To: Team "D" participants
From: UCAN
RE: Proposed comments re: Registration and Redress
Date: June 13, 1996
RIGHT OF REDRESS
A. CPUC REGISTRATION OF ENERGY SERVICE COMPANIES.
Points: Any provider interacting directly with retail customers must be
registered.
Registration requires filing of corporate information and posting a
bond with Commission. Upon satisfaction, the provider receives
a license.
The Commission is the logical lead agency for enforcement
The Commission can revoke a license if violations of CPUC rules are
proved.
The Commission can suspend a license or curtail solicitation
of new customers if the likelihood of violations is established
by staff or customers.
1. Retail Customer Interaction Compels A License
Competition will engender the entry of a number of service providers.
Some will offer brokerage, some aggregation services, some demand-side
services and some will offer services that have not even been envisioned at
the moment. Such is a unfettered market.
The issue is whether the retail market will be entirely unfettered.
The answer is no. Any provider offering services directly to retail
customers will be required to register with the CPUC. That way, if any
service provider interacts with a retail customer, that provider will fall
under the jurisdiction of the CPUC.
Other providers, such as brokers interacting with aggregators,
generators, companies offering ancillary services and scheduling
coordinators are not required to provide a filing or bond with the CPUC so
long as their interaction remains with other wholesalers. However, these
providers may have to fulfill registration requirements established by the
ISO.
The rationales for this licensing and bonding requirements are as follows:
a. Retail customers must be able to learn about the owners, location
and financial viability of any prospective advisor. In order to ensure
uniformity, that information should be on file with a clearinghouse. The
CPUC fills that role.
b. In order to guard against undercapitalized or fly-by-night
companies, the CPUC must have a means of screening prospective energy
providers.
c. Retail customers, especially residential and small business
consumers, will not have the wherewithal to screen prospective companies.
The abuses of the solar hot water market and the long-distance
telecommunications companies have graphically demonstrated the need for the
ability to screen providers.
2. Registration Includes Licensure and Bonding
The registration process needs to be stringent enough to protect
customers but not so onerous as to create a barrier to entry. The CPUC has
developed a non-dominant carrier registration process for local
telecommunications companies that is not overly burdensome. It requires
filing with the CPUC the identities of the owners and officers of the
corporation, a description of services to be provided and basic financial
information to ensure economic viability.
However, the telecommunications registration does not require bonding,
and this is precaution that is necessary for electric service for many
reasons:
a. Electric service is a necessity and generally is more expensive than
phone service. Thus greater protection is warranted;
b. The upfront costs of entering the electric services market is fairly
low. Aggregators need only a computer and customer leads. Thus bonding
requirement will not put an undue burden on any prospective new entrant, as
its start-up costs are relatively low.
c. Without a bond, it is likely that complainants and their
attorneys/representatives will not be able to recover damages caused by
failed service providers.
d. The bonding process, itself, serves as a useful screen against
companies or individuals with questionable financial pasts who seek to
enter the electricity market. Bonding services will either decline to bond
or require higher deposits of entrants with questionable records.
The amount of the bond would be established based upon the prospective
number of customers to be served. E.g., a local community aggregator
planning to serve 50 residents could post a very modest bond whereas a
large aggregator planning to serve customers throughout the state would
require a more substantial bond.
3. Revocation and Suspension of Licenses is Within the Purview of the CPUC
The CPUC's ability to revoke, suspend or limit a license is absolutely
necessary for adequate enforcement. In the initial 5-10 transitional years
of electric competition, new entrants must be clearly noticed that
questionable business practices, undue risks and shabby treatment of
customers will not be tolerated. The potential for abuse and the serious
ramifications of that abuse mandate adequate enforcement powers by the
agency. The CPUC's staffing and its expertise on energy matters positions
it as the only logical state agency charged with enforcement.
Consumers might also be able to look to civil courts for tortious or
statutory remedies (e.g. Business & Professions Code Section 17200 et seq).
However, these cases would be expensive to pursue and the civil courts are
not equipped to handle the load of individual complaints that will
correlate with the advent of competition. Moreover, the courts will not be
well-positioned to establish uniform industry rules where patterns of rule
violations or shabby customer service are established. Thus, the CPUC
should continue its role as lead enforcement agency for customer complaints
about all retail energy services.
This enforcement power is anchored by the CPUC's ability to license an
energy service company. Without this ability, enforcement of CPUC rules
would be ineffectual. The CPUC rules would include a code of conduct and a
set of specific minimum standards of service as described in the discussion
on code of conduct.
The CPUC should have the ability to suspend, limit or revoke licensure
depending upon the gravity of provider malfeasance. Suspension would be
invoked only where due process had been afforded to a provider. However,
injunctive suspension or limits on a license could be imposed upon a
showing that the Commission rules had likely been violated by a service
provider and that significant damage could be caused by a continuation of
service by that provider.
B. READY ACCESS TO JUSTICE
Points: Consumers must have free or low-cost access to redress
The forum must be neutral
Mediation can be encouraged, but can't be compulsory
Penalties imposed upon providers must be used for consumer education
or advocacy
Complainants must have access to CPUC-compiled market conduct data
The CPUC should refer patterns of abuses to consumer attorneys for
class action and statutory remedies.
1. Consumers must have free or low-cost access to redress
Where complaints by consumers can not be readily resolved by a service
provider, an individual consumer must be afforded access to regulatory
redress at no cost to that consumer. This is the status quo and it should
be preserved during the transitional years, at the least. Access to no-cost
regulatory relief means that the consumer should not be charged any filing
fees or assessed any costs for pursuing regulatory relief. It does not
mean that the time spent pursuing a case or travel and out-of-pocket costs
will be necessarily recovered by the complainant regardless of the outcome.
However, where an individual prevails in a regulatory complaint, the
damages awarded should include reimbursement of costs incurred in pursuing
an action in addition to restitution normally awarded by the CPUC. This
no-cost redress is essential if the Commission is to encourage consumers to
bring complaints to their attention. It is also necessary to level the
playing field advantage enjoyed by better-resourced providers.
2. The forum must be neutral
The forum in which complaints are resolved must be neutral. The
arbitrators need not be Commission ALJs, but they can not be
representatives of or affiliated with energy service providers. Ideally,
the CPUC could enlist the use of trained, but local arbitrators, to conduct
formal hearings and render recommendations that would be reviewed by the
CPUC. An evidentiary record should be kept, but it can be taped, rather
than transcripted.
The Commission's current expedited complaint process is an adequate
process by which formal complaints can be cost-effectively heard and
decided.
3. Mediation can be encouraged, but can not be compulsory
Mediation and other alternative dispute resolution tools should be
encouraged. However, they can not be compulsory. Nor can a consumer be
penalized for not submitting to mediation.
As a means of encouragement, local mediation should be made available
to an individual complainant within two weeks of filing a complaint. If
mediation is chosen by both parties, the individual consumer should have
made available the presence of a CPUC staff advocate or a qualified
intervenor advocacy group representative at the mediation to assist on
behalf of that individual.
If the parties do not choose mediation, then the expedited complaint
process should be made available to the complainant.
4. Penalties imposed upon providers must be used for consumer education
or advocacy
Not all complaints will result in penalties imposed upon service
providers. Most complaints will either be found to be warrantless or will
result in restitution to the complainant. However, where a pattern of
abuses is discovered and proved, the Commission is empowered to impose
financial penalties upon a licensed service provider as a condition for
retainer of the license. Where a financial penalty is assessed, the
proceeds should be applied to promotion of consumer education and/or
consumer advocacy via the Electric Education Fund.
5. Complainants must have access to CPUC-compiled market conduct data
As part of its on-going market conduct oversight responsibilities and
as part of its customer education duties (as discussed under "Consumer
Education) the CPUC staff will be compiling data about the complaint
records, financial viability, prices and service quality of any and all
service providers licensed to do business in California. Much of this data
will be made available to consumers who are shopping for energy services.
However, all of this data should be made available to complainants that
have filed formal complaints to the Commission about an energy provider(s).
In assessing a complaint against an energy provider, the Commission
must consider not only an individual isolated complaint but also whether a
pattern of inappropriate business practices is extant. Complainants must
have access to such data and must be able to enter it into an
administrative record in order for the data to be fairly adjudged by the
Commission.
6. The CPUC should refer patterns of abuses to consumer attorneys for
class action and statutory remedies.
The Commission's market conduct duties will lead it to identify
patterns of abuse or misconduct by energy service providers. In order to
make maximum use of limited staff resources, the Commission should share
its market conduct findings with private consumer attorneys who may wish to
initiate civil class actions against one or more providers. This frees
the Commission from the burden of resource-draining litigation where one or
more providers is engaging in clearly inappropriate behaviors. The civil
courts share concurrent jurisdiction with the Commission and are empowered
to awarded specific and general damages for tortious actions as well as
general consumer-related statutory damages.
The Commission's role would be to coordinate private and public
prosecution of misleading information. For example, when companies engage
in inappropriate marketing transactions, the state attorney general, local
district attorneys and consumer class-action attorneys can utilize the
state's Business & Professions Code to discourage such behaviors and gain
remedies for victimized consumers. The CPUC should serve as a
clearinghouse for complaints and references to such attorneys. The CPUC's
public intake functions are essential and low-cost means of identifying
such abuses. The private or prosecutorial attorneys offices can
expeditiously act once the CPUC alerts them to a pattern of deceit. The
CPUC should also be referring individual consumers to private attorneys for
fact-specific complaints; referral panels could be readily established at
little cost to the CPUC.
The Commission's resources are best utilized as a collector and
distributor of information first, and a prosecutor second. However, where
no private attorneys are willing or able to pursue case, the Commission is
obligated to self-initiate regulatory action or to instruct its staff to
pursue civil or criminal remedies, where warranted.
***********
Time is the best teacher. The only problem is she kills off all of her
students..
Michael Shames
mshames@ucan.org
UCAN
1717 Kettner Blvd. Suite 105
San Diego, CA 92101
(v) 619-696-6966
(f) 619-696-7477