CONSUMER EDUCATION TRUST

14.4 CONSUMER EDUCATION TRUST

(This section is preliminary, to show some of the options under consideration by the Consumer Protection and Education Committee of the Direct Access Working Group. The final product on this subject will be included in the October 30 report, as scheduled by the Commission. However, the limited time available between now and January 1, 1998, dictates that efforts should begin immediately to clear the way for the creation and funding of the trust. If legislation is needed, the Commission should initiate the process now to achieve that end.)

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 educational aims, namely the Telecommunications Education Trust (T.E.T.) and the D.E.A.F. Trust.

14.4.1 Telecommunications Education Trust

On December 22, 1987, the Commission issued D.87-12-067 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 consumer oriented 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.

14.4.2 The D.E.A.F. Trust

The second trust fund, the Deaf Equipment Acquisition Fund (D.E.A.F.) 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, hearing impaired 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.89-05-060 (May 30, 1989). This decision completely reorganized the administrative structure of the D.E.A.F. Trust.

Prior to this decision, under the jurisdiction of the Commission, Pacific administered the D.E.A.F. Trust and performed its day-to-day activities. The decision created one administrative committee and two subcommittees, and ordered the administrative committee to open and staff a D.E.A.F. Trust office to handle day-to-day 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.

14.4.3 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 Federally-mandated 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.

14.4.4 The Electric Consumer Education Trust

The Electric Consumer Education Trust (ECET), (or whatever it 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 non-English speaking communities. 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").

14.4.5 How would the Trust be funded and administered?

14.4.5.1 Funding

Consumers (ratepayers) should not be required to pay for a program to educate them when the matter of whether or not the industry was to be restructured 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, with respect to both funding and instructional efforts. 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, i.e., NO LATER THAN JULY 1, 1997. Obviously, the trust must be established well ahead of that date. If legislation is required to create the trust, the Commission should make the appropriate overtures to the Legislature now to make it happen.

Where will the monies to establish the trust fund come from for preparatory education (i.e., prior to 1/1/98)? 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 short-term funding mechanism might 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.

Funding mechanisms under consideration are as follows:

IOU funding, diverting funds already earmarked for marketing and education;

1. IOU funding, with subsequent reimbursement in a manner to be determined;

Establishment of a surcharge, akin to the "CARE" surcharge or the Public Goods Charge (or included as a component of the PGC);

4. Fines and penalties levied on service providers;

5. Private funding from advertisements included in educational materials.

14.4.5.2 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. (This includes expenses for consumer members, which should be subject to the same rules as those applicable to Commission staff.) 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.

14.4.6 What type of monitoring and evaluation should be done to ensure cost-effective expenditure of funds?

14.4.6.1 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. Summaries of educational efforts:

a. What was done?

b. Who was the target group?

c. What was the impact of the effort? (How many people contacted? What was the response, if appropriate?)

5. Account balances.

14.4.6.2 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.

14.4.7 Concerns

Experience with other trust funds has shown that certain problems have arisen with the trust fund process. These problems are primarily in the area of definition of roles of the members and conflict of interest. DRA believes the ECET 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 tie-breaking 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.

14.4.8 Proposed Charter for the Trust

The ECET Committee will have a charter detailing its purpose, structure, duties and conduct. Appendix ___ is a model for such a charter.

APPENDIX ___

CHARTER OF THE

Electric Consumer Education Trust Committee

I. NAME

The name of the committee shall be the Electric Consumer Education Trust Committee

(referred to hereafter as "ECET" Committee).

II. PURPOSE

The ECET Committee's general purpose is Consumer Education mandated by ______________ (¼Section xxxx of the Public Utilities Code, or other authority¼), for providing education for consumers concerning the restructuring of the provision of electricity services in California.

III. MEMBERSHIP

A. Members. The ECET Committee shall be comprised of twelve (12) members as follows:

1. Members shall include:

(a) Service Provider members -

(b) Consumer Members -

2. Member(s) -- Shall be three from the California Public Utilities Commission (CPUC), one each from San Diego Gas & Electric Co., Pacific Gas & Electric Co. and Southern California Edison, three from established consumer groups and three from electric service retailers in competition with established utilities.

B. Selection of Members. Initial selection shall be determined by the Commission. Thereafter, potential members of the ECET Committee shall be nominated by the organizations or constituencies they are to represent. The members of the ECET Committee shall be recommended for approval by the Commission's Executive Director, according to procedures preferred by the Commission.

C. Qualifications of Members. The qualifications of members shall be established by the ECET Committee in conjunction with the CPUC. In general, members shall have professional or technical expertise sufficient to enable them to be conversant with the responsibilities of ECET. Consumer members should be able to demonstrate organizational or other ties to the constituency they are representing, and in addition, they should not be employed by or represent the interests of any vendors or distributors who are providing or who may in the future provide equipment or services related to consumption of electricity, consistent with the Disclosure and Conflict of Interest Policy attached to this charter. (To be developed and attached.)

D. Term of Appointments. The terms of the members of ECET Committee shall be staggered, with one-third of the membership appointed each year. Initial appointments shall be for terms of one, two or three years; thereafter members will be appointed for three-year terms. A member may be re-appointed, but no member shall serve for more than two consecutive full terms.

E. Removal from Membership.

1. Membership may be terminated through resignation.

2. Members who fail to attend three consecutive meetings without just cause or proxy may be subject to removal from committee.

3. Any member of ECET Committee, on the recommendation of two-thirds of the ECET Committee, may be removed by the Commission's Executive Director for cause shown, in procedures preferred by the Commission.

F. Vacancies. Vacancies on the ECET Committee shall be filled from nominations submitted by the organization or constituency whose vacancy is being filled. The membership of persons filling a vacancy shall be selected and approved by the Commission's Executive Director using procedures preferred by the Commission. Vacancies for expired terms will be filled by full-term appointments; vacancies for unexpired terms will be filled for the remainder of the term.

G. Expenses. Consistent with Commission Resolution ? , consumer members of ECET Committee shall be entitled to appropriate reimbursement of expenses they incur in connection with their services on the ECET Committee. Expenses will be reimbursed in accordance with the Commission's travel expense claim rules applicable to its own employees. Utility members and other service providers are not eligible for expense reimbursement.

IV. DUTIES AND RESPONSIBILITIES

The ECET Committee shall have the following duties and responsibilities:

A. (To be specified.)

B. (To be specified.)

C. Provide representation on any specially created Task Force.

D. Perform other functions and duties as may be directed by the CPUC.

V. MEETINGS

A. Regular Meetings. The ECET Committee shall hold such meetings as it shall decide are necessary or appropriate in order to carry out its functions. The succeeding meeting, place, time and location shall be scheduled at the preceding meeting. All meetings shall be open to the public, shall be noticed, shall be conducted pursuant to Robert's Rules of Order, 199x Edition, and shall be otherwise held in accordance with the provisions of Government Code Sections 11120 ff.

B. Special Meetings of the Committee. Special meetings of the ECET Committee may be called by the Chair or by a quorum. All ECET Committee members are to be notified at least three days prior to the special meeting.

Such notices shall:

1. Set forth the date, time and location of such meeting.

2. State the business to be conducted at such meeting.

C. Public Participation. All meetings will be open to the public. Each meeting shall have a specific portion of the meeting agenda devoted to the presentation of questions, comments, and suggestions from any non-member of ECET present on accordance with Government Code Sections 11120 ff. Members from the public and observers shall not be permitted to take part in any meeting unless recognized by the Chair. The ECET may limit time for public participation, depending on the number of participants and the content of the overall agenda.

D. Quorum; Eight authorized members or their designated representatives shall be necessary to constitute a quorum for performing ECET Committee functions. No action shall be taken unless a quorum is present. A majority of the members present at a meeting, whether or not a quorum is present. A majority of the members present at a meeting, whether or not a quorum is present, may adjourn the meeting to another time or place. Any adjourned meeting shall be subject to the same notice requirements as a regular meeting.

E. Proxies. A member may be represented at any meeting by oral or written authorization by that member to the chair naming a designated individual to represent the member at a specified, noticed meeting. Any proxy may be revoked at any time before the meeting begins by oral or written notice to the chair by the member who gave the proxy.

F. Motions. Any member may submit motions from the floor for ECET vote.

G. Agenda. Each notice of meeting shall be accompanied by an agenda setting forth the matters that are expected to be presented at the meeting. Each agenda shall include allotted time for public input. Except in an emergency and with the approval of a majority of the members present, ECET Committee shall not consider at any meeting an item not on the agenda.

H. Participation. Members of the public and observers shall not be permitted to take part in any meeting unless recognized by the chair.

VI. OFFICERS

A. Two Officers. The ECET Committee shall have a Chairperson and a Vice Chairperson, both of whom shall be elected by a majority of the members to serve for one year from date of election and may be re-elected.

B. Duties. The Chairperson shall be the executive officer of the ECET Committee and subject to the control of the ECET Committee and this Charter, have the general supervision and direction of the affairs of the ECET Committee. The Chairperson shall preside at all general and special meetings of ECET Committee, set the agenda for place and time of meetings, appoint Task Forces as needed, and submit proposals and recommendations to the CPUC. In the event of a vacancy of the office of Chairperson, the vacancy shall be filled by a majority vote of the members of ECET Committee. The Chairperson so appointed shall serve out the term of the vacancy that has been filled.

The Vice Chairperson shall perform the duties of the Chairperson when the Chairperson is unavailable.

V11. AMENDMENTS

The ECET Committee may recommend that the Charter be amended at a regular meeting by a vote of a majority of its voting members. Any proposed amendment must have either been proposed at a previous meeting or have been received by ECET Committee members at least ten days in advance. Any revisions shall not become effective until approved by the CPUC.

VIII. INDEMNIFICATION

Members of the Committee, who are not members of the Commission staff, are uncompensated servants of the Commission and the State of California within the meaning of Section 810.2 of the Government Code. The State will accordingly indemnify them as it indemnifies its compensated employees, and will provide them representation by the California Attorney General, for their acts done within the course and scope of the services they perform for the Committee, as provided in Government Code Sections 825 et seq. and Sections 995 et. seq.

IN WITNESS WHEREOF, we the undersigned members of the Electric Consumer Education Trust Committee do hereby constitute, establish, and adopt this as the charter for said committee effective as of the day, month, and year first written.