MEMORANDUM

TO: Implementation, Market Rules and Metering Groups

FROM: Laura Scher, Working Assets

SUBJECT: Clarification of Working Assets' Position

DATE: July 10, 1996

This memo is provided to clarify for the groups Working Assets' position on many of the issues discussed with Commissioners Knight and Neeper at the July 9 checkpoint meeting.

We were pleased to hear yesterday that the DAWG and its sub-groups are trying to develop a range of options to accommodate every type of customer and supplier. We wish to emphasize our belief that any additional cost introduced into the system, even a seemingly small cost, presents an additional barrier to entry. Because the goal of the Direct Access Working Group is to present the Commission with recommendations that will best facilitate a fully competitive electric market for all customer classes, it needs to ensure that new barriers to entry are not created.

Mandatory Meters and Load Profiles

We do not believe that time-of-use or interval meters of any kind should be required for participation by residential and small business in direct access. We are very supportive of the notion that meters can provide a price signal and serve an energy conservation purpose, but we think this needs to be a market-driven decision. It is very possible that as the cost of sophisticated meters comes down, small business and residential customers will choose to purchase them, but we want that to be a customer's choice, not a requirement to participate in restructuring.

We also do not favor mandatory upstream meters. This is one of the largest barriers that could be erected, in terms of establishing a level playing field. Upstream meters imply that there is an aspect of geographic aggregation occurring, something Working Assets finds to be restricting in terms of customer choice.

The solution we favor for those residential and small commercial customers who choose direct access is load profiles. We have seen utilities in other states take the information they have in their systems today, information that the utilities use on a regular basis in their rate case and attendant proceedings, and develop load profiles.

Billing

We are concerned that the DAWG is trying to establish roles, rules, and responsibilities that are best left to the market to develop. As I told the Unbundling Working Group on June 26, there is no reason why aggregators should not be the central billing entity. If the utilities properly unbundle their costs in a way that facilitates entry of new participants, it should be possible for new entrants to charge customers for UDC transmission and distribution fees and remit those fees to the UDC, as happens in long distance telephone service and will happen with local telephone service soon. We see no need for the DAWG to establish new regulations at this time. Let the market determine what kinds of companies can best meet the needs of a diverse consumer population.

In the residential and small business markets, the margins on a percentage basis, and especially on an absolute basis, will be very low. Continuing to regulate or require the UDC to bill for distribution will create significant inefficiencies and maintain the monopoly power of the UDC. It might even preclude many new energy service providers (ESPs) from entering the market, prohibiting residential and small business customers from benefiting from restructuring. If the ESPs are allowed to bill the customer the entire amount and remit to the UDC the unbundled transmission and distribution fees, we will create a thriving competitive market with innovations in product offerings, billing and customer service for the residential and small business market.

Next Steps

We realize that time is short. Working Assets is happy to assist in any writing, or meet with parties individually or at a group meeting to further explain our views. As a small company we cannot attend every meeting, but we make our best effort to attend when possible. We track proceedings on the Web site, and commend DRA for its work in keeping the site up-to-date.