To: Direct Access Team "D"
From: Michael Shames
RE: Consumer Principles & Education -- Second Drafts
Date: July 8, 1996
CONSUMER PRINCIPLES FOR RESTRUCTURING
This incorporates some proposed changes by parties. ______
denotes changed language. [ ] denotes disputed language.
I. Right to Know
Customers must be ensured of access to affordable and accurate
informational and education materials to all customers that enable
comparison of price, quality, service record and terms of service offered
by all market participants.
Elements: Affordable info
Accurate and understandable info (incl. multi-lingual)
Comparable info
Readily access info for all customers
Price, Quality, Terms and Providers' track record
Disclosure of basic information
II. Right to Choice
[Customers should have choices which offer substantial savings and
identifiable value.] All customers should have the ability to aggregate
efficiently on a non-discriminatory basis.
[Where competitive services are not available to certain customer
groups, barriers to competition that prevent access by these customers
must be eliminated. ]
Elements: Ability to aggregate efficiently
Non-discriminatory access
[Meaningful choice
Eliminate barriers
Choice of providers vs. choice of services from one
provider]
III. Fair Dealing
All classes of customers should have access to affordable choices and
pricing options without undue discrimination. Service claims must be
verifiable and service options responsive to the needs of all customer
classes.
Elements: All classes
Affordability
Pricing options
Undue discrimination barred
Verification of performance
Responsiveness to customer needs
IV. Right to Redress
Regulatory oversight must continue to ensure that electric providers
maintain prompt, low-cost and effective redress for customer complaints
in a neutral forum. Regulatory enforcement and penalty power
required.
Elements: Prompt investigation & resolution
Low-cost or no-cost
Effective
Neutral forum
Licence revocation and fining power
V. Customer Participation
Customers must be able to participate in regulatory oversight of the
restructured industry which should be on-going during and after
competition commences.
Elements: Consumer input
Oversight continues after commencement of competition
Regulatory follow-up on implementation of restructuring
policies
VI. Right to Privacy
Consumers should be able to control release and use of personal
information and records. This information is to be used only in a manner
to electric service. Marketing should not be unduly intrusive.
Elements: Control of personal records and information
Customer information usage must be pertinent to service
Reject undue intrusiveness
VII. Quality of Service
Service must be safe and in accord with specified service criteria. [
Customers should be offered a choice of differentiated levels of service.
Service limiters should not be imposed upon low-income customers]
Elements: safe
reliable
different levels of quality available
[use of service limiters]
VIII. Required Codes of Conduct & Oversight
As a condition of registration and continued service rights, all providers
must either accept an industry standard code of conduct or offer a
comparable alternative code specifying standards upon which their
customer service policies and business practices will be based.
Elements: Code as a condition for entry
Choice of codes -- not imposed
Clear enunciation of policies and practices
Revocation of rights if code is not heeded
IX. Right to Affordable Electric Service
Because electricity is a necessary service, [electric restructuring must
result in no significant increases for any identifiable group of customers.
To the extent that savings result from the restructured market, customer
classes with relatively fewer options should still reap comparable
savings to those with more options.]
Elements: Essential service
Vulnerable classes protected
[Systemic inelasticity acknowledged]
X. Transaction Costs
Market processes should be designed to avoid unnecessary transaction
costs. Regulatory policy should be focused upon lowering barriers for
market entry. [Essential elements of electric service should be non-
proprietary and customers without or with modest market choice should
be responsible for no more than an equitable share of costs arising from
restructuring]
Elements: reduce barriers to entry
equitable sharing of restructuring costs
minimize costs
XI. Improvement over the status quo
Competition must support, rather than jeopardize, existing and evolving
social and environmental policies and programs Special "lifeline" rates
and services and safeguards for low-income customers, the elderly and
disabled should be preserved in a restructured environment.
Elements: Preserve social goals
Preserve lifeline rates and safeguards for vulnerable
customers
1.0 Right to Know: Consumer Education
1.1. COMMUNITY BASED EDUCATION
Points: Education plan must be required by CPUC
Messages must be independently crafted
Should use CBOs for education
Education must begin prior to commence and continue through
transition
The Commission has demonstrated the efficacy and
effectiveness of community-based education in its implementation of a
public education plan for CNEP (Caller Notification Education Plan).
Recognizing that the introduction of CallerID would present new and
important impacts upon telephone customers, the Commission required
that Pacific Bell and other phone providers commence a "bottoms-up"
education plan as a precondition for the commencement of CallerID
service.
The efficacy of this approach towards customer education is
discussed in depth in "Evaluation of the October 11 Pacific Bell CNEP
on CPN Delivery" by Professor Brenda Dervin of Ohio State University.
This report, commissioned by the Commission's CACD and delivered on
November 21, 1995, establishes a number of important principles for
educating customers about changes in utility service.
Some of the relevant hallmarks of this education plan were:
i. Independently crafted messages. Professor Dervin
stressed the need for involving community representatives in co-
production of campaign messages. For CNEP, the Commission
approved the hiring of a nationally recognized media consultant to
develop themes and mass advertising and sought the input of
intervenors to refine the proposed themes.
ii. Use of Community Based Organizations (CBOs) to
educate customers. The Professor emphasized the use of high
involvement/high interaction outlets and recommended that at least 50%
of the campaign need be implemented out in the communities.
Recognizing the educational advantages offered by the state's existing
network of non-profits, the CPUC required that these CBOs be hired to
effect customer education.
iii. Concerted education plan commencing 6 months prior to
the beginning of the new regulatory scheme and continued through
the transition. The campaign must be iterative and sustained,
according to Dervin. Accordingly, the CNEP began educating
customers almost 6 months prior to the introduction of Caller ID service
in California. The plan proved to be so successful that Pacific Bell
could not accommodate the crush of customers seeking blocking
protections and implementation was delayed until customer responses
could be completed. The plan is to continue for one year after the
introduction of the service.
iv. Make the Campaign Relevant To Customers. Electric
restructuring is going to require a new awareness by customers of
matters that had been heretofore largely handled by the monopoly utility.
It will be essential that customers are educated, in simple terms, why
they should care. The message must be interactive and accessible to
all customer groups, including multi-lingual and multi-cultural
communities.
These four essential elements must be applied to the Electric
educational plan. This education effort would commence at least six
months prior to January 1998 and would be crafted by a qualified
independent entity to impart to residential customers the following
points:
o Companies other than the local utility will be offering electric service
o Customers will have the right to choose these other services or stay
with the local UDC
o In making that choice, the customer must understand prices, risks
and personal usage patterns.
o Utilities will provide customer with personalized energy usage profile.
o CPUC and others will provide customer with energy shopping
information.
1.2. EDUCATIONAL MATERIALS AND PROGRAMS
Points: Overarching regulatory objectives are to make competition work
and to make it work in accord with state policies to preserve equity
principles and to prevent chronically underserved communities.
Customers will require educational programs and materials that
will permit comparison shopping for price, quality of service, provider
track record, understanding of choice and quantification of risk and
redress opportunities.
The CPUC must assume ultimate responsibility that adequate
market information ls available to consumers.
Non profits and private companies can play an important role in
customer education
The CPUC should work to reduce transaction costs associated
with aggregation
UDCs will initially provide a personalized energy usage profile to
individual customers
Focus Upon Underserved Communities
1.2.1. CPUC Education Responsibilities
The Commission is charged with significant customer education
functions. Faced with overarching regulatory objectives to make
competition work and to make it work in accord with state policies to
preserve equity principles as well as to prevent chronically underserved
communities, regulators will need to ensure that consumers are provided
the tools to participate in a competitive market. With the new reliance
upon the competitive market to provide basic electric and telephone
services for small consumers, the CPUC's new challenges are, in the
simplest of terms:
1. Promote a competitive marketplace with multiple buyers and sellers.
2. To arm all consumers with the information necessary to make
informed choices.
These two elements are essential components to a competitive
market. This underlying premise compels the CPUC to adequately
inform consumers of their choices of service and service providers.
This mission can be accomplished with three strategies:
i. Sponsor and disseminate price and quality comparisons of
deregulated services;
ii. Monitor customer education conducted by private participants and
administer an education trust funds for electric and telecommunications
industries; and
iii. Work to help aggregate customers, especially traditionally
underserved communities.
1.2.2. Price and Quality Comparisons
If a consumer is unable to comparison shop for utility services,
then the market will fail. In order to shop, a customer must be able to
determine value. In order to establish value, the consumer must be
able to compare price and quality of competing services. The
"competitive" markets don't always succeed in providing such
information. Notably, long-distance and local-long distance telephone
services and the auto insurance industry has failed to properly apprise
customers of this essential information. (In response, the state's
Department of Insurance has a program to assess and public
comparative rates or customer service records for auto insurers. It is
also statutorily charged with creating a "hotline" service for price
comparisons to customers.)
The Commission will need to increase its educational efforts to
supplement the information provided by the private market. These
efforts should include:
a. Monthly listing of licensed energy providers
b. Bi-annual listing of price comparisons and energy providers
c. Bi-annual listing of consumer complaint information
d. Annually-revised glossary of energy service terms and
description of services
e. Telephonically-accessed listing of service providers whose
license has been revoked, suspended or limited and an alert about
unlicensed providers
f. Creation of representative service benchmarks for different
types of customers upon which comparisons of service can be readily
made.
This information should be made available to customers at no
cost. It can be distributed though CPUC offices, community-based
organizations, other state agencies and by all licensed energy providers.
1.2.3. Customer Education by Private and Non-Profits
Beyond simply providing price comparison information and
evaluative services, the CPUC will be obligated to monitor private
consumer education by market competitors and non-profits to ensure
accuracy of the information. There are three concrete steps that can
be taken by the CPUC to improve the quality of consumer information in
the market. These steps include:
1. The Commission should provide copies of its education
materials to CBOs and other state agencies for distribution to clients.
2. As part of its public outreach and dispute resolution
functions, the Commission should train individuals in CBOs and assorted
social service agencies to handle electric and telecommunications
complaints. These designated individuals will then be familiar with the
kinds of complaints and available remedies to customers who have
problems with their newly competitive services. The individual could
advise the consumer, help mediate a resolution or refer the customer to
the CPUC and/or other appropriate entities for resolution of the
complaint. This training effort could substantially increase the
likelihood that consumers will get assistance. It will also serve as an
early warning system for potential systemic problems in the market and
it potentially reduces the workload on the Commission's Consumer
Services Division.
3. The CPUC can also serve an advisory function for market
participants. During the transition period, the CPUC should provide a
service whereby it will review marketing materials voluntarily submitted
by service providers to the CPUC. By undergoing an accuracy review
by the CPUC, the market providers may be protected against possible
private action for misleading or false advertising. And the CPUC is
able to proactively prevent potential customer confusion.
1.2.4. Help Lower Transaction Costs for Aggregation of
Customers
Small customers will need to be aggregated in order to gain
adequate market leverage to benefit from electric competition. Absent
aggregation, these customers may fare poorly if the power exchange
does not perform adequately. As demonstrated in insurance, banking
and other complex services, aggregation of small customers minimizes
transaction costs and increases market leverage. In newly established
markets like electric and telecommunication services, it is essential that
such aggregation occur, so as to give small consumers some
opportunity to secure improved service and lower costs.
During the five-ten year transition period, the CPUC should be
active in helping promote aggregation by properly educating customers.
While the Commission should not directly assist energy providers, it can
serve as a coordinator for private companies to find customers. For
example, it can distribute information to the state's customers about
available aggregators in rural, inner city and other underserved
communities. It can establish a hotline where interested consumers
can learn of the potential aggregators. For example, the CPUC has
established a reseller program for cellular services but most consumers
are unable to track down the names and phone numbers for these
resellers. A call to the CPUC hotline is of no value -- they don't have
this information. But they should.
The CPUC can be even more active and work with the private
market to aggressively promote customer aggregation. It can assist
municipalities and other public agencies who seek to create muni-lites
for electric or phone services. It can list the aggregators' names and
product information on the CPUC Web Site and make the information
available at CPUC offices.
Finally, the CPUC is acutely aware of the problems faced by
traditionally underserved communities. It has studied and is aware of
low-income, senior, rural, ethnic minority, inner-city and other readily
identifiable subgroups that have been disserved in telecommunications
reforms. It is uniquely qualified to help identify and aggregate these
communities by improving information and communication among
potential customers. This task can not be left, exclusively, to the
private market because that market has, and will admit to being, ill-
equipped to address this equitable objective. Markets pride themselves
in achieving efficiency, not equity.
1.2.5. The UDC Should Provide Personalized Energy Usage
Profiles to Its Customers
In order to effectively comparison shop, customers will need to
understand their energy consumption patterns and history of usage. It
is unreasonable to expect that customers have saved their bills over the
previous three years in order to secure this information. However,
UDCs have collected a certain amount of historical data about its
customers that can be used.
The UDCs should be ordered to provide, upon request, an
energy usage profile for an individual customer. This profile would
include a chart and breakdown of monthly data for energy consumption
and price paid for energy over the previous 12-24 months, depending
upon the information storage practices of each UDC (typically, utilities
save 13-18 months of customer usage data. It should be adjusted for
weather and price changes. It should also include a comparison to
other representative customers' data so as to provide a benchmark
against which to a customer can compare his/her usage. The first
energy profile should be offered at no cost to customers. Modest
charges may be applied to subsequent profile requests.
This profile will be the basis upon which customers can gauge
their historical energy consumption patterns, better assess their energy
needs and gain a sense of the cost of that electricity. This profile
could be released by the customer to retail energy companies to better
enable them to choose appropriate services for that customer.
1.2.6. Focus Upon Underserved Communities
Even under the regulatory paradigm, certain residential customer
groups have been underserved relative to other customers. In
telecommunications, rural areas, low-income and minority groups,
especially those with language-diversity, were not as well served as
other customer groups. In a competitive markets, underserved
communities will increase as private markets function to stratify social
and economic classeses. Residential consumers wil be cherry picked
because the underlying objective of the competitive market is to
discriminate. Unfortunately, the the social objective of non-
discriminatory electric services (c.f. Public Utilities Code 451, et. seq,
453 et. seq.) is undermined by this competitive reality.
Thus, it is encumbent upon the Commission to focus its attention
on potentially underserved communities, (e.g. rural areas, minority
groups, seniors, renters, low-income, inner city and areas served by
antiquated equipment). In a competitive electric market, these
underserved communities may also be technologically dictated. For
example, areas with distribution constraints or unusual climatic zones
may prove unattractive to aggregators. The Commission will need to
pay special attention to the intentional or inadvertant discrimination that
is engendered by the competitive market.
1.3. USE OF UDC BILLS TO PROMOTE CUSTOMER EDUCATION
AND AGGREGATION
Points: UDC will be sending monthly bills to most small customers for
distribution service costs
This bill packet has "unused space" that can provide
information
The CPUC can require inserts that list aggregators' names and
information
Other state mailers, such as DMV and tax-related mailers can
be used.
It can distribute lists of qualified, certificated aggregators along with
customer information about how to evaluate these services. In short, it
can help reduce the significant transaction costs facing any service
provider seeking to "crack" the mass market. Notably, this list can be
distributed an information insert in a distribution companies billing
packet, much like rate increase notices are currently distributed. The
cost of the insert could be defrayed by a contribution from those
aggregators who are listed in the notice.
1.4. ELECTRIC EDUCATION TRUST FUND
(to be provided separately by DRA)
***********
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