Offered by DRA, 6/14/96
For Discussion on Consumer Education Trust (Issue #4)
At DAWG subgroup "D",
Meeting of June 19, 1996
The Commission has set the stage for
development and implementation of an education trust as an important
element to facilitate the success of its program to restructure
the electric industry. Before developing a framework for a consumer
education trust for electric service, let us look at two other
trusts with similar aims, namely the Telecommunications Education
Trust (T.E.T.) and the D.E.A.F. Trust.
On December 22, 1987, the Commission
issued D. 8712067 which ordered Pacific Bell (Pacific)
to create a trust fund called the Telecommunications Education
Trust (T.E.T.). The T.E.T. was one of the programs the Commission
ordered Pacific to establish to make restitution to ratepayers
for abusive marketing tactics employed by the telephone company
in selling certain telephone services. T.E.T. was established
to further educational efforts and increase ratepayer understanding
of the telecommunications system. Funding for T.E.T. was set by
the Commission at $16.5M. The money was to be disbursed annually
over a period of six years ($ 3M per year for five years; the
remainder in the sixth year) to various community and consumeroriented
groups and other organizations to implement certain outreach and
educational projects. Trust funds were to be administered by a
trustee (in this case, the trust department of a bank). A disbursements
committee composed of DRA, Pacific, two consumer groups and the
Public Advisor would meet annually to review applications for
funds and decide which projects were to be funded.
The second trust fund, the D.E.A.F. Trust Fund (the Trust), existed in various forms since the early 1980s, when state legislation mandated a fund be established to provide special equipment and communication services to deaf, hearingimpaired and disabled individuals. Funds were collected by placing a surcharge on intrastate telephone calls. In 1989, in response to complaints from various groups in the deaf and disabled communities, the Commission issued D. 8905060 (May 30, 1989). This decision completely reorganized the administrative structure of the Trust.
Prior to this decision, under the jurisdiction
of the Commission, Pacific administered the Trust and performed
its daytoday activities. The decision created one administrative
committee and two subcommittees, and ordered the administrative
committee to open and staff a Trust office to handle daytoday
operations. Each committee had representatives from the various
constituent consumer groups, as well as personnel from the telephone
utilities (including the communications services provider) and
Commission staff. The 1996 Budget for the D.E.A.F. Trust was approximately
$44M.
Comparison of T.E.T. and
D.E.A.F. Trusts
The differences between the two trust
funds are summarized below.
1. The T.E.T. was established to benefit
all users of telecommunications services; the D.E.A.F. Trust was
established to benefit only certain segments of the community.
2. The T.E.T. was funded as a result
of a penalty levied on a utility by the Commission; the D.E.A.F.
Trust was funded by a surcharge.
3. The T.E.T. was a temporary trust;
the D.E.A.F. Trust is a Federallymandated permanent fund.
4. The T.E.T. was established as a disbursement
vehicle for restitution funds; the D.E.A.F. Trust is a subsidy.
5. Each T.E.T. Committee member had one
vote; on the D.E.A.F. Trust subcommittees, certain parties were
standing members only and were not permitted to vote.
The Electric Consumer Education
Trust
The Electric Consumer Education Trust (ECET), (or whatever is may be called) is to be established to promote consumer education and understanding of forthcoming changes in the structure of the electric industry in California and to educate consumers about service options available to them in the newly competitive electric environment.
Such efforts could include, but not be
limited to: mass media programs, educational forums and community
outreach efforts, paid for by giving trust funds to selected groups.
Special efforts should be made to target certain groups such as
the elderly, low income and nonEnglish speaking communities.
DRA's experience in the restructuring of the telecommunications
industry indicates these groups are targeted by unscrupulous companies
and subjected to various forms of marketing abuse (i.e., "slamming"
and "redlining").
Funding
Consumers (ratepayers) should not be
required to pay additionally for a program to educate them when
the matter of restructuring of the industry was beyond their control.
Funding should come from those companies who have a vested interest
in doing business in California in the newly deregulated energy
market. A budget for outreach and education could be agreed upon,
and a fair and reasonable method of assessment of industry participants
agreed to. In addition, an education fund of this nature could
also be fed by fines or penalties levied by the Commission on
service providers who violate the Commission's rules.
Timing is a major issue. Consumers must
be educated BEFORE the market is declared competitive, as well
as during the transition and afterward. In order that direct access
can be implemented, a major responsibility of the education trust
will be to ensure that customers are able to make informed choices
in the market. For this to happen, massive and general education
efforts must begin at least six months prior to implementation
of direct access. Obviously, the trust must be established well
ahead of that.
Where will the monies to establish the
trust fund come from for preparatory education? Assessments of
participants can hardly be made if the market is not yet competitive,
so at the outset, existing IOUs would be required to provide the
funding. A shortterm funding mechanism would be to divert
general rate case funding for marketing/education to the trust.
Such funding is already included in rates, so customers would
pay, but they would not pay more.
Administration
The electric trust fund should be administered
by a committee modeled after the committee which administered
T.E.T. Committee members should consist of DRA and other Commission
staff (including the Public Advisor and outreach officers), industry
participants, and various consumer groups. Criteria should be
established for consumer members similar to the criteria established
for consumers of the T.E.T. Disbursements Committee:
1. Consumer members must have prior experience
with mass consumer education programs.
2. Consumer members must not have appeared
before the Commission in formal proceedings.
3. If consumer members are active in
a consumer group, that group must be willing to forego competing
for any monies the committee may grant or disburse.
Committee members should be approved by the Commission and each member should have one vote. A trustee for the actual funds would need to be retained, as well as the services of an attorney. Fees for these services and committee operating expenditures should be approved by the Commission.
The Committee should be responsible for
reviewing various requests for proposals (RFPs) or grants submitted
to it. An outside party (someone not on the committee) should
be made available to assist parties with the writing of requests
and grants. In other words, no group or individual should be automatically
excluded from the process due to their inexperience in grant or
request writing.
What type of monitoring and
evaluation should be done to ensure costeffective expenditure
of funds?
The trust committee should
periodically report to the Commission on such matters as:
1. Amounts of money disbursed.
2. Names/Identities of fund recipients.
3. Purpose of programs funded.
4. Account balances.
A Commission resolution should
be required for the trust committee to do the following:
1. Change the identity of the financial advisor or trustee.
2. Change either the committee structure or its membership.
3. Change the terms and conditions of the trust.
4. Obtain approval for an operating budget.
Concerns
Individuals in DRA have served on the
committees of both trust funds discussed earlier. In conversations
with those individuals and others involved in both programs, DRA
found that certain problems have arisen with the trust fund process.
DRA believes this trust fund can be established in such a way
as to avoid problem areas by implementing measures such as those
listed below.
1. Voting Rights. Each member of the
committee should have one vote. If a vote is tied, the Public
Advisor should cast a tiebreaking vote.
2. Either experts should be hired to
conduct a consumer outreach program, or the groups given funds
should have extensive experience in this area.
3. Before any outreach education programs
are conducted, ways of effectively measuring outreach efforts
should be agreed upon by the committee.
4. The roles of committee members, the
committee itself and the Commission should be distinctly defined.
5. Conflict of interest rules need to
be explicitly defined and understood by everyone.
6. A "sunset" clause needs to be included in the terms and conditions of the trust.