The Division of Consumer Counsel, Office of the Attorney General ("Consumer Counsel") submits the following comments regarding consumer protection issues that should be considered in any electric utility restructuring legislation. Consumers must be protected during and after transition to a competitive electric generation market in Virginia. Such protection should be designed to ensure that consumers continue to have reliable service at fair rates.

Consumer Counsel concedes that it is difficult to foresee all of the potential consumer protection issues at this time. Accordingly, the General Assembly should grant the State Corporation Commission (the "Commission") the duty to enforce statutory requirements addressing consumer protection issues as Virginia transitions to a competitive electricity generation market.

As part of a comprehensive plan to develop effective consumer protection safeguards, the General Assembly should also consider a private cause of action for consumers to supplement protections provided by the State Corporation Commission. A private cause of action should provide remedies to consumers injured as a result of abuses and fraudulent conduct in and incident to the transition to competition and when the market is effectively competing. Currently, Virginia consumers are protected under the Virginia Consumer Protection Act, Section 59.1-196 et seq. Code of Virginia (1950) as amended (the "Act"). As part of any recommendation for the protection of consumers in the new competitive markets for the generation and sale of electricity, the General Assembly should consider amendments to the Act to ensure that the fundamental protections afforded therein, such as the right of private action and government enforcement by the Office of the Attorney General; the various Commonwealth's Attorneys, and local city, county and town attorneys; and the prohibitions stated therein, apply to the sales of and contracting for electricity. Public service corporations regulated and supervised by the State Corporation Commission currently are excluded from coverage by the Act.

CONSUMER EDUCATION - Consumers should be informed of the opportunity to choose a generation supplier and directions for comparing rates and services so that their decision is informed. The question of who should bear the cost for such education should be determined by the General Assembly. One payment option is to require payment from those participating in the restructured market, e.g. generators, distributors, marketers and aggregators.

An impartial entity such as the Commission, in conjunction with the Division of Consumer Counsel and other interested parties, should have the jurisdiction and budget to fashion consumer education programs, including the authority to disseminate that information through all forms of media advertising including public service announcements. Education programs must ensure that consumers have the information they need to function in a competitive marketplace. This includes information about:

(1) the restructured market for electric services;

(2) the choices available to consumers in that market;

(3) the specific protections afforded them as consumers;

(4) how consumers can protect themselves against unlawful, fraudulent and deceptive practices and where they should turn for assistance if they are subjected to such practices;

(5) programs that offer assistance to consumers with high energy bills that may be unaffordable; and

(6) how consumers can reduce their home energy needs and thereby reduce the need for energy assistance.

ENVIRONMENTAL DISCLOSURES - Consumers should be informed of the type of generation they are purchasing and the emissions for such generation, so that they can make informed decisions when shopping for environmentally sound providers. For example, the bill for electric services could show (among other things) the supply mix (coal, oil, gas, hydro, renewable, etc.) and the air emissions of NO_x and SO₂ and CO₂ compared with a regional average.

RELIABLE SERVICE - Consumers must continue to receive reliable, non-interruptible and safe service and to be protected in emergency situations. Where necessary, the Commission should have the authority to order providers under its jurisdiction to maintain adequate reserves either through physical facilities or by contract for the purpose of ensuring reasonable reliability criteria and for the provision of all necessary ancillary services. This may require the Commission to retain some jurisdiction over generation facilities.

PROVIDER OF LAST RESORT/DEFAULT SUPPLIERS - All electric service providers should be under an obligation to serve customers without discrimination. Redlining (refusing to provide service in geographic areas because of their racial, ethnic or economic composition) must be prohibited. Policymakers will need to decide how electric service will be provided to:

1. Customers who have competitive choices available to them, but do not affirmatively choose a provider;

2. Customers who have no competitive choices available to them; and,

3. Customers who have had their service terminated by a provider.

LICENSING OF AGGREGATORS, BROKERS AND MARKETERS - In order to bring competition to the residential ratepayer, small business or commercial users of electricity, it is envisioned that some forms of aggregation of small usage customers may emerge. The aggregation of small consumers will give the small user a market presence comparable to that of a larger user. In this way, small consumers may see the advantages of a competitive market. Aggregators, brokers and resellers of power have the opportunity to take advantage of the customer and the market arbitrage. The ability to correct abuses by aggregators and marketers should be within the oversight authority of the Commission. The Commission should encourage and assist local governments to participate as aggregators with appropriate exemptions from regulatory oversight required of non-governmental aggregators. In that way, small consumers will be permitted to participate in the competitive market and the entity providing the service will be an accountable governmental agency.

FAIR RATES - Virginia consumers must continue to receive reliable service at fair rates. The Commission should have the authority to use established regulatory tools, e.g. price caps, price freezes or other mechanisms, to ensure the delivery of electricity at fair and reasonable rates, at least during the transition period to effective competition. The Commission would serve as a "monitor" to ensure that the market functions and the consumer is protected.

BILLING/METERING - The Commission should determine if it is in the public interest to separate billings, and whether different services should be billed on one or more separate bills (such as has been done for local and long distance calling statements). The Commission should also decide what items should be specifically disclosed on bills. One element of a bill is essential: All bills should be consistent among all suppliers to provide consumers with the ability to comparison shop and to allow for monitoring of abuses. The bill should, at a minimum, disclose the rates for different usage levels, the basic terms of the contract including the term and whether any price escalators or changes are included within the term.

The cost of metering, billing, and collection should be separated ("unbundled") from other costs of distribution. Although such services may not have monopoly characteristics and could potentially be deregulated, such deregulation may unnecessarily complicate initial restructuring efforts. Billing and collection services can be provided by competitive suppliers, however, their deregulation may cause customer confusion. The provision of these services is also relatively inexpensive and the benefits associated with their deregulation would likely be minimal. Therefore, Consumer Counsel believes that, at least at the initial stage, these services should not be deregulated, and should continue to be provided by distribution companies.

All electric service providers should be subject to consistent requirements regarding customer deposits. As currently required, customer deposits should be collected only pursuant to written rules filed with regulators and for reasonable amounts. Customers should be paid interest on deposits and utilities and electric service providers should be required to apply customer deposit rules in a nondiscriminatory manner. Also, all electric providers should be prohibited from refusing service for debts owed for services unrelated to electric service, as is currently the case.

Procedural and substantive protections in shut-off situations should apply to all electric providers. These protections include notice requirements, winter and extreme temperature moratoria, prohibition against shut-off for disputed bills and mandatory offering of payment plans in lieu of shut-off.

DECEPTIVE MARKETING - Consumers should be protected from deceptive marketing practices. The Commission should have the authority to fine or suspend companies that engage in unfair practices from operating in Virginia. This authority should be consistent with the consumer education criteria listed earlier and the Commission, the Attorney General or other appropriate agencies should be empowered to enforce compliance with marketing practices that are in the public interest. The residential retail customer and the small business or commercial customer are most susceptible to fraud. To assist in reducing the potential for abuse, all electric suppliers should be required to provide small customers the following information: the price, service reliability, environmental attributes, the company's track record, customer service record and the contract terms. This information should be available in a consistent manner for each supplier. Using these objective measures, the appropriate regulatory agency then would have a bright line to evaluate deceptive practices.

SUPPLIER SHIFTING - Consumers must be protected from having their generation supplier changed without their informed consent. Consumer complaint and resolution procedures should also be established. The contract for the provision of electricity is based upon a consumer's decision, which encompasses more variables than price alone. A consumer typically will often take into consideration factors such as service reliability, environmental attributes, the company's track record, customer service record and the contract terms. The involuntary transfer of a customer to another provider is a contract violation and an overriding of the whole package of reasoned decision making that should go into the decision to use a particular supplier.

FLEXIBILITY - Any legislative mechanism should afford the Commission the flexibility to protect consumers before, during and after competition develops in the electric generation market in Virginia. This should include mechanisms to prohibit and punish non-conforming practices and suppliers. It should empower the Commission to seek out infractions and to monitor and adopt standards of conduct in the event that and until the industry self-polices. It should include the ability to refer criminal conduct to the appropriate law enforcement agency, State or Federal, and to enforce administrative sanctions and penalties. Those State sanctions and penalties should include, but not be limited to, revocation of State licenses to engage in business in the Commonwealth as a supplier or broker.

ISO/RPX PARTICIPATION AND STRUCTURE - From a consumer protection prospective, an ISO or RPX should be not for profit entities. Whether the ISO or RPX is unbiased in its decisions is better assured if the entity operates without the profit motive. In addition, beside the prohibition of any generator, supplier, transmitter or distributor of electric energy being precluded from having an ownership interest in an ISO or RPX, no affiliate of any generator, supplier, transmitter or distributor of electric energy should be permitted to have an ownership interest. To ensure consumer confidence in the ISO or RPX, the Commission should be allowed to appoint a consumer representative to serve on the ISO and RPX governing body who would receive compensation commensurate with the other participating members.

ENERGY ASSISTANCE

There are currently no energy assistance programs that are funded by State action, either through taxation or included in the regulated price of electricity. Nevertheless, all citizens benefit from the fact that the price charged for electricity in Virginia is relatively low, when compared to the prices charged in other states. Any restructuring of the electric industry should provide safeguards to ensure that the Commonwealth retains its low cost advantage.

The General Assembly should develop a flexible mechanism that gives the Commission the duty to develop and implement a procedure for protecting consumers as Virginia transitions to a competitive electric generation market. During the transition to competition, the Commission should be the surrogate for market regulation. Until the market has an opportunity to develop and mature, the Commission needs the resources and ability to enforce consumer protection measures. Any mechanism should consider the consumer protection issues addressed in these comments, but should not be limited to them. In addition the General Assembly should consider amendments to the Virginia Consumer Protection Act to ensure that the Act's protections and prohibitions apply to the sales of and contracting for electricity.

Consumer Counsel appreciates the opportunity to present comments on Consumer issues to the members of the Joint Subcommittee Studying Electric Utility Restructuring (SJR 91) and stands ready to provide any assistance the subcommittee may desire.