Delegate Plum and members of the Taskforce. I am Jean Ann Fox, Vice President of the Virginia Citizens Consumer Council. I appreciate this opportunity to discuss the two topics on today's agenda: Aggregation of residential customers and consumer information and education requirements for electric restructuring.

Aggregation of residential and small commercial customers

VCCC discussed aggregation before the SJR91 Subcommittee in August. We expressed the fear that competition for residential customers will occur in name only. The experience in California and other states where major companies have withdrawn from the residential market underscores that fear. Restructuring plans must ensure that residential customers have access to choice by requiring new market entrants to serve both residential and commercial customers. Another way to ensure that residential customers will get both universal service and the lowest competitive price for electricity is through aggregating consumers to increase their purchasing power. Participation by any retail customer in a municipal or group aggregation program should be voluntary. Aggregation models should not carve out low-income consumers as a separate group. There are a variety of ways to foster aggregation.

Municipal aggregation such as Massachusetts' Community Choice Plan permits citizens of a municipality to vote in a public referendum or by city council vote, to form a "public aggregator," which will purchase electricity on behalf of all consumers within a municipality's jurisdiction.

Community Choice is voluntary, with any consumer having the right to opt-out of the pool. Through public aggregation, consumers can form a large buying group to get lower rates for electricity than would be available to individuals. Public aggregators are publicly accountable through elections, open meeting laws, fair bidding laws, and conflict of interest rules. In Massachusetts, Community Choice municipalities were given the option of recovering the money utilities normally collect from ratepayers for energy efficiency programs, enabling communities to design and implement programs more suited for their citizens and avoid the utility's substantial fees for program operation. The current electric utility continues to own and maintain the distribution system, read meters and do billing. The municipality only negotiates the terms and provisions of the power supply contract on behalf of its citizens.

Municipal aggregation benefits small consumers in three ways: It creates bargaining power for small, individual consumers, it stimulates competition, and it increases market efficiency by reducing the overall costs associated with serving small customers.

The report, "Aggregating Low Income Customers: Can Market-Based Solutions Fix Market-Based Problems," issued by the Energy CENTS Coalition in Minneapolis and co-authored by Roger Colton, recommends a geographically-based aggregation model with specific low income provisions. The report finds that municipal aggregation is the most effective means for pooling the largest number of electric customers with the most diverse consumption characteristics. Through municipal aggregation, all customers are automatically enrolled, including lower income and lower usage customers who might be refused service in a competitive industry or under other aggregation models.

State government can facilitate aggregation. In Connecticut, the state Office of Policy and Management is required to operate a purchasing pool for the purchase of electricity for state facilities and to provide an opportunity to participate in the purchasing pool to each household that includes an individual who receives means-tested assistance administered by the state or federal government. Any such household receives the same benefits and discounted rates as state facilities do in the purchasing pool. The Commonwealth of Virginia could make it a condition for bidding on its power needs that electric service providers submit competitive bids for the power needs of all participants in the state's first-time homeowners program, and subsidized housing programs, all LIHEAP customers, and nonprofit organizations providing health, housing, job-training and other social services to low income consumers under contract with state or local governments.

Other models of aggregation include for-profit and non-profit corporations subject to SCC jurisdiction. Customers can form co-ops to act as an aggregator for electric service. Vermont has a consumerco cooperative program. Other forms of aggregation include biddable franchise, buying clubs, and affinity groups.

Legislation pending in Ohio (SB 237 and HB 732) takes another approach. These bills divide the state into Retail Marketing Areas during the five-year transition period (1/1/2000 - 12/31/2004). Generation service would be bid out through an open, public process for an aggregation of all customers in each area who choose not to select electricity suppliers on their own. Retail Marketing Areas would be sub-units of the existing utility territories. The generation provider in each RMA retains responsibility for serving low-income customers and would be reimbursed for services.

Strong legislative provisions that provide for and encourage aggregation of residential customers should not be viewed as a cure-all for electric deregulation. Aggregation is one way of minimizing risks to small customers from deregulation, but aggregation will only be effective if there is a competitive generation market without transmission constraints through which a supply of power can be purchased for customers. Once again, this subcommittee must get the big problems solved in order for consumer protections to be effective. Those big problems are effective competition for generation, responsible treatment of stranded costs/benefits, and universal service and all that concept entails.

Consumer Information and Education

Profound changes in an industry that provides essential services to virtually every household require a comprehensive and sustained public education and outreach effort. Regulators in Vermont, California, Maine, New Hampshire and Massachusetts all issued orders calling for significant public involvement in consumer education and outreach programs that will precede competition. The California plan cost $87.5 million for consumer education, a sum that is .43% of the annual $20 billion spent each year on electric service in California.

Electric restructuring requires two phases of information and education. The first phase should start well before retail choice is introduced into the market. The general public is only vaguely aware of the changes being debated in state capitals that will fundamentally change the delivery of electricity. The principal responsibility for informing the public about pending changes in the electric market must be assigned to the State Corporation Commission. Utilities can be required to communicate information or facts to customers, but only the Commission has the standing and ability to provide objective information in an ongoing dialogue with all utility customers. The information and outreach campaign should be uniform statewide, both to minimize public confusion and the cost of producing and providing information materials.

This will be a new role for the SCC and will require additional funding and staff to perform. The SCC can form partnerships with other units of state government that have consumer education and information expertise, such as the Office of Consumer Affairs/VDACS, the Consumer Counsel office in the Attorney General's office, and Virginia Cooperative Extension at Virginia Tech and Virginia State University. Non-profit community-based organizations should also be included in the outreach and education effort. These groups have credibility with their constituents and speak the language of their communities.

An effective public education program should meet at least five goals: to obtain valuable feedback to aid decision-making, to create order out of confusion, to create a reasonably well-functioning market, to assure that all customers benefit from restructuring, and to protect vulnerable consumers. The job of informing the public cannot be left up to utilities, marketers, aggregators, or other self-interested market participants.

The second level of information and education involves equipping individual consumers to shop for and use electricity. Consumers who have had no experience in shopping for electricity as a commodity will need information and education services to make informed decisions, and to understand electric bills and services. As a NCLC staff person has noted, for our lifetimes, "choice" in the electricity context has meant deciding when to turn on and off the lights.

Competitive markets depend on informed consumers. For shoppers to make accurate comparisons, they must have prices that are stated on the same basis, whether per ounce of tuna or per kWh for electricity. In the absence of "apples-to-apples" price information, electricity consumers are more likely to choose not to choose. Research conducted in states with pilot projects (New Hampshire and Massachusetts) found that consumers want information from neutral parties, such as newspapers, TV and government organizations. Consumers want to learn how to become savvy shoppers for electric service. Consumers want uniform price disclosures and key environmental information presented by all suppliers so they can comparison shop.

The SCC should encourage the development of materials to enable consumers to make effective choices, including standardized information on price, quality and features for comparison-shopping. The standard electric label required for all suppliers would disclose effective prices, fuel mix, and emissions, contract terms.

The SCC will need rules for delivery of bills and billing information, including frequency of bills, standardized format and detail. A parallel experience in the telephone market showed that private payphones caused great confusion. The Commission issued uniform pay phone signage standards to reduce complaints and consumer confusion.

Legislation to implement a restructured electric industry must include authorization and mandates to ensure an effective public information campaign prior to the start of retail choice, information and education programs to help consumers shop and do business with competitive energy services providers, and information on consumer protections and recourse to resolve complaints. This is a major assignment that will require adequate staff, funding, and broad participation by stakeholders. The General Assembly should not leave the job of educating and informing consumers to the market.

Thank you for this opportunity to comment.

Appendix

(1996) Deborah Schachter for the National Consumer Law Center and the Regulatory Assistance Project is the source for the following Legislative Directives to Accomplish Public Education Goals for Electric Restructuring:

Minimum elements for a legislative directive on consumer education

1. Statement of intent that the smooth and orderly transition to a restructured industry requires an informed and involved public, and that the SCC is responsible for ensuring and overseeing comprehensive public education designed to:

   Maximize public participation in decisionmaking
   Minimize customer confusion
   Equip all customers to participate competently in the market
   Curtail discriminatory or abusive market practices.

2. A requirement that the Commission develop and implement a comprehensive education and outreach campaign at least twelve months in advance of the implementation of restructuring;

3. Specification that such an education and outreach plan should include:

   Dissemination of information by means of interactive approaches, as well as brochures or other written materials and a variety of mass media outlets, with the goal of reaching every electric consumer, such information to include but not be limited to:
   

   An explanation in clear, accessible language of the basic concepts of restructuring.
   An alert that rates, consumer protections, environmental and low income programs may be affected by restructuring decisions.
   Explanations of customer risks and responsibilities.
   Explanations of available consumer protections.
   Information about how to obtain and assess a personal energy profile.
   Advice about how to go about selecting an appropriate supplier.
   Information about aggregation.
   Information about available dispute resolution mechanisms.
   Notice about where to go for further information.

   Well-publicized public forums to be conducted in different geographical areas of the state, to foster public input, and to provide opportunities for an exchange of questions and answers.

   Active involvement of community-based organizations in developing messages and in devising and implementing education strategies.

   Targeted efforts to reach rural, low income, elderly, foreign language, disabled, ethnic minority and other traditionally underserved populations.

   Use of focus groups to gather public input on both broad restructuring issues and concerns and related public education needs.

   A toll free hotline to provide individual guidance to customers seeking advice about personal energy needs, the selection of an energy supplier, aggregation or dispute resolution.

   Use of pre-established outcome measures of customer awareness, understanding and ability to act to evaluate periodically the success of educational efforts.

4. A Requirement that the Commission compile, regularly revise, and make available without charge listings of certified energy suppliers, supplier service and price comparison information, records of consumer complaints, and listings of qualified or registered aggregators.

5. A requirement that the Commission issue public alerts about any unauthorized or fraudulent entities holding themselves out as suppliers, or suppliers which have seriously or repeatedly violated any applicable consumer protection rules.

6. An appropriation of funds earmarked for purposes to include a full-time staff member or independent communications consultant to oversee campaign development; sufficient additional commission staff to carry out necessary outreach, education, coordination, training, public information, public assistance, and related functions; and comprehensive mailings to keep interested parties alerted to developments in Commission dockets, collaborative meetings and other formal and informal decisionmaking proceedings.

7. Establishment or expansion of an intervenor fund, available for participation in formal commission proceedings to ensure that consumer and community organizations and other citizen advocacy groups can participate effectively.

8. A mandate to establish an Electric Consumer Education Trust to support grants to community-based organizations and outreach efforts, with a grant of authority to the Commission to impose charges on competitive suppliers to fund the trust, establish guidelines for the award of grants, appoint a volunteer committee to review grant requests and make awards, and to oversee and coordinate grantee education projects.