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High Voltage: Affiliate Rules Shock Utility Markets

Fortnightly Magazine - January 15 1999

might be a chance an unlicensed supplier would sell electricity, that savings might apply only during certain hours, and that the changeover process may be complicated. TV ads implied electric generation suppliers aren't truthful, that they wouldn't keep promises and that PECO was superior due to its unique link to the monopoly.

MAPSA did not win immediate relief, but the commission's interim guidelines clearly are a partial answer, spelling out regulators' future roadmap and emphasizing the distinction between informing and marketing.

The commission reiterated its position in its order adopted Feb. 26 at Docket No. M-00981036, cautioning that " 'funds ¼ earmarked for consumer education may not be used for other business purposes such as marketing, lobbying and product advertising.'

"It is not disputed that the EDC's duty to inform and educate consumers ¼ includes the responsibility to inform and educate customers about the availability of PLR service."

The commission, citing case law, said based on the Supreme Court's holding, it's clear that false or misleading advertising by EDCs of their PLR function enjoys no First Amendment protection. As federal courts have recognized, even literally true statements can be deceptive or have implications that are deceptive, the commission wrote. "To rise to the level of deceptive advertising, an advertising practice need only have a tendency to deceive the consumer. (Pekular v. Eich, 513 a.2d 427, Pa. Super. 1986.) Therefore it is entirely appropriate for the Commission to impose guidelines restricting EDCs from engaging in misleading, as well as false, advertising with respect to their PLR function."

Turning Tables:

Utilities Cite Aggressive Marketing

Prior to the PLR interim guidelines being issued, Durham, the PECO attorney, insisted that in theory, affiliate rules shouldn't be needed.

"I don't believe they are needed," he says. "Politically, the decision has been made otherwise.

"Deregulation doesn't really reflect much deregulation yet," he says. "It's more accurately described as a re-regulation, not only of the existing utility business that will remain regulated, but also the competitive arenas."

Durham says competition should be just that, competition. "Get out of our way if you want competition and let us go out there and the best folks will win," he says, adding that what concerns him is the mindset that suggests "unless people switch, choice hasn't been effective. [T]he real issue is, 'When people have choice, what's wrong if they choose the utility?'"

"Ultimately, that's the right answer," says Irwin A. "Sonny" Popowsky, Pennsylvania's consumer advocate, of Durham's "let the best folks win" philosophy. "But that's not the right answer in the transition when you're part of an electric distribution company that starts off with 100 percent market share."

"One of your choices is to stay where you are and that's fine, there's nothing wrong with that," he adds. "But that ought to be a conscious choice."

Popowsky says what concerns him is that of the 1.8 million residential customers who said they would consider switching, not many have been shopping for an electric supplier.

Two other affiliate rule skirmishes in Pennsylvania worth noting also involve PECO - one as the organization