January 18, 2000

BY HAND

Mark W. Musser, Esq.
Secretary
New Jersey Board of Public Utilities
Two Gateway Center - 8th Floor
Newark, New Jersey 07102

Re: Aggregation

Dear Secretary Musser:

At the Board’s January 10, 2000 agenda meeting Commissioner Armenti raised concerns about whether the privacy provisions of the Electric Discount and Energy Competition Act (the "Act") are an impediment to aggregation. Specifically, Commissioner Armenti expressed concerns as to whether the privacy provisions, which appear in section 36(b) of the Act, prohibit utilities from providing aggregators with customer names and addresses, and, if so, whether anything can be done by the Board to address this problem. President Tate suggested that these issues be scheduled for discussion at the Board’s next agenda meeting, on January 19, 2000. This letter is to provide the Ratepayer Advocate’s comments on the importance of aggregation, especially for smaller residential and commercial consumers, and to suggests measures that the Board could pursue to encourage aggregation in New Jersey.

The Importance of Aggregation.

As States across the country have gained experience with electric and gas competition, the power of aggregation has become increasingly apparent. Larger consumers have been quick to recognize the advantages of purchasing in groups. The following are just a few of the many aggregation initiatives that have occurred in other states:

In Massachusetts, a group of non-profit organizations has formed a group to aggregate its members’ electric and gas loads. This group was organized in 1996, and currently has approximately 650 members.

In California, several groups have been formed to aggregate their energy purchases, including State universities and colleges, federal military facilities, and associations of building owners and retailers.

In North Carolina, counties, municipalities and school boards have formed a Local Government Energy Savings Organization to aggregate their energy needs.

In Pennsylvania, organized buying groups include a consortium of several pre-energy choice buying groups involving non-profit and public entities, which has recently banded together with a group of for-profit entities.

In our own State, the New Jersey School Boards Association has formed a group to reduce energy costs for schools.

Aggregation is even more important for smaller consumers, who do not have the high usage levels and load profiles that are attractive to third party suppliers. In order to realize the full benefits of the competitive market, these customers will have to purchase energy in groups.

The importance of aggregation for smaller consumers has been recognized in other states. Many states, including California, Connecticut, Maine, Massachusetts, New Hampshire and Pennsylvania, have enacted legislation authorizing aggregation of smaller consumers by government units, private aggregators or both. Municipal aggregation initiatives have been undertaken in other states including Massachusetts, Pennsylvania, and Ohio. In Pennsylvania, for example, a supplier is working with municipal governments to aggregate residential consumers. "Marketing the Commonweal," E³--Timely Issues About Pennsylvania’s Environment, Energy and Economy, Vol. 2, No. 1 (Jan 12, 2000) (copy attached). Several States have undertaken aggregation initiatives to achieve savings for their most vulnerable customers, those who have difficulty paying their energy bills. Aggregation initiatives to benefit low-income consumers have included the following:

Vermont, in November 1999, received a grant from the United States Department of Health and Human Services to fund development of a "Consumerco," a not-for-profit buyers’ cooperative offering comprehensive energy services to all consumers regardless of income.

In New York, Chautauqua and Erie Counties have aggregated 8,000 low-income customers of National Fuel Gas.

Columbia Gas Company has implemented an aggregation project for its low-income consumers in Pennsylvania.

The Ohio Commission in 1998 directed three of its gas utilities with unbundling programs to issue requests for proposals to provide gas supply service to their Percentage of Income Payment Plan ("PIPP") customers on an aggregated basis. In the Matter of Commission’s Investigation of the Customer Choice Program of Columbia Gas of Ohio, Case Nos. 98-593-GA-COL et al. Finding and Order at 24-26 (June 18, 1999). The Ohio Order required the utilities to request bids based on alternative forms of pricing other than straight percentage discounts. Id. at 25-26. The recently enacted Ohio energy affirms the soundness of this approach by authorizing the Director of Development in the Ohio State Treasury to aggregate low-income electric consumers. Am. Sub. S.B. No. 3, 123rd General Assembly, § 4928.54 (1999).

The Ratepayer Advocate is in agreement with Commissioner Armenti that the New Jersey Legislature, by specifically authorizing both government and private aggregation, intended these same benefits to be available to New Jersey consumers.

The need for aggregation is also clear. According to the most recent reports from the Board, as of December 31, 1999, only 9,603 residential customers and 10,492 non-residential New Jersey customers had selected an alternative electricity supplier. Aggregation is also required to encourage a vibrant natural gas marketplace, especially for residential customers of Public Service Electric and Gas Company, which had unsuccessful residential pilot programs, and Elizabethtown Gas Company, which had no residential pilot. Clearly, effective aggregation programs will be required to bring the benefits and opportunities of energy competition to all New Jersey consumers.

Interpretation of Privacy Provisions.

The privacy provisions of the Act do not appear in a vacuum. They are part of legislation that contemplates both private and government aggregation. The terms "private aggregator" and "government aggregator" are both defined in section 3 of the Act, and specific provisions applicable to each appear in sections 40 through 45 of the Act. Sections 40(a) and 41 of the Act provide for registration of private aggregators and set forth registration and other requirements applicable to private aggregators. Sections 40 and 42 through 45 of the Act specifically authorize government aggregation, and set forth detailed provisions for both "opt in" and "opt out" aggregations. These provisions would not have been included in the Act unless the Legislature had intended for New Jersey’s energy consumers, including residential and small commercial consumers, to have the benefits of aggregation.

The privacy provisions of the Act have only limited scope, and need not pose a serious obstacle to the implementation of effective aggregation programs for smaller customers. Under section 36(b) of the Act:

An electric power supplier, a gas supplier, an electric public utility, and a gas public utility shall not disclose, sell or transfer individual proprietary information, including, but not limited to, a customer’s name, address, telephone number, energy usage, and electric power payment history, to a third party without the written consent of the customer.

This provision applies only to detailed "individual" information concerning an individual customer, not the name and address lists and usage information requested by aggregators. Based on the language quoted above, this provision was intended to address the privacy concerns that would arise if utilities were to provide, upon request, an individual customer’s "name, address, telephone number, energy usage, and electric power payment history," to perhaps a credit agency. Similar concerns are not raised by the disclosure of simple lists of customer names, addresses and energy usage for purposes of implementation of the Act . As every consumer knows, customer lists are routinely sold by a variety of commercial and non-profit entities.

The disclosure of customer list to aggregators would not violate customers’ privacy, it would merely help them to achieve the benefits that are specifically provided by the Act. As noted, the Act specifically provides authorizes government and private aggregation, and provides for registration of private aggregators. Clearly, the section 36(b) of the Act was not intended to prohibit aggregators from obtaining the information they need to aggregate customers. The Board has already issued detailed regulations concerning both government aggregation programs, and the registration of private aggregators. The Board can exercise its regulatory authority over both government and private aggregators to prohibit them from using or disclosing the information for purposes other than aggregation.

Further, as noted in the comments filed by the Ratepayer Advocate in connection with the recent Verified Petition filed with the Board by Monroe Township (BPU Dkt. No. EC00010009), if section 36(b) is interpreted to prohibit aggregators from obtaining customer lists, this would directly contradict the Act’s government aggregation provisions. Under both the "opt-in" and "opt-out" models, government aggregators are specifically required to give notice to all customers within the aggregation group. Act, §§ 44(a) and 45(a)(2). As is apparent from the Monroe Township petition, the utility is the only available source for the complete list of consumers that is necessary to comply with these notification requirements. If section 36(b) is read to prohibit disclosure of this information to government aggregators, the Act’s detailed provisions authorizing government aggregation will be rendered a nullity.

The Act also places no restrictions on the provision of usage and other data on an aggregated basis. This is important because aggregated buying groups can be formed by a variety of means, such as, for example, residents of a senior citizen community, by employees of one or more corporations, or through a non-profit affinity group. Section 36(b) of the Act places no restriction on the provision of aggregated usage data for an already-identified group of consumers. Similarly, this provision would not apply to a request for aggregated usage data requested by an aggregator for a group of customers identified by geographic area, customer class, or other identifying characteristic. There is also no restriction on providing data to consumers. The utilities should provide this information routinely, such as the usage data that already appears on some utilities’ consumer bills. Conveniently available usage data would facilitate efforts to aggregate smaller consumers.

In short, if we are to read the Act as a whole, section 36(b) of the Act can apply only to a limited category of disclosures of individualized customer information that could be used for purposes other than energy aggregation. This limited constraint need not seriously impede the implementation of aggregation initiatives in this State.

Encouragement of Aggregation.

Aggregation can be accomplished through a variety of approaches, which are limited only by the imagination of those who devise and implement them. The attached article from Pennsylvania discusses four different aggregation models that have emerged in that State alone. "Marketing the Commonweal," E³--Timely Issues About Pennsylvania’s Environment, Energy and Economy, Vol. 2, No. 1 (Jan 12, 2000) (copy attached). Again, Pennsylvania leads the state in pro-consumer initiatives. The Board can facilitate the implementation of aggregation programs in New Jersey by encouraging the utilities and other stakeholders to develop innovative proposals to facilitate aggregation which are consistent with the Act, as well as the market conditions that exist in this State’s emerging electric and natural gas marketplaces.

The Stipulations recently approved by the Board in the natural gas unbundling proceedings provide means to initiate this process. Under the Board-approved Stipulations, the four natural gas utilities will soon be submitting their proposals for providing data to government and private aggregators. These proposals will undoubtedly include a variety of ideas for facilitating aggregation for smaller customers. The Ratepayer Advocate anticipates that gas utilities’ proposals for a Universal Service Fund, also required by the Board-approved unbundling Stipulations, will include proposals for aggregating low-income customers. The utilities should be encouraged to submit proposals which include a variety of ideas for facilitating aggregation, including low-income aggregation.

CONCLUSION

The New Jersey Legislature clearly intended for New Jersey’ residential and small commercial consumers to realize the benefits of competition by buying energy in aggregated groups. The privacy provision of the Act establishes a limited constraint on the disclosure of individual information, and was not intended to prohibit aggregators from obtaining the information they need to aggregate consumers. It does not place any restriction on providing aggregated usage data which may be needed by already-identified aggregation groups, nor does it prohibit providing any data to consumers. This limited provision should not be an obstacle to the implementation of effective aggregation programs. The Board can facilitate this process by encouraging the utilities to develop innovative proposals, and by working with the utilities and other stakeholders to assist in their implementation.

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