From mshames@ucan.org Thu Jun 27 14:12:48 1996
Date: Tue, 25 Jun 1996 15:34:26 -0700
From: Michael Shames 
To: lwhouse@spider.lloyd.com
Subject: Re: License of public aggregators comments


Lon -

Thank you for your recommendation that reads:

I  recommend that that this working group specify the clarification that the 
necessary registration and oversight of energy service providers is
exclusive of political subdivisions of the State of California.   Such a
spefification would clarify the wording the wording on page 188 of the
Decision to:

      "Our consumer protection role may be enhanced if we retain the
      ability to require private energy service providers, including
      marketers, brokers and aggregators, to register with or obtain a
      license from this Commission.  " (change emphasized).


Unfortunately, while I agree with much of your reasoning, I'm not sure that
I can agree upon your conclusion.    But we must be clear about the
scenarios we are discussing. 

Our group is discussing the rules and registration that would apply to
brokers, aggregators and other energy service providers to citizens in
California.    I envision two scenarios for the munis.   

1.   The munis provide aggregation or other energy services for their
existing muni customers.  

2.   The munis provide such services for customers outside of their current
franchise service area.  e.g. SMUD offers energy brokerage for customers in
Richmond. 

If munis aggregate for their existing customers then your recommendation
would appear to be valid, primarily because munis are elected and thus have
a higher degree of accountability to their customers.     But then, they
already provide these services to their customers, so this is not a new
scenario. 

The latter scenario is new.   Here, the muni (SMUD, in the hypothetical) is
providing energy services to customers outside of the muni's franchise area.
In this hypothetical, the muni is not any more responsive to the customers
in Richmond than PG&E (or any other IOU).    The citizens of Richmond don't
vote in the SMUD board election.    The citizens of Sacramento have little
regard for the fate of Richmond or its citizenry.    In this situation, I
see no greater protections for the Richmond customers.     The municipality
may be "stable" but it may choose to disregard the interests of its
customers just as a "stable" private provider.   And while munis are
solvent, it doesn't necessarily mean that they are going to pay all of their
claims promptly or completely.    In fact, it could use many of the tort
protections that accrue to public entities to better frustrate claimants
than could a private provider.      So with no greater accountability and no
greater incentive to respond to extra-franchise customers,  I don't see a
basis for differentiated treatment. 

So from my perspective, if a muni is serving customers outside of its
franchise area, it should be licensed and held to observe the same rules as
private providers.    Most important is the bonding requirement that would
hopefully be a condition for any license. 

That's my concern.    Please address it or let me know what I'm missing. 

Michael Shames - mshames@ucan.org

Utility Consumers' Action Network
1717 Kettner Blvd.  Suite 105
San Diego, CA  92101
619-696-6966