PUC to Allow Utilities to Serve Own Areas

In a decision that gladdened utilities and disappointed consumer advocates, state regulators decided Tuesday to allow subsidiaries of California’s three largest utilities to market electricity inside their own service territories and give them restricted use of the parents’ names and logos in their marketing.

The long-awaited ruling by the California Public Utilities Commission means that subsidiaries of the parent companies that own Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric can compete for the customers that the parent utilities have long served as monopolies.

The PUC’s Office of Ratepayer Advocates and consumer groups, including Utility Consumers Action Network (UCAN), opposed giving affiliates access to those service areas, warning that utilities would unfairly subsidize them to undercut competitors. Utilities argued that their participation would increase competition and improve service.

Utilities’ power marketing subsidiaries have been targeting customers outside their parents’ service area once choice comes to California’s electric power industry on Jan. 1. But until Tuesday, they didn’t know whether they would have access to their traditional customer bases.

Earlier this month, an example of alleged self-dealing came to light in a PUC-sponsored audit which found that PG&E; had “cross subsidized” its affiliate operations by lending employees, information and cut-rate consulting services worth $33.7 million to the enterprise. PG&E; contested the findings.

Addressing consumer fears, the PUC threatened harsh penalties to prevent “utility ratepayers from subsidizing an affiliate’s operation” and permitted the affiliates’ use of utility logos and names only with prominent disclaimers that the affiliate is a different, unregulated entity from the utility. Penalties for violations will be determined later.

The PUC vote came after two influential commissioners, Jessie Knight and Richard Bilas, dropped a proposal that would have banned utility affiliates from their service areas for at least two years and permanently prohibited the use of utility names and logos. Their proposal, submitted Oct. 31, had the support of the PUC’s ratepayer advocates office.

But both Knight and Bilas withdrew their proposals Tuesday, after hearing comments on their plans, including utilities’ strenuous objections. Knight said he now believes his proposal would be more harmful than protective of consumers.

“This sounds like a total capitulation to the utilities,” said Michael Shames, UCAN’s executive director.

The plan that the PUC adopted Tuesday was put forth by the PUC’s administrative law judge. Members also voted down a proposed decision suggested by Commissioner Greg Conlon that would have allowed utility affiliates into their coverage areas but limited their market share to 20%.

Southern California Edison’s affiliate marketer is called Edison Source and San Diego Gas & Electric’s affiliate, a joint venture with Pacific Enterprises, is called Energy Pacific.

San Diego Gas & Electric Vice President Bill Reed said the decision was “what we were asking for. We were concerned it would exclude us from the market . . . and it looked like [the PUC] was going to favor out of state competitors,” Reed said. “We’re pleased that we will be able to compete on the same basis.”

In agreement were some of the utilities’ competitors. “I feel confident about the fact that the commission is committed to ensuring an open and fair market,” said Julie Blunden, regional director of Green Mountain Energy Resources, a “green energy” marketer based in San Francisco.

But others, including Enron Corp. of Houston said the ruling didn’t go far enough in laying down penalties.

“What this process is about is leveling the playing field, as opposed to giving [utilities] a deregulated monopoly,” said Steve Kean, Enron’s senior vice president for governmental affairs.