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Consumer issues remain in electric deregulation case

(Published July 31, 2000)


Staff Writer

Residents concerned about the impending deregulation of electric service will be able to air their views on protecting and educating consumers at an upcoming public hearing.

Sponsored by the Public Service Commission, the Aug. 3 hearing represents the next step in the opening of the electric service market to new providers. The public hearing will begin at 6:45 p.m. in the commission’s seventh floor hearing room at 1333 H St. NW. Persons who wish to testify at the hearing should contact commission secretary Jesse P. Clay Jr. at (202) 626-5100.

Lawrence Crocker, senior attorney at the commission, said this hearing will provide a critical opportunity for consumers to contribute input to the decision-making of the commission and comment on the proposal.

"We are concerned with what will make consumers fully comfortable and prepared going into this new era," Crocker said.

The main issues at question are how to protect consumers in a unregulated market and how to prepare them for shopping for services on the free market once competition is introduced in January, said People’s Counsel Elizabeth Noël.

Electric service deregulation allows for customers to choose from which supplier they would like to receive their electricity, in contrast to the current regulated monopoly. The introduction of competition should lower consumer prices and increase service options, according to deregulation proponents.

Makini Street, a spokeswoman for Potomac Electric Power Co. (PEPCO), said the main benefits for customers may not come in the form of reduced prices but in the opportunity to choose how their energy is generated, such as by environmentally friendly solar or wind power, as well as the possibility of receiving all utility services "bundled" from one company.

The process of deregulating electric service in the District started with PEPCO’s request to cease generating electricity and become solely an energy distributor. In December, D.C. City Council passed legislation to allow for the deregulation of electric service, setting January 2001 as the start date for a pilot program with the full program engaged by the next January.

As part of a settlement agreement with the commission, PEPCO has committed to instituting a 7 percent rate decrease before the market opens next January and is responsible for serving any customers who do not choose an alternative supplier.

Despite the rate decrease, Noël noted that residential customers are unlikely to reap benefits similar to commercial customers because the high costs of attracting residential customers, through costly marketing, will deter new providers from entering the market.

"In other states, very few customers have chosen to change because it is too complicated and we are not used to it," Noël said. "(But) if customers do not choose (an electric service provider), they will default to PEPCO, which will be an unregulated monopoly, and they will not recognize the benefits of deregulation."

Herbert Harris, chairman of the District’s Consumer Utility Board (CUB), said that while CUB worked with the Office of the People’s Counsel to oppose PEPCO’s efforts to deregulate, both stayed actively involved to ensure that consumers had a voice in the inevitable settlement.

"The battleground now…will revolve around how to protect consumers in an unregulated market," Harris said. "CUB is working to empower people via education and information about the choices they will have to make in the market."

Though adamantly opposed to the deregulation, Noël said she was confident that residential customers will be protected in the unregulated market because the City Council legislation included a host of consumer-friendly provisions.

Noël said the best option for consumers to benefit from deregulation is through aggregation, the banding together of consumers to create enough demand that entering the market is cost-effective for potential suppliers.

Aggregation could be achieved by uniting umbrella groups — such as churches, Advisory Neighborhood Commissions or wards — and non-residential entities, like the federal government, to present to potential suppliers a large, diversified customer base that will be economically attractive, she said.

The District is not the first entity to deregulate its electric service.

Maryland’s electric service market opened at the beginning of July, although no alternative suppliers have yet entered the market, according to Mark J. Travieso, Maryland people’s counsel.

PEPCO’s Street attributed this lack of new competition to an unanticipated surge in energy prices that complicated the transition.

New Jersey also deregulated recently, opening the markets for choice last August. The state has seen less than 2 percent of residential consumers switch to a new provider, said Blossom Peretz, ratepayer advocate for the state.

She said the energy prices of the last year have certainly deterred new providers from entering the market, but the change has also been slowed by difficulty aggregating populations large enough to make the entry cost-effective for the suppliers.

Copyright 2000, The Common Denominator