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Georgia's Problems Cause Tempers to Flare at PSC

Georgia's Problems Cause Tempers to Flare at PSC

Georgia regulators have become bitter following the third settlement of a slamming case involving a retail gas marketer and the second retail marketer bankruptcy. Simmering tempers have reached the boiling point with some public service commissioners concluding the deregulation process has been a total failure. Others remain hopeful that the many lessons learned in the process will help the PSC proceed with electric deregulation when it becomes the next order of business.

Regardless of their conclusions, however, both sides are moving toward tougher restrictions on retail marketers, particularly in the areas of billing, customer relations and price reporting.

The latest lesson concluded last Tuesday with a resolution of pending allegations of unfair business practices by retail marketer Energy America. The marketer, a partnership of Sempra Energy and Direct Energy Marketing, agreed to pay $100,000, including $75,000 to an energy assistance fund for elderly and low income customers and $25,000 to the state treasury.

The company also agreed to change its marketing practices. It must comply with Federal Trade Commission regulations on door-to-door sales and for a six month period must provide the Georgia commission with advance notice of the area in which it will be conducting its door-to-door marketing. During that period and for an addition six months the third party verification company used by Energy America to confirm its new customer enrollments must use a script that has been approved by the commission.

The conclusion of the slamming case came only a week after the auction of 50,000 retail gas customers, which were previously served by bankrupt marketer Titan Energy (see related story this issue). Titan was the second retail marketer in the state to file for Chapter 11.

Billing problems, meanwhile, continue more than a year and a half into the program. One PSC staff member said four of the 13 marketers still participating in the retail market continue to have billing problems and up to 20% of their customers still get their bills late. Some customers haven't received bills in six months and have been calling the PSC, begging to simply pay what they owe. Many are afraid that once they get a bill it will be enormous and will be due in 20 days. The commission at times has been virtually shut down by customer calls.

In addition, the marketers have been reluctant to file their prices with the PSC as required. July was the first month of mandatory filing, but only two out of the 13 marketers submitted complete information. The others filed under "trade secrets" and had to be asked by the PSC to re-file.

Deregulation in 'Deep Trouble'

Georgia gas deregulation is "in deep, deep trouble," Georgia PSC Chairman Bob Durden said in an interview with NGI last week. "We've shaken down now to what looks like five major [retail marketing] companies after starting out with 22 because of the purchases, those that have just decided to quit and the bankruptcies we've had. There's no doubt in my mind that there are some major problems.

"I know that view is not a majority view on the commission, but I think it's the right view. I don't think we can go back to the old system because people have sunk too much money into this system. But we may be able to assert some regulatory authority that would prevent residential consumers from taking it on the chin like they have."

Although he has little support from the other PSC commissioners, Durden believes some significant changes toward reregulation are needed. He vowed to make a lobbying effort during the next legislative session to win the PSC any additional authority required to regulate billing and force marketers to use volumetric rates which would give residential customers greater rate relief during periods of low demand.

"Residential consumers deserve better than this," Durden said. "Let's quit pretending everything is going to be all right if we just wait awhile, and start paying attention to fixing the thing. That's all I'm saying. There's been no acknowledgment that it is a mess. I don't know what more we can do. We have companies going bankrupt. We have slamming problems. Bills can't even get out. The whole gamut, it's all there. But I think a lot of it is pride and ego and egg on their face," he said. "A lot [of the PSC commissioners] bragged and pushed this as a major thing. 'Georgia is in the lead; other states will follow us,' [they said]. Well I don't think so."

Durden also said there is no way he would ever be in favor of electric restructuring now in light of what has happened in the state's gas industry. "As far as I'm concerned you can't have electric deregulation. I said the other day you can forget electric deregulation because I will raise hell from beginning to end about that. If we haven't learned a lesson from our experience in gas, we will never learn. Somebody said you ought to go out to San Diego and see what is happening in California where they deregulated electricity. I understand their rates have gone through the roof out there.

"I told Georgia Power 'you all do whatever you have to do; you'll have 100% support from me.' We have some of the lowest electric rates in the country right now, and I wrote the rate case decisions in every major electric rate case we've had since I came on the commission almost 10 years ago. I'm proud of what we've done [with electric regulation] in Georgia. If they think they are going to come through here with electric deregulation and start screwing electric customers, I'm going to tell it like it is from the beginning."

The other commissioners squirm when Durden says things like that. While they may share his disappointment with the situation, Durden's bitterness definitely is not shared.

Commissioner Bobby Baker isn't willing to write it off as a failure. He said last week other states need to realize that business-related matters rather than regulatory and legislative snafus were primarily to blame for the difficulties. And Commissioner Lauren (Bubba) McDonald agreed. Both commissioners blasted Durden for "grandstanding" in front of the press.

"According to Chairman Durden and the comments he has made, it is a disaster. But he never let the General Assembly know when they were passing it in 1997," said McDonald. "He never offered. As a veteran public service commissioner, he never exposed any of his wisdom to that body on deregulation. Since we have been involved in the managing of deregulation in Georgia, he has never offered one statement in regards to how to deal with a particular issue as we have plowed this field of responsibility that we have. So to be able to call it a disaster but yet never offer anything or any fix, [leads me to] question the credibility of the statement."

McDonald said commissioners need to get busy working hard to fix the problems that have occurred instead of sitting around complaining about them.

"With nothing to measure it by I think we have made a tremendous amount of progress in the state of Georgia and in gas deregulation," said McDonald. "On the nonregulated side, those consumers, the 1.4-plus million, are all in a marketer's possession. There is no other state that has done that."

McDonald said he is disappointed primarily in the companies that came in unprepared to do business. Strong companies with deep pockets simply were not prepared to handle the logistical problems of getting simple bills out to customers. "Some marketers you think would be most efficient because of the most experience in these programs in other areas...have been some of the worst that we've had."

One of McDonald's recommendations to other state regulators is to question marketers in the certification process about their business practices: their billing methods and customer relations methods in particular. "We looked at finances and those things that seemed to be very important and should be very important, but we didn't look at just the day-to-day business practices which have caused us as much a problem as anything out there."

The legislature and the commission could have done more had they foreseen the pitfalls ahead, both McDonald and Commissioner Bobby Baker admitted.

"I think deregulation of the gas market can work even for small consumers, but there has to be some safeguards put into the legislation by regulatory agencies to protect customers from slamming, from being hit with price increases or bearing a disproportionate share of the cost of gas service," said Baker. "Those are good lessons to be learned. Our experience here is going to help us when we initiate electric deregulation."

While distancing himself significantly from Chairman Durden's comments, Baker said he is disgusted with the track record and the current situation in Georgia. He agrees with Durden that some significant changes are required, particularly in the areas of billing and rate comparisons for customers. But he said he is not calling for "reregulation" and doesn't plan to fight electric restructuring when it comes down the pike.

"I think the major lesson other state regulators and businesses throughout the country ought to focus on is that you had better have the fundamentals in place and operational before you decide to jump into this business and start serving gas customers in your deregulated marketplace because the business end of it is the Achilles heel," he said.

Business Basics Lacking

"There were some problems that were caused by the legislation and by our rules, but the killer fatal errors that occurred that have driven companies into bankruptcy and out of the marketplace have been basic business issues: not having the financial resources, the warm winter weather and cash shortfalls, not having adequate billing systems in place to accurately and timely bill customers, not having trained customer service representatives who can respond to consumer inquiries and complaints and satisfactorily address those consumer complaints."

Baker noted that there are some immediate issues that have to be dealt with in Georgia, including the continuing billing problems. "At some point you have to tell the marketers [who have had billing problems] that 'Hey you've had a fair amount of time. You've had adequate opportunities, and if you still can't do it, then you are going to waive those charges to those customers and you are going to start taking it in the pocketbook. That ought to get your attention and focus your folks on straightening out the problem.' Our staff attorney is working on drafting proposed language for that right now," said Baker.

McDonald said he thinks language will be drawn up that requires marketers to get bills out on time or else they will lose their marketing privileges in the state of Georgia.

The other remaining thorn in the commission's side is in the area of marketer rates. Only two marketers, Scana and Infinite Energy, have filed complete pricing data. The rest have filed under "trade secret" and have been asked by the commission to re-file in the public record.

"It doesn't do the public any good if you are sending us the pricing information under trade secrets," said Baker, adding that the marketers are starting to re-file full information. "The problem that we're seeing now is that everybody has a different method of charging customers for their service so we're trying to get them all to provide information that is uniform that can be provided via our web site or to the newspaper."

While most of the major pitfalls now appear to be behind Georgia regulators, the battle over the little things continues, he said.

Rocco Canonica

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