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High Voltage: Affiliate Rules Shock Utility Markets

Fortnightly Magazine - January 15 1999

he says. "And through the political process, those who are entering the markets we have traditionally been in have been somewhat successful in arguing they need a hand up the ladder in order to be able to compete with us, which translates into: The utilities should be prohibited from doing what other businesses would do."

From interviews with Durham, utility executives, independent power suppliers and consumer advocates, and from a few cases involving affiliate rules, it becomes obvious this area is ripe for disagreement. And in some cases, the subject sparks real rancor.

Who will win the fight? Will commissioners find themselves in the middle, ultimately blocked out via jurisdictional claims? Who will politicize the process - utilities and their affiliates? Or independent power marketers and their advocacy organizations? Ultimately, will consumers be the ones to benefit? Or will they be left bloody and monopoly bound?

Disclaimers: Tripped by Small Type

In California, an advertising campaign dubbed "High Voltage" shorted out for PG&E Energy Services and parent company PG&E Corp. in the spring of 1998, about the time the state opened its electricity market to retail competition.

Earlier, the state public utilities commission had set rules governing energy utility affiliates. (See Decision 97-12-088, Dec. 16, 1997, 183 PUR4th 503.) But on March 23, as the market was about to open, an ad ran in the San Francisco Chronicle. The ad, immediately brought to the commission's attention, apparently violated CPUC rule V.F.1., which mandates "plain legible" language to distinguish utilities from their affiliates. In this case, PG&E had used a disclaimer to distinguish its affiliate from the parent corporation, but the disclaimer was made illegible by the background behind the 6.5-point type. By comparison, typical newspaper classifieds are printed in 4-point type. The disclaimer also was printed vertically on the page. The disclaimer read:

"PG&E Energy Services is not the same company as Pacific Gas and Electric Company, the utility. PG&E Energy Services is not regulated by the California Public Utilities Commission; and customers do not have to buy PG&E Energy Services' products in order to continue to receive quality regulated services from Pacific Gas and Electric Company, the utility."

PG&E admitted in filings made to the commission that the ad "regrettably does not feature the disclaimer prominently as should be expected." But while the 57-word disclaimer was barely legible, injury to prospective customers wasn't possible, PG&E claimed, because when customers inquired about the affiliate, both its web site and toll-free number repeated the disclaimer.

PG&E also said that as soon as the ad hit the streets, the company established a pre-clearance policy for future ads. All future ads, the company said, would require a type size of at least 8 points. (An April 9 commission order required all disclaimers to be three-fourths the size of the company name in any ad).

The initial advertisement ran in about 10 other publications, including the Wall Street Journal, Money and Business Week, on about 15 occasions. Because the publications had already been printed, the ads could not be pulled.

State commission administrative law Judge Janet