held by the utility for up to one year without interest. Some customers may prefer to contract with an ESP that installs service limiting or pay-as-you-go meters, thereby avoiding that deposit.

Other customers may be interested in these meters as well, for they may eliminate the need to perform meter reading, data processing, billing, payment processing, and collection activities. These savings, when passed to the consumer, create an incentive for both good and bad credit customers to make the switch.

In the event that providers wish to deploy such meters, the Commission should hold a rulemaking to establish the conditions for their use, the protections for customers choosing these meters, and installation, operations and maintenance practices

3.2.3.2 Billing Issues

Undelivered Services. Service providers may intentionally bill for energy services they did not deliver and perhaps did not ever expect to deliver.

Unpaid Previous Balances. Alternatively, a customer could be billed by a newly-selected service provider for an unpaid balance due a previous service provider. This could be accomplished without the knowledge or consent of the customer, or without an opportunity to settle the unpaid balance with the previous service provider.

Perhaps an explanation is required for this scenario. Assume a customer does not pay an account in full with a current service provider. Assume further that the customer deselects this provider and selects a new one. It is conceivable in today's technological environment that when the customer selects a new service provider the unpaid balance may follow the customer to the new service provider's account. This new provider may seek to collect this unpaid balance for its own enjoyment by misrepresenting to the customer that (1) it is a legal obligation owed to it, or (2) it is acting as a collection agent for the previous service provider.

If past unpaid balances are billed by new service providers, then that provider must clearly indicate to the customer that the balance is from a previous service provider and that the new provider is acting as an agent. Further, the customer should be given the choice of whether or not to pay the outstanding bill directly to the new provider or to settle the matter separately with the previous service provider using available administrative and legal means.

Required Information on Bills. The billing agent shall identify the UDC and the ESP, if applicable, on each bill. Each bill must prominently display a toll-free number for service or billing inquiries, along with an address where the customer may write. If the service provider uses a billing agent, the provider must also include the name of the billing agent it uses. Each bill for energy service will contain notations concerning the following areas:

1. When to pay your bill;

2. Billing detail including the period of service covered by the bill;

3. Late payment charge and when applied;

4. How to pay your bill;

5. How to ask questions about your bill;

6. Termination of service;

7. Breakdown of charges, if other services are billed;

8. Breakdown or unbundling of energy components included in the bill, to allow comparisons with other suppliers;

9. Explanation of how to read and understand the bill;

10. Dispute resolution procedure.

Disputed Bills. If the correctness of a bill is questioned or disputed by a customer, an explanation should be promptly requested from the billing agent. If the bill is determined to be incorrect, the billing agent will issue a corrected bill.

A customer who has initiated a complaint or requested an investigation shall be given an opportunity for review of his/her complaint. If a residential customer and the UDC or ESP agree on the amount of the bill, the UDC or ESP will determine and advise the customer of the date the unpaid balance of the account must be paid. If an amortization period is warranted and agreed to by the customer and the billing agent, service will not be discontinued for nonpayment, provided the customer continues to meet the obligations of that agreement and keeps current their account for utility service as charges accrue in each subsequent billing period. If the customer fails to comply with this arrangement, service shall be subject to discontinuance for nonpayment of bills as provided in the section on Discontinuance of Service.

If a customer and the service provider or UDC fail to agree on the amount of the bill after the review, and the service provider or UDC has determined to its satisfaction that the bill is correct, the service provider or UDC will explain to the customer that:

1. The service provider or UDC has completed its investigation and review.

2. In lieu of paying the disputed bill, the customer may deposit with the California Public Utilities Commission at its office in the State Building, San Francisco, CA 94102, the amount claimed by the UDC or service provider to be due. A check or other form of remittance for such deposit should be made payable to the California Public Utilities Commission. A residential customer who is unable to pay the full amount in dispute will not be required to deposit the full amount in dispute for a bill covering a period in excess of 90 days but shall deposit an amount equal to 90 days at the average disputed charge per day of the disputed bill.

3. The customer shall submit the disputed bill and a statement setting forth the basis for the dispute of the amount billed.

4. Upon receipt of the deposit, the Commission will notify the UDC or service provider, review the basis of the billed amount, and advise both parties of its findings and disburse any deposit in accordance therewith.

5. Service will not be discontinued for nonpayment of the disputed bill when deposit has been made with the Commission pending the outcome of the Commission's review.

6. Failure of the customer to submit a dispute to the Commission in accordance with 1) and 2) above will warrant discontinuance of customer's service in accordance with the Section concerning Discontinuance of Service.

7. If, before completion of the commission's review, additional bills become due which the customer also wishes to dispute, the customer should follow the procedures set forth in 2) and 3) above with regard to the additional amounts claimed by the service provider or UDC to be due. Failure to follow the procedures in 2) and 3) above may warrant discontinuance of customer's service in accordance with the Section concerning Discontinuance of Service.

8. Subsequent bills, not in dispute, rendered prior to the settlement of the disputed bill, will be due and payable in accordance with the Sections concerning Rendering and Payment of Bills and Discontinuance of Service.

An Alternative: Private Dispute Resolution . While the Commission is obligated by law to provide dispute resolution services, it can encourage the industry to create its own, sustainable complaint resolution process, thus reducing regulatory costs and interference. The following proposal should be considered as a model that may be imposed upon the three investor-owned utilities but voluntary for all other providers during the transition period, after which it should be totally voluntary.

The model is patterned after a public-private model used in Australia to deal with insurance disputes. The Australian insurance industry established an "Insurance Enquiries & Complaints Corporation" which addresses complaints or claims by insurance customers who feel they have been not been dealt with fairly by their insurer. Over 100 individual insurers participate in the plan.

This office is industry funded and managed, but it is overseen by non-industry governing board which sets budgets and overarching policy. The non-industry governing board of seven individuals is comprised of three non-industry persons selected by industry and four non-industry persons selected by government. They are charged with protecting the public interest.

The office has a two-step process in resolving complaints. Any customer who calls must have made an overture to the company against which the complaint exists. The calls are received by intervention officers who develop a record of the complaint and attempt to resolve it informally. For each complaint that is resolved in favor of the customer, the company is charged a fee of $600. For each complaint resolved in favor of the company, the charge is a modest $200 administrative fee. Where is there is clearly no basis for a complaint, the intervention officer does not open a file.

If there is no informal resolution, then the complaint goes before a special arbiter who works for the entity and is answerable to the governing board. These arbiters are independent judges who are assigned the task of resolving a complaint, first through mediation and, failing that, arbitrating a decision. The arbiter's decision is binding upon industry but is not binding upon a complainant. Moreover, a complainant is not obligated to use this mechanism, thus ensuring that it does not become a captive of the industry. Consumers would use the mechanism only if it is more responsive, easier and quicker than courts or regulatory enforcement agencies.

The model is appealing because it is self-sustainable, independent, sufficiently expert to resolve complicated disputes, and readily adaptable to electric or telecommunications dispute resolution. If the model works for industry and consumers alike, then it is sustainable. If it swings towards one interest more than another then industry participants may withdraw their participation or consumers may opt not to use it. Most importantly, it is accessible and imposes no monetary cost upon the complaining consumer.

3.2.3.3 Collection Practices

Illegal collection activities include those steps taken by service providers that are prohibited under the laws and regulations governing service disconnection to collect unpaid bills. For example, it is not legal to force collection of an unpaid bill by discontinuing service without first adhering to legal notification and timing requirements.

3.2.3.4 Discontinuing Service

Notice Requirements. Notices to discontinue service for nonpayment of bills shall be provided in writing by first class mail to the customer and to the UDC, not less than 10 calendar days prior to termination. Each notice of discontinuance of service for nonpayment of bills shall include all of the following information:

1. The name and address of the customer whose account is delinquent.

2. The amount that is delinquent.

3. The date by which payment or arrangements for payment are required in order to avoid termination.

4. The procedure the customer may use to initiate a complaint or to request an investigation concerning service or charges.

5. The procedures the customer may use to request amortization of the unpaid charges.

6. The procedure for the customer to obtain information on the availability of financial assistance, including private, local, state, or federal sources, if applicable.

7. The telephone number of a representative of the UDC or service provider, who can provide additional information or institute arrangements for payment.

8. The telephone number of the commission where the customer may direct inquiries.

UDC Required Procedures. UDCs will follow approved discontinuance of service procedures. The UDC will not terminate service for service provided by a third party. The UDC has the right to discontinue service without any liability to energy services provider.

There are conditions when the UDC may deny or terminate service to the customer immediately and without notice. However, such termination may be exercised only with express permission by appropriate regulatory or local police authorities, and then only for specific reasons including:

a. The UDC determines that the premise wiring, or other electrical equipment, or the use of either, is unsafe, or endangers the UDC's service facilities.

b. The customer threatens to create a hazardous condition.

c. Any governmental agency, authorized to enforce laws, ordinances or regulations involving electric facilities and/or the use of electricity, notifies the UDC in writing that the customer's facilities and/or use of electricity is unsafe or not in compliance with applicable laws, ordinances, or regulations.

d. When relocation or replacement of electric service by the UDC is necessary, the service, including the metering facilities, will be installed in locations mutually acceptable to the UDC and the customer and which conform to current applicable codes, regulations and standards. If no such mutually acceptable location can be agreed upon, the UDC shall discontinue service until the customer and the UDC reach agreement.

e. The UDC will not supply service to a customer operating equipment which is considered by the UDC to be detrimental to either the service of other UDC customers or to the UDC. The UDC will terminate service and refuse to restore service to any customer who continues to operate such equipment after receiving notification from the UDC to cease.

f. The rights of the UDC and the consequences in cases where fraudulent information is given to the UDC by the customer shall remain as they are presently.

ESP Required Procedures. ESPs will follow Commission approved procedures for discontinuance of service due to non-payment of energy services bill by the due date shown on the bill and after all notice requirements and periods of response have been met.

The ESP shall have the right to terminate supply arrangement, discontinue service, or refuse to provide service to applicant or customer, with 7 days advance notice if the acts of the customer or conditions upon the premises are such as to indicate that false, incomplete, or inaccurate information was provided to the ESP or if the acts indicate intention to defraud the service provider. This includes fraudulently providing and receiving energy and energy services and/or providing false credit information.

Energy services providers must provide at least 30 days notice to UDC of intent to cease, discontinue or terminate supply or service arrangement whether due to non-payment or customer request.

Customer Responsibilities. Customer is responsible for notification to UDC, proper agreements, etc. for customer default service if UDC provides energy due to discontinuance of service by energy service provider.