FTC Staff Submits Comments to West Virginia Public Service Commission Regarding Electric Power Restructuring

Staff of the Federal Trade Commission's Bureaus of Economics and Consumer Protection have provided comments in response to a request from the West Virginia Public Service Commission (PSC) regarding a variety of issues related to the implementation of electric power restructuring legislation within the state. West Virginia is among a growing number of states establishing regulatory reforms to bring the benefits of increased competition -- including lower prices, improved service and innovation -- in the electric power industry to its citizens and businesses. The PSC has identified several areas where it will be necessary to put forward rules pursuant to its Restructuring Plan (which has been adopted by the State Legislature) before customers can begin to select their electric power supplier on January 1, 2001.

The FTC has a longstanding interest in regulation and competition in energy markets, including proposals to reform regulation of the electric power and natural gas industries. The staff has submitted many comments concerning these issues at both the federal and state levels, and the Commission also has reviewed proposed mergers involving electric power and natural gas utility companies.

The comment first suggests that the PSC may wish to ensure that consumers obtain the full benefits of competition by conducting a study of existing market power in the electric power industry, before consumers begin to choose their electric power supplier. If market power is allowed to go unchecked, the staff contends, the result can be higher consumer prices, inefficient allocation of scarce resources, and distortions in consumer choices. Further, competitive wholesale markets are a prerequisite to consumers obtaining the benefits of retail competition.

Next, the comment suggests that the PSC may wish to consider implementing uniform information disclosures, given that West Virginia consumers have not previously had a choice of electric power suppliers. Because advertising does not always provide consumers with all the information they need to make an informed choice, the comment recommends that standardizing some of the information that suppliers disclose to consumers would help them understand the wide variety of price offers, contract terms and environmental claims made - some of which may prove to be confusing, or even misleading. Such standardized disclosures, the staff points out, are currently in place in states including California, Connecticut, Illinois, Maine, Massachusetts, Michigan, Nevada, New Hampshire, Pennsylvania and Vermont, and are "likely to help ensure that consumers receive, prior to purchase, accurate information important to their purchasing decisions."

In implementing the proposed rules that will govern the sharing of customer information between the incumbent company that still controls the transmission and distribution systems and its unregulated power merchant, the staff comment suggests that the PSC consider the relative sensitivity of information about consumers' electric power usage. According to the staff, while it may be reasonable to subject such information to a high level of privacy protection given the monopoly status of local distribution companies, over-protective privacy provisions may unduly limit the marketing of generation services and thereby hinder competition. The PSC may wish to establish a procedure through which an affiliate or a third-party marketer can request certain information from the incumbent electric utility for marketing purposes, depending on the sensitivity of the information requested.

Addressing the Plan's provision that prohibits an incumbent electric utility from participating in joint advertising, marketing, or sales calls, with its unregulated affiliates, the FTC staff suggests that the PSC consider how anticompetitive cross-subsidization -- cost shifting among inputs used for both regulated and unregulated products, such as the use of a corporate logo in marketing the affiliate's as well as the parent utility's products and services -- and the resulting possible consumer confusion, may affect the success of retail competition within the state.

Lastly, the staff comment offered suggestions that the PSC may wish to consider as it implements interconnection standards for distributed energy resources (DER) and emergency service provider requirements.

The Commission vote to file the staff comment was 5-0.

NOTE: The views expressed in the comment represent the views of the staff of the FTC's Bureau's of Economics and Consumer Protection. They are not necessarily the views of the Federal Trade Commission or any individual Commissioner.

Copies of the comment mentioned in this release are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; toll free: 877-FTC-HELP (877-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(FTC Matter No.: V000008)