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Utility Marketing Affiliates: A Survey of Standards on Brand Leveraging and Codes of Conduct

Fortnightly Magazine - November 15 1998

doing something for you." Other marketers reportedly are very suspicious of the workability of the separation.

Ohio has employed a standard of conduct in its pilot program requiring new complaint procedures. Commission staff there say they also would look to the Office of Attorney General to participate in any necessary enforcement through the fair trade and state antitrust laws or private actions thereunder. %n8%n

New Jersey %n9%n requires only accounting separation of the unregulated affiliates in its two pilot programs. According to staff, there is a widely held perception among state legislators and marketers that the overlap in employees and logos has been injurious to real competition. A new collaborative on the subject may be in the offing.

Legislation signed into law in April 1997 and administered by the Georgia PSC provides fairly strict limitations on relations between distribution companies and their affiliates. %n10%n In a July 1998 decision the commission prohibited a prominent LDC under its jurisdiction from allowing a marketing affiliate to use a name "too similar" to its own on grounds that it would be "misleading" and retard the development of competition.

New York faced these issues most recently in a settlement agreement involving a complicated corporate restructuring between Brooklyn Union Gas and Long Island Lighting and their affiliates. %n11%n Detailed requirements were set out to "protect customers from harm" and not restrict competition. One of these last is the prohibition on employee "revolving door" transfers (em for no longer than 18 months at a time and not again for at least 18 more months. Further, the PSC prescribed a charge (ratemaking credit) of 20 percent of the first year of compensation for each utility employee loaned out. Another wrinkle in the agreement was a royalty feature for gas utility customers to compensate them (in the form of a ratemaking credit) for the affiliate's use of the name, reputation, and expertise of the company, and "to capture any 'unquantifiable' subsidies or misallocations resulting from affiliate transactions." Interestingly, the parties also agreed not to challenge the PUC's authority to levy royalties.

Learning from Electricity

A number of commissions are working toward devising codes of conduct for use in electric restructuring. In 1997, the Strategic Issues Committee and Staff Subcommittee on Accounts for the National Association of Regulatory Utility Commissioners prepared and disseminated for comment a draft paper for use by PUCs addressing the relationship between the activities of regulated and nonregulated affiliated companies in a restructured electric industry. In September this document still awaited action at the committee level.

Commissions in New Jersey and Pennsylvania are working on fashioning agreeable codes of conduct using working groups and collaboratives. %n12%n New York completed a negotiated agreement and settlement on a Consolidated Edison restructuring plan for retail competition. %n13%n Safeguards were similar to the above-mentioned Brooklyn Gas-LILCO case. However, branding was allowed, and a royalty payback of 2 percent of the capital investment in the affiliate is required for use of the logo. A new complaint system must be set up by the utility with the utility having 20 days to informally