June 30, 1999

VIA HAND DELIVERY
Mark W. Musser, Esq., Secretary
Board of Public Utilities
Two Gateway Center
Newark, New Jersey 07102

Re: I/M/O the Energy Master Plan Phase II Proceeding to Investigate the Future Structure of the Electric Power Industry -- Restructuring Proceeding

BPU Docket Nos. EX94120585Y, EO97070457, EO97070460, EO97070463, EO97070466

 

Dear Secretary Musser:

Enclosed for filing please find an original and eleven copies of the comments of the Division of the Ratepayer Advocate ("Ratepayer Advocate") in response to the Secretary's letter, dated June 24, 1999 in the above referenced matter. Please date-stamp the extra copy as "filed" and return it to our messenger. Thank you for your assistance in this matter.

Introduction

On October 5, 1998 the Board of Public Utilities ("Board") issued an Order to begin developing the Third Party Supplier ("TPS") Agreement for the four electric utilities. I/M/O the Energy Master Plan Phase II Proceeding to Investigate the Future Structure of the Electric Power Industry -- Restructuring Proceeding, BPU Docket Nos. EO97070457, EO97070460, EO97070463, EO97070466. The Board ordered the electric utilities to file a proposed form of the TPS Agreement within 45 days of the date of the Order and scheduled a comment period thereafter. The Ratepayer Advocate filed comments on the proposed TPS Agreements on December 10, 1998.

The Board also began a working group process to discuss the proposed TPS Agreements. When the working group was unable to come to a consensus on the form of the agreement and TPS fees, the Board, at its June 16, 1999 agenda meeting, established a schedule for discovery, prefiled testimony and an evidentiary hearing on this matter. Further discussions among some of the members of the working group resulted in a proposed master TPS Agreement and proposed TPS fees. At its June 24, 1999 agenda meeting, the Board suspended the hearing process and ordered interested parties to file comments on the proposed master TPS Agreement and fees. These comments are filed pursuant to the June 24, 1999 Secretary's letter that permitted filing comments by June 30, 1999.

The Ratepayer Advocate would not object to the proposed TPS Agreement and fees as modified herein. Moreover, the Ratepayer Advocate opines that the Board should adopt the following principles in establishing and approving these agreements.

1. The TPS Agreement and fees should be as uniform as possible throughout the State.

2. There should be no fee for providing a customer's twelve months usage history once per calendar year.

3. The TPS Agreement should be adopted as a tariff for each utility as "Standard Terms and Conditions of Service" as opposed to only a contract between the TPS and the utility.

4. The Board should create a tracking mechanism to monitor the costs for which the TPS fees are charged and the revenues the LDCs receive from the fees and from other sources for transition costs (e.g., direct charges to customers and stranded costs recovery). This mechanism should include the LDCs filing quarterly reports to the Board with a copy to the Ratepayer Advocate and TPSs. The format of the reports should be created with the input of the Ratepayer Advocate and the TPSs. The Board should establish an evidentiary hearing process to review the TPS fees after the parties have had one year of actual experience in the workings of the retail market and the effect of the TPS fees on the market. The hearing process should begin on August 1, 2000.

5. There should be no fee for load or usage data or related data for customers who participate in government aggregation efforts.

6. There should be no fee for load data or related data for customers who participate in low-income customer aggregation efforts.

With these modifications, the TPS Agreement/Tariff and fees would help promote healthy competition and expand customer choice in the retail electric market throughout New Jersey.

Structure, Form, and Content of Draft TPS Agreement/Tariff

The TPS Agreement/Tariff should be narrowly tailored to the legal and financial agreements that are necessary between LDCs and TPSs to encourage retail competition. However, the Ratepayer Advocate recognizes that certain interactions with customers must be addressed in the TPS Agreement/Tariff to define the relationship between the TPS and the utility. In order for the Board to retain as much jurisdictional authority as possible to ensure that customers’ rights are protected, especially during the initial period of retail choice in New Jersey, it is important that terms and conditions of service directly pertaining to customers be carefully crafted by the Board, and be implemented through tariff provisions and/or administrative regulations.

Uniformity in Approach is Essential

There are several reasons why it is critical that the terms by which competitive TPSs do business be as uniform as possible across the State. First, uniformity will make it possible for TPSs to participate in the state-wide market more effectively and efficiently. Second, and more importantly, by maximizing the ease with which TPSs are able to participate in the market, the Board will maximize the chance that all consumers will experience the benefits of robust competition among those suppliers. Such benefits might be unattainable if a lack of uniformity in the terms and conditions serves to erect a substantial barrier to entry to the retail marketplace.

Furthermore, publishing the TPS Agreement/Tariff in the utilities' tariffs will promote choice and competition by making it easier for prospective TPSs to find them. They should also be placed on the LDCs' websites for convenience.

The Ratepayer Advocate notes that numerous provisions of the draft TPS Agreement/Tariff are blank and will be filled later with utility-specific sections. Although some information has been discussed in the working groups on some of these provisions, without seeing the exact provisions of these utility-specific sections, it is impossible for the Ratepayer Advocate to comment on them. The Board would presumably have no legal authority to approve them "sight unseen" and obviously should not do so until they have been spelled out with specificity and presented for public review and comment.

Retail Metering Services

Article 14 states that only utility-owned, utility-installed and utility-read meters will be used to determine customer usage. This article should also include the information that within three months of the start of retail competition, the Board will institute a proceeding on allowing the customer to receive customer account services from the TPS instead of the LDC. The customer account services would include metering services. The start date of this review is mandated by section 6 of the "Electric Discount and Energy Competition Act" ("Competition Act") which also requires that the Board issue an order on competitive customer account services not later than one year after the start of retail competition. That section also requires the Board to prohibit the LDCs from taking any actions to unreasonably impede a transition to a competitive customer account market.

Creditworthiness Standards

The Ratepayer Advocate agrees that the creditworthiness standards in Article 7 should be uniform for all LDCs, but recommends that the Board strike the language from that Article that allows the LDC to modify the standards from time to time and the language that the standards contained in Appendix C is "for illustrative purposes." It makes no sense to include Appendix C as the standards "in effect in June, 1999" and also to say that Appendix C is only for illustrative purposes. Without specifying the standards to which the TPS is agreeing when it reads the Agreement/Tariff, no TPS can be sure what standards are actually in effect at that time.

Moreover, since the Agreement/Tariff should be included in the LDC's tariffs, the creditworthiness standards will not be subject to unilateral modification by the LDC. The LDC will have to petition the Board for approval to change this tariff just as it is required by law to do so for any tariff modification. This requirement for Board pre-approval of any tariff changes also applies to all other parts of the TPS Agreement/Tariff, so that the language in other articles that contemplate unilateral changes by the LDC will also have to be stricken. Although a dispute over the New Jersey creditworthiness standards would be ultimately decided by the Board according to Article 7, this is not sufficient to protect a TPS in the interval between the dispute and ultimate Board resolution. It also violates existing law requiring Board approval of tariff changes.

Article 17 contemplates some undefined informal dispute resolution process for LDCs and TPSs. The TPS Agreement/Tariff should provide for the availability of an alternative dispute resolution process at the Board for such disputes. This would reduce some of the time and expense needed to come to a satisfactory conclusion to the dispute and will promote the competitive marketplace.

FERC Jurisdiction Issues

By incorporating the terms and conditions that LDCs and TPSs must comply with for retail competition in New Jersey into the LDCs’ tariff, the Board may avoid pre-emption of its jurisdiction by the Federal Energy Regulatory Commission ("FERC") under the Federal Power Act ("FPA") over certain aspects of the subject terms and conditions. The draft TPS Agreement/Tariff warns that inclusion of certain issues in the Agreement/Tariff that are under the jurisdiction of the FERC are "intended solely for informational purposes and is not intended to accord any jurisdictional authority over such matters to the Board." (Article 19.3) The Board may be able to steer clear of any possible jurisdictional entanglements by addressing the terms and conditions of service through retail tariffs, rather than solely through these contracts. In this way, the Board would not have to be concerned that it would "lose" jurisdiction over terms and conditions of retail competition through their inclusion in contract parts which may be subject to the FERC’s jurisdiction. Many of the issues contained in the draft TPS Agreement/Tariff pertain to relationships with customers and otherwise exist entirely within the context defining the retail market in New Jersey. Furthermore, at the end of this Article 19.3, the LDC pledges to "use reasonable efforts to secure, from time to time, all appropriate orders, approvals and determinations from the FERC necessary to support this Agreement."

Fees

The Ratepayer Advocate is concerned that the imposition of excessive or duplicative fees on TPSs may negatively impact retail competition at its very start. It would also be contrary to the Competition Act for such fees to become a barrier to entry into the New Jersey electric marketplace, thereby depriving New Jersey customers of the benefits that a robust competition among energy suppliers would bring.

The Ratepayer Advocate notes that the derivation of the fees proposed by the four LDCs has been reached by compromise and negotiation between the LDCs and the TPSs. In addition, it appears that the TPS representatives who actively participated in the discussions over the fees have either agreed to them or will not object to them (e.g., June 23 letter from Martin C. Rothfelder, attorney for the Mid-Atlantic Power Supply Association ("MAPSA").

The Ratepayer Advocate would not object to the imposition of the proposed TPS fees (as further conditioned herein) as enumerated in the utility-specific Appendix E to be attached to each TPS Agreement/Tariff for one year, subject to a later proceeding to commence no later than August 1, 2000, including evidentiary hearings, in which the LDCs provide financial data to support the fees and in which the burden of proof as to the need for the fees and the reasonableness of them rests on the LDCs. The Ratepayer Advocate would, of course, be a statutory party to that proceeding in which other interested parties could also intervene. Our office proposes this solution so as not to delay the August 1, 1999 start of retail competition.

This proceeding, to commence no later than August 1, 2000, would review all the LDCs proposed costs for these TPS services and would also include a review of any transition costs that the Board has approved, or will in the future approve, for collection from customers and TPSs in the utilities' specific restructuring, stranded costs and unbundled rates dockets. It is necessary to review these latter charges as well to insure there is no double recovery of fees in the TPS Agreement/Tariff and the transition costs charges that the Board has approved or may approve in the utilities' specific restructuring, stranded costs and unbundled rates dockets.

This review proceeding would also insure that the fees are entirely cost-based, reasonably necessary, and not already covered by revenues that have been included in the utilities' base rates. The review of the fees would necessarily consider whether the utilities are already earning a reasonable rate of return without imposition of new fees subsequent to the last base rate cases. Utilities that are already earning a reasonable rate of return or are overearning even without these fees would obviously not need to add revenues from these fees since that would then contribute to overearning.

Approval of these fees should also be conditioned on the creation of a tracking mechanism to monitor the costs for which the TPS fees are charged and the revenues the LDCs receive from the fees and from other sources, including for transition costs (e.g., direct charges to customers and stranded costs recovery). This mechanism should include the LDCs filing quarterly reports to the Board with a copy to the Ratepayer Advocate and TPSs. The format of the reports should be created by Board Staff with the input of the Ratepayer Advocate and the TPSs.

Though the Ratepayer Advocate does not generally object to these fees subject to later review, our position is partly based on an appreciation that the fees would be for uniform services among the four LDCs and would be uniformly charged. That way, a TPS will not be unduly influenced to stay out of a particular LDC's service territory because that LDC charges a fee for a service that other LDCs do not charge.

For example, GPU Energy's Appendix E offers to provide a customer's load information for no charge once per calendar year. This would help facilitate retail competition. The Appendix E for Public Service Electric & Gas Company ("PSE&G") and for Rockland Electric Company ("Rockland") do not mention a fee for this service. Presumably, if the Board does not specifically approve a set fee for this service, there will be none for those two utilities. However, Atlantic City Electric Company ("ACE") proposes to charge $5 per account per request for up to twelve months of monthly kW and/or kWh data.

The Board should require uniformity in the provision of such basic information as customer usage and load data. If the other three LDCs can provide this data once for free, then it is reasonable to require ACE to do so as well. Allowing ACE to charge this fee for data that is so inherent in the ability of customers to choose an electricity supplier other than a utility would serve only to discourage customer choice, especially for smaller usage residential and commercial customers.

Government Aggregation and Low-income Customer Aggregation Load Data

Furthermore, as the Ratepayer Advocate has already proposed in other filings with the Board, the Board should not permit any fee to receive load data, usage data, or related information for customers who participate in government aggregation efforts or in low-income customer aggregation efforts. These customers are least likely to enjoy the benefits of retail competition unless the Board helps to ease the barriers to aggregating their loads and making them more attractive to serve.

Other Fees

Also, ACE includes a $25 fee for an unscheduled meter read which the other three utilities do not mention in their Appendix E. For the same uniformity reasons discussed above, the Board should not allow this proposed fee. Further, ACE already has a $15 fee to customers for special meter readings in its current tariffs (Rate Schedule CHG, Original Sheet No. 5B). It is unclear whether the proposed $25 fee would be charged to a TPS or customer and what the basis is for increasing this fee to $25. Therefore, the proposed $25 fee should not be allowed. Also, GPU Energy, PSE&G and Rockland include in their General Supplier Administrative fee the provision of five "free" hours of coordination services. ACE's Appendix E does not mention a similar provision. For the same reasons above, ACE should also be required to include the same number of "free" hours of coordination services as the other three utilities will provide.

Appendix E for all LDCs contain a provision to allow the LDC to petition the Board for higher or additional fees on or after August 1, 2000. Based on discussions in the TPS working group, the Ratepayer Advocate understands that there is also a proposal to allow deferred accounting for ACE and Rockland for "coordination expenses" that are underrecovered by the currently proposed fees. The deferred accounting would only be permitted for the first year of the transition period. GPU Energy and PSE&G would not receive deferred accounting since their restructuring, stranded costs and unbundled rates cases have been decided, although only summary orders have been issued.

This provision for deferred accounting does not appear in the proposed draft TPS Agreement/Tariff or in the Appendix E for ACE or Rockland. If this is indeed part of the settlement proposal on the TPS Agreement/Tariff and fees, then it must be reduced to writing and be subject to full review and comment of all parties, including the Ratepayer Advocate, before it can be approved. Questions must be answered before approval, such as how will the deferral work, what specific expenses will be subject to deferred accounting, how will the deferred balance be recovered or refunded and from whom, and what revenues from what sources will be contemplated as counting against the deferred balance? Such a review would necessarily include the utilities' overall expenses and revenues. Without any details on this proposal, or even any mention of it in the proposed TPS Agreement/Tariff, the Board would have no authority to approve it. Moreover, if the Board does not approve the August 2000 proceeding proposed by the Ratepayer Advocate to review the TPS Agreement/Tariff and related fees, then the Board should also not approve any deferred accounting for these fees.

CONCLUSION

The Ratepayer Advocate respectfully urges the Board to adopt the above amendments to the draft TPS Agreement/Tariff and to adopt the proposed fee schedule with the few necessary uniformity modifications discussed above, subject to (1) the tracking and quarterly report process to be developed; and (2) the more detailed review and an evidentiary hearing process to begin in August 2000 after one year of actual experience. The Ratepayer Advocate makes these recommendations mindful that the time for further review is limited at the present since the August 1, 1999 start of retail competition is almost at hand. The TPS Agreement/Tariff and fees should be adopted as tariffs by each electric utility and should be as uniform as possible to encourage vigorous competition throughout all geographic areas of New Jersey.

Very truly yours,

BLOSSOM A. PERETZ, ESQ., RATEPAYER ADVOCATE
N.J. DIVISION OF THE RATEPAYER ADVOCATE

By: __________________________

Badrhn M. Ubushin, Esq.
Deputy Ratepayer Advocate

c: President Herbert H. Tate, Jr.
Commissioner Carmen J. Armenti

Commissioner Frederick F. Butler
Elizabeth Murray, Chief of Staff
Dr. Fred S. Grygiel, Chief Economist
Robert Chilton, Director - Energy
George Riepe, Assistant Director - Energy

Service list attached

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