Good morning, Mr. Chairman and members of the Subcommittee. I am Judy Mason, Executive Director of the Virginia Council Against Poverty. I thank you for the opportunity to appear before you today to discuss other concerns that VACAP has with regard to electric utility deregulation. The primary issue I want to discuss with you today is consumer education.
In terms of urgency, VACAP's first concern for the low-income residents of Virginia--in fact, for all of the Commonwealth's small electric consumers--is the lack of public information regarding this monumental change that Virginians are facing. Small consumers, especially low-income consumers, are unprepared to shop wisely for electricity. It is imperative that Virginia prepare its citizens with publicly-sponsored consumer education and information, through a program administered by the Commonwealth and conducted by organizations experienced in working with these vulnerable populations.
Beginning as quickly as possible, Virginia's consumers need information on what changes are being made in the electric utility industry, why change is happening, how the change may effect them, and what they can realistically expect from a restructured electric industry. But even more important will be the information low-income and other consumers will need later in order for them to make informed choices among providers of electric service. This information must be carefully designed, easy to understand, and targeted specifically to those populations that are most vulnerable.
Default Provider
As Rob testified last week to the Structure and Transition Task Force, the consumer education issue underlies VACAP's concern as to who will be the default provider of electric service in a restructured environment. The arbitrary assumption that the incumbent utility will be the default provider gives the incumbent a competitive advantage, and could delay effective competition. Those who argue in favor of the incumbent as default provider say that if consumers don't want to stay with the incumbent utility, they will actively choose. However, our contention is that within the set of "people who choose not to choose" there are actually 3 subsets. The first is made up of people who are pleased with the service they receive from their incumbent utility.
The second group are those people who simply won't want to be bothered--the issue doesn't mean enough to them to make switching worthwhile. They're like the people who get aggravated at the long-distance telemarketers who call every evening at dinnertime. They simply want to be left alone. Any benefit they would gain by switching would be more than offset by the trouble they went through to do it.
But it's the third subset of people who will choose not to choose that concerns VACAP. These are the people who simply don't understand what deregulation is all about. They're confused by all the hype, and the direct mailings, and the telemarketers, each promising more than the previous one did. These folks can't sift through all the advertising and promotions to figure out what changes are being made by deregulation and whether or not changing electric suppliers is of benefit to them. In other words, they "choose not to choose" because they don't understand why they should choose and how to do it--so they choose to do nothing.
Consumer Education
The people in this third subset are the most vulnerable of our friends and neighbors. They are the low-income, the less educated, the elderly, the handicapped. There must be a publicly-sponsored consumer education campaign, specifically targeted at these vulnerable populations. This education must not be left up to the utilities to carry out. It must be mandated by law, administered by an office of state government, and conducted by organizations throughout the Commonwealth that have expertise in providing outreach, information, and services to the targeted populations. VACAP's recommendation is that legislation direct the administering agency to hire a marketing firm to produce a generic brochure and informational materials, and also that they be directed to contract with experienced non-profits who provide advocacy and outreach to Virginia consumers and to specific populations of consumers that are recognized to be more vulnerable. The mandating of such a consumer education campaign, adequately funded and administered, would go far toward alleviating VACAP's concerns over the default provider issue. It is noteworthy that this is an area of agreement with Virginia Power--they also are advocating for a state-sponsored, third party consumer education initiative. I might also add that the National Association of Regulatory Utility Commissioners has created consumer information templates that provide some basic consumer information, including a list of key questions that consumers should ask before making a choice. Their website is <http://www.naruc.org>
The funding of this consumer education campaign would be an additional element of the "consumer benefits charge" that Rob has already spoken about. All consumer, regardless of class would pay this nonbypassable wires charge based on their monthly usage of electricity (per kWh). No class of consumer would pay a disproportionate share of the charge.
Other Issues
VACAP is concerned that, with the advent of electric competition, low-income customers are likely to receive fewer and less quality service than they have in the past. Service provided by an electric utility is more than just the electricity that comes through the wires. We expect that restructuring will bring about a reduction in customer service--less staff to handle personal contacts, negotiate payment plans, provide information regarding payment assistance. Low income customers use these services more than the "average" customer, thus low-income consumers would be more negatively impacted by the cutbacks in customer service.
VACAP is also concerned about consumer protections. It is imperative that electric utilities be subject to strong consumer protection laws. Specific concerns include 1) the threat of service shutoffs used as a collection practice, 2) unfair marketing practices, 3) the potential for redlining, 4) disproportionate negative environmental impacts on low-income consumers and poor neighborhoods, and 5) the potential for confusion in billing disputes.
I appreciate the opportunity to speak to you today on behalf of Virginia's low-income residents and hope that you will address their concerns as you move forward with your task. I would be pleased to answer your questions.