In one of the first major affiliate abuse decisions to goagainst an unbundling gas utility, the Rhode Island Division ofPublic Utilities and Carriers fined Providence Gas Co. (PGC)$23,000 for violating its affiliate, tariff and numerous otherregulations, and ordered the utility to refund retail gas marketersnearly $300,000.

Following an extensive process of discovery and evidentiaryhearings triggered by a Dec. 1, 1997 complaint by Aurora NaturalGas, the Division found PGC made unauthorized changes in itsunbundling pilot program that significantly benefited its affiliatewhile negatively impacting firm ratepayers and other retailmarketers.

“Most revealing,” according to Division Hearing Officer StephenT. Scialabba, “is that while the above incidents occurred anddecisions were made, the company was simultaneously engaged in thefollowing activities:” 1) joint marketing of PGC, parent companyProvidence Energy Co. and affiliate Providence Energy Services(PES), 2) joint management of PGC and PES operations, 3) corporatebranding of PGC, PES and other affiliates, 4) providing marketsensitive information to PES, 5) tying compensation to the seniorPGC personnel responsible for the rate unbundling policy andimplementation to the financial performance of PES, and 6) creatinga corporate structure where both PGC and PES personnel hadreporting responsibility to the same person.

PGC violated numerous regulations governing the use of sharedemployees, sharing market sensitive information, sharing theutility’s logo, and providing its affiliate with special serviceswithout offering the same services to other marketers.

“.The totality of the evidence in this proceeding demonstrates asystematic pattern of behavior whereby the company’s unregulatedgas marketing affiliate benefited substantially, and firm salesservice customers were potentially harmed.,” Scialabba said in hisdecision.

One of the more significant violations involved PGC makingunauthorized changes in the unbundling program, including a lastminute removal of a requirement that customers who select FT-1service buy, install and have tested telemetering equipment. FT-1service is a daily metered service with third-party storage andpeaking services. The utility waived the telemetering requirementon FT-1 customers, providing them with free daily balancing, whenit was unable to complete and test the telemeter installationsprior to the Dec. 1 commencement of unbundled service. By the endof November, PGC had completed only 26% of the installations andnone were operational.

Meanwhile customers selecting FT-2 service, a monthly meteredservice with PGC assigned and controlled storage and peaking, hadto continue paying for balancing. Significantly, 82% of the FT-1customers who benefited from the last-minute removal of thetelemetering requirement were being served by PGC’s affiliate.

Scialabba ordered the utility to pay each marketer serving FT-2customers the amount they had to pay for storage and peakingservices and another $300 per month for each month from Dec. 1through the effective date of the order to compensate fordifferences in what they were charged and what other FT-1 marketershad to pay. Through the end of July, that amount totaled about$293,000.

In addition to the fines and refunds, Scialabba recommended theRhode Island Public Utility Commission require greater separationbetween utility and marketing affiliate operations and restrict PGCfrom making changes in its transportation service during anenrollment period.

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