Georgia regulators have become bitter following the thirdsettlement of a slamming case involving a retail gas marketer andthe second retail marketer bankruptcy. Simmering tempers havereached the boiling point with some public service commissionersconcluding the deregulation process has been a total failure.Others remain hopeful that the many lessons learned in the processwill help the PSC proceed with electric deregulation when itbecomes the next order of business.
Regardless of their conclusions, however, both sides are movingtoward tougher restrictions on retail marketers, particularly inthe areas of billing, customer relations and price reporting.
The latest lesson concluded last Tuesday with a resolution ofpending allegations of unfair business practices by retail marketerEnergy America. The marketer, a partnership of Sempra Energy andDirect Energy Marketing, agreed to pay $100,000, including $75,000to an energy assistance fund for elderly and low income customersand $25,000 to the state treasury.
The company also agreed to change its marketing practices. Itmust comply with Federal Trade Commission regulations ondoor-to-door sales and for a six month period must provide theGeorgia commission with advance notice of the area in which it willbe conducting its door-to-door marketing. During that period andfor an addition six months the third party verification companyused by Energy America to confirm its new customer enrollments mustuse a script that has been approved by the commission.
The conclusion of the slamming case came only a week after theauction of 50,000 retail gas customers, which were previouslyserved by bankrupt marketer Titan Energy (see related story thisissue). Titan was the second retail marketer in the state to filefor Chapter 11.
Billing problems, meanwhile, continue more than a year and ahalf into the program. One PSC staff member said four of the 13marketers still participating in the retail market continue to havebilling problems and up to 20% of their customers still get theirbills late. Some customers haven’t received bills in six months andhave been calling the PSC, begging to simply pay what they owe.Many are afraid that once they get a bill it will be enormous andwill be due in 20 days. The commission at times has been virtuallyshut down by customer calls.
In addition, the marketers have been reluctant to file theirprices with the PSC as required. July was the first month ofmandatory filing, but only two out of the 13 marketers submittedcomplete information. The others filed under “trade secrets” andhad to be asked by the PSC to re-file.
Deregulation in ‘Deep Trouble’
Georgia gas deregulation is “in deep, deep trouble,” Georgia PSCChairman Bob Durden said in an interview with NGI last week. “We’veshaken 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’vehad. There’s no doubt in my mind that there are some majorproblems.
“I know that view is not a majority view on the commission, butI think it’s the right view. I don’t think we can go back to theold system because people have sunk too much money into thissystem. But we may be able to assert some regulatory authority thatwould prevent residential consumers from taking it on the chin likethey have.”
Although he has little support from the other PSC commissioners,Durden believes some significant changes toward reregulation areneeded. He vowed to make a lobbying effort during the nextlegislative session to win the PSC any additional authorityrequired to regulate billing and force marketers to use volumetricrates which would give residential customers greater rate reliefduring periods of low demand.
“Residential consumers deserve better than this,” Durden said.”Let’s quit pretending everything is going to be all right if wejust wait awhile, and start paying attention to fixing the thing.That’s all I’m saying. There’s been no acknowledgment that it is amess. I don’t know what more we can do. We have companies goingbankrupt. We have slamming problems. Bills can’t even get out. Thewhole gamut, it’s all there. But I think a lot of it is pride andego and egg on their face,” he said. “A lot [of the PSCcommissioners] bragged and pushed this as a major thing. ‘Georgiais in the lead; other states will follow us,’ [they said]. Well Idon’t think so.”
Durden also said there is no way he would ever be in favor ofelectric restructuring now in light of what has happened in thestate’s gas industry. “As far as I’m concerned you can’t haveelectric deregulation. I said the other day you can forget electricderegulation because I will raise hell from beginning to end aboutthat. If we haven’t learned a lesson from our experience in gas, wewill never learn. Somebody said you ought to go out to San Diegoand see what is happening in California where they deregulatedelectricity. I understand their rates have gone through the roofout 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 lowestelectric rates in the country right now, and I wrote the rate casedecisions in every major electric rate case we’ve had since I cameon the commission almost 10 years ago. I’m proud of what we’ve done[with electric regulation] in Georgia. If they think they are goingto come through here with electric deregulation and start screwingelectric customers, I’m going to tell it like it is from thebeginning.”
The other commissioners squirm when Durden says things likethat. 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 afailure. He said last week other states need to realize thatbusiness-related matters rather than regulatory and legislativesnafus were primarily to blame for the difficulties. AndCommissioner Lauren (Bubba) McDonald agreed. Both commissionersblasted Durden for “grandstanding” in front of the press.
“According to Chairman Durden and the comments he has made, itis a disaster. But he never let the General Assembly know when theywere passing it in 1997,” said McDonald. “He never offered. As aveteran public service commissioner, he never exposed any of hiswisdom to that body on deregulation. Since we have been involved inthe managing of deregulation in Georgia, he has never offered onestatement in regards to how to deal with a particular issue as wehave plowed this field of responsibility that we have. So to beable 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 fixthe problems that have occurred instead of sitting aroundcomplaining about them.
“With nothing to measure it by I think we have made a tremendousamount of progress in the state of Georgia and in gasderegulation,” said McDonald. “On the nonregulated side, thoseconsumers, the 1.4-plus million, are all in a marketer’spossession. There is no other state that has done that.”
McDonald said he is disappointed primarily in the companies thatcame in unprepared to do business. Strong companies with deeppockets simply were not prepared to handle the logistical problemsof getting simple bills out to customers. “Some marketers you thinkwould be most efficient because of the most experience in theseprograms in other areas…have been some of the worst that we’vehad.”
One of McDonald’s recommendations to other state regulators isto question marketers in the certification process about theirbusiness practices: their billing methods and customer relationsmethods in particular. “We looked at finances and those things thatseemed to be very important and should be very important, but wedidn’t look at just the day-to-day business practices which havecaused us as much a problem as anything out there.”
The legislature and the commission could have done more had theyforeseen the pitfalls ahead, both McDonald and Commissioner BobbyBaker admitted.
“I think deregulation of the gas market can work even for smallconsumers, but there has to be some safeguards put into thelegislation by regulatory agencies to protect customers fromslamming, from being hit with price increases or bearing adisproportionate share of the cost of gas service,” said Baker.”Those are good lessons to be learned. Our experience here is goingto help us when we initiate electric deregulation.”
While distancing himself significantly from Chairman Durden’scomments, Baker said he is disgusted with the track record and thecurrent situation in Georgia. He agrees with Durden that somesignificant changes are required, particularly in the areas ofbilling and rate comparisons for customers. But he said he is notcalling for “reregulation” and doesn’t plan to fight electricrestructuring when it comes down the pike.
“I think the major lesson other state regulators and businessesthroughout the country ought to focus on is that you had betterhave the fundamentals in place and operational before you decide tojump into this business and start serving gas customers in yourderegulated marketplace because the business end of it is theAchilles heel,” he said.
Business Basics Lacking
“There were some problems that were caused by the legislationand by our rules, but the killer fatal errors that occurred thathave driven companies into bankruptcy and out of the marketplacehave been basic business issues: not having the financialresources, the warm winter weather and cash shortfalls, not havingadequate billing systems in place to accurately and timely billcustomers, not having trained customer service representatives whocan respond to consumer inquiries and complaints and satisfactorilyaddress those consumer complaints.”
Baker noted that there are some immediate issues that have to bedealt with in Georgia, including the continuing billing problems.”At some point you have to tell the marketers [who have had billingproblems] that ‘Hey you’ve had a fair amount of time. You’ve hadadequate opportunities, and if you still can’t do it, then you aregoing to waive those charges to those customers and you are goingto start taking it in the pocketbook. That ought to get yourattention and focus your folks on straightening out the problem.’Our staff attorney is working on drafting proposed language forthat right now,” said Baker.
McDonald said he thinks language will be drawn up that requiresmarketers to get bills out on time or else they will lose theirmarketing privileges in the state of Georgia.
The other remaining thorn in the commission’s side is in thearea of marketer rates. Only two marketers, Scana and InfiniteEnergy, have filed complete pricing data. The rest have filed under”trade secret” and have been asked by the commission to re-file inthe public record.
“It doesn’t do the public any good if you are sending us thepricing information under trade secrets,” said Baker, adding thatthe marketers are starting to re-file full information. “Theproblem that we’re seeing now is that everybody has a differentmethod of charging customers for their service so we’re trying toget them all to provide information that is uniform that can beprovided via our web site or to the newspaper.”
While most of the major pitfalls now appear to be behind Georgiaregulators, the battle over the little things continues, he said.
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