FTC Staff Comment Before the Public Service Commission of West Virginia Concerning Restructuring the Electric Utility Industry in West Virginia

UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580
Before the
PUBLIC SERVICE COMMISSION OF WEST VIRGINIA,CHARLESTON
In the matter of a Proposed Rulemaking
Related to Restructuring the Electric Utility
Industry in West Virginia
Comment of the Staff of the
Bureaus of Economics and Consumer Protection
of the Federal Trade Commission(1) (2)
General Order No. 255
May 19, 2000
I. Introduction and Summary
The staff of the Bureaus of Economics and Consumer Protection of the Federal Trade Commission (FTC) submits
this comment in the above-captioned proceeding concerning restructuring the electric utility industry in West Virginia.
With this proceeding and associated recent legislation, West Virginia is joining a growing list of states that are
establishing regulatory reforms to bring the benefits of increased competition (lower prices, improved service, and
innovation) in the electric power industry to their citizens and businesses.
The FTC is an independent administrative agency responsible for maintaining competition and safeguarding the
interests of consumers. The staff of the FTC often analyzes regulatory or legislative proposals that may affect
competition or the efficiency of the economy. In the course of this work, as well as in antitrust research, investigation,
and litigation, the staff applies established principles and recent developments in economic theory and empirical
analysis to competition issues.
The staff of 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 numerous comments
concerning these issues at both the federal and state levels.(3) Moreover, the FTC has reviewed proposed mergers
involving electric power and natural gas utility companies.
The West Virginia Public Service Commission (PSC) has identified several areas where it will be necessary to
promulgate rules pursuant to the PSC's Restructuring Plan (which was adopted into law by the West Virginia
Legislature on March 11, 2000 (the Plan)) before customers can begin to select their electricity supplier on January 1,
2001. The PSC also requests recommendations as to whether additional rules, other than the areas identified, may
be necessary. This 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 (pursuant to its transition authority (Plan, Section 22))
before consumers begin to choose their electric power supplier. In addition, the comment suggests that the PSC may
wish to consider implementing standardized information disclosures given that consumers have not previously had a
choice of electric power suppliers. The PSC also may wish to consider further the effects on competition of an
affiliate's use of an incumbent electric utility's name and logo, as it implements the Plan's marketing provisions, and
ways to protect consumer privacy without dampening incentives for entrants to market to consumers. The comment

also provides suggestions the PSC may wish to consider as it implements interconnection standards for distributed
energy resources and emergency service provider requirements.
II. The PSC May Wish to Examine Whether Competition Is Workable Prior to
Opening the Retail Electricity Market to Competition
Section 22 of the Plan provides the PSC with the authority to determine whether there is "workable competition" in
the provision of retail electric service prior to lifting price caps on the cost of power supply.(4) The FTC recently noted
the importance of addressing existing market power to ensure that the benefits of competition flow to consumers (i.e.,
"workable competition") when it provided its views to Chairman Thomas E. Bliley, United States House of
Representatives, Committee on Commerce, on the Electricity Competition and Reliability Act, H.R. 2944. The
Commission recognized:
[T]raditional antitrust analysis recognizes that the benefits of competition are most likely to accrue to consumers when
markets operate unburdened by substantial and durable market power. Accordingly, economically practicable policies
that lessen existing market power in electric power markets by broadening product markets, expanding geographic
markets, and lowering entry barriers are likely to enhance consumer welfare. This is particularly true where high
concentrations of ownership of generation may allow the exercise of market power even after competition is first
introduced in wholesale and retail markets.(5) In light of this possible situation, tools to identify and remedy horizontal
market power in generation are critical to increased competition in electric power markets. . . .
[O]utside the merger context, concerns with horizontal market power focus on the possibility that one or a few
generating firms might obtain and be able to exploit market dominance in areas of the country where transmission
congestion occasionally creates restricted geographic markets for electric energy (load pockets). Market
concentrations of electric power generation may be high in some areas, in part because state and federal regulators
assumed that rate and service regulation would remain in place indefinitely and thus may have assumed there was
no need for antitrust scrutiny to restrain the growth of horizontal market power. As regulations are relaxed for
generation and retail trades of electricity, however, existing market power in generation may prevent consumers from
realizing the full benefits of competition.
Current antitrust laws are not designed to address the mere possession of market power or the legitimate acquisition
of or increase in market power through lawful regulatory processes. Instead, the antitrust laws are designed to
address increases in market power brought about by mergers or unfair methods of competition, such as predation,
discrimination, and raising rivals' costs.(6)
Examining whether market power can be exercised prior to the start of retail competition may be instructive in
determining whether customers in West Virginia are likely to receive the full benefits of competition. If market power is
allowed to go unchecked, it can result in 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. FTC staff recently submitted a comment to the Arkansas Public Service
Commission evaluating its proposal to examine existing market power at the wholesale and retail levels; that
comment may be of interest if the PSC determines to assess existing market power.(7)
III. Standardized Information Disclosure Requirements Are Likely to Assist
Consumer Choice of Electric Power Suppliers
After restructuring of the electricity industry occurs, advertising will be one of the primary sources from which
consumers obtain information about the products they will choose to purchase. Advertising, however, does not
always provide consumers with all the information they need to make an informed choice. In competitive electricity
markets, consumers are likely to face a wide variety of price offers, contract terms, and environmental or service
claims that may prove to be confusing, difficult to evaluate, or even misleading.

One approach to this problem is to standardize some of the information that suppliers disclose to consumers -- similar
to what has been done with nutrition labeling on food, care labels on clothing, or energy efficiency labels on
appliances. In fact, consumers in an electricity competition pilot project in New Hampshire noted the difficulty of
comparing competing products when suppliers were allowed to present whatever information they chose about the
product in any format they chose.(8) Standardized product labeling can alleviate this common consumer complaint by
ensuring that consumers receive the relevant information they need to make an informed choice.
Various regulatory groups have recommended developing appropriate uniform disclosure requirements as a means
to facilitate customer choice, provide consumer protections, and enhance market efficiency.(9) Laws or regulations
calling for some degree of mandatory uniform disclosures have been enacted in a number of states, including
California, Connecticut, Illinois, Maine, Massachusetts, Michigan, Nevada, New Hampshire, Pennsylvania, and
Vermont.(10) Other states are considering disclosure requirements as well. In addition, various bills introduced in the
United States Congress propose federal disclosure requirements, including the bill supported by the Department of
Energy.(11) Indeed, the FTC has noted that mandatory disclosures are "likely to help ensure that consumers receive,
prior to purchase, accurate information important to their purchasing decisions," and that disclosures should be
uniform to "reduce costs to market participants by enabling them to use one disclosure throughout the country."(12)
Although existing laws and FTC rules prohibiting unfair or deceptive claims would govern electricity advertising,
uniform disclosures would provide an important additional consumer benefit in a new market where consumers have
had no prior experience with choice.
Uniform disclosure, however, raises many issues, including determining which types of information are important to
consumers in choosing a supplier. Information that may be suitable for uniform disclosure includes price, price
variability, environmental attributes of power supply (generation source and emissions characteristics),(13) and
contract terms (minimum length, termination fees, transfer charges, etc.).
Another issue when mandating uniform disclosure rules is the format for disclosure of information. The chosen format
should present information simply and clearly, and take a minimum of time to review and comprehend. A format that
is overly restrictive, or that prohibits any additional claims elsewhere in the advertisement, may place unconventional
or innovative products at a competitive disadvantage. California currently requires environmental disclosures using a
standard label format, and the NECPUC Model Rule includes a sample label format.(14)
If disclosures are standardized, the PSC must confront whether they will be mandatory (required of all marketers
regardless of claims made) or claims-based (required of marketers only when certain claims are made). One
consumer study suggests that when standard disclosures are provided by all marketers, consumers are more likely
(1) to think they had adequate information to make a choice, (2) to correctly identify the lowest priced product among
several samples, and (3) to correctly identify the product with the least environmental impact among sample
products.(15) If disclosures are mandatory, the PSC may wish to consider allowing suppliers to use a "default" label,
and to determine the default label's content.(16) Another consideration is the placement of standardized disclosures -
- that is, whether they must appear only in advertising that gives consumers the opportunity to select a competing
supplier, or in all print advertising, or whether some alternative form of disclosures should appear in small-format print
advertising and in non-print media.(17)
Each of these issues relating to label format and content raises cost concerns as well. Mandatory disclosure
requirements will impose some level of costs on companies subject to them. The cost of tracking and maintaining the
data necessary for the disclosure will vary depending on the type of information mandated and the degree of
precision required for the information disclosed. It is likely that these costs, as well as the actual costs of making the
disclosures, will be passed on to consumers. Therefore, the cost of requiring disclosures should be weighed against
the benefit when deciding which items of information to include and what manner of disclosure to require.
IV. Code of Conduct Provisions Can Enhance Retail Competition

Section 17 of the Plan sets forth minimum provisions that are to be included in a code of conduct that governs the
relationship between an incumbent electric utility (which will continue to control the utility's transmission and
distribution system) and its unregulated affiliates offering electric power supply services. For example, an incumbent
electric utility is prohibited from providing an affiliate any undue preference over a non-affiliate, and from
discriminating against a non-affiliate in various ways. The Plan also prohibits incumbents from cross-subsidizing
unregulated affiliates and from tying unregulated products and services to an incumbent's regulated services. The
PSC may wish to consider two specific issues in order to implement the code of conduct in a procompetitive manner.
A. Restriction on the Sharing of Customer Information
The Plan prohibits an incumbent electric utility from disclosing to any affiliated electric energy supplier or unaffiliated
electric energy supplier, any information, including customer load and usage information, obtained as a result of its
role in providing retail electric distribution service, unless the customer so requests.(18) This requirement provides a
high degree of privacy protection to a customer's information and requires customers to "opt in" to the sharing of their
information with affiliated and unaffiliated electric power marketers.
The PSC may wish to consider the relative sensitivity of information about consumers' electric power usage in
determining how to implement this requirement. There may be reasons to subject such information to a high level of
privacy protection given the monopoly status of local distribution companies (that is, consumers will not have a choice
of local distribution company from which to purchase electric power generation services). On the other hand, there
may be instances where over-protective privacy provisions unduly limit marketing of generation services and thereby
hinder competition. For example, access to such information could allow marketers to target their marketing efforts
efficiently in an industry with high costs to acquire new customers.
The PSC may wish to consider establishing a procedure through which an affiliate or a third-party marketer can
request certain information from the incumbent electric utility for marketing purposes, depending upon the sensitivity
of the information requested. If that request were granted, all other licensed marketers would be notified, either by the
incumbent or by the requesting party, to ensure non-discriminatory sharing of information.
B. Affiliate Use of the Incumbent's Name and Logo
The Plan also prohibits an incumbent electric utility from participating in joint advertising, joint marketing, joint sales
calls, or joint proposals with its affiliates.(19) As part of implementing this provision, the PSC may wish to consider
how an affiliate's use of the name and logo of the incumbent utility may affect the success of retail competition in
West Virginia in light of possible anticompetitive cross-subsidization and consumer confusion.
First, the relationship between a regulated utility and its unregulated affiliates may create a competitive advantage for
affiliates of the incumbent utility, in light of possible cross-subsidization. For example, cross-subsidization could take
the form of cost-shifting among inputs used for both regulated and unregulated products, such as the use of a
corporate logo in marketing the affiliate's products and services as well as the regulated parent utility's products and
services. Costs of shared inputs could be assigned in a biased manner (i.e., with additional costs assigned to the
regulated side of the business) so that the regulated entity could justify higher rates. Such a biased assignment of
costs, which is often difficult for regulators to detect and remedy, distorts competition and produces inefficiencies in
the unregulated business as well.
The risk of failing to detect anticompetitive cross-subsidization is heightened if (1) the reputation of the regulated
parent utility is effectively embodied or represented by its logo; (2) the regulated parent firm can improve its
reputation by incurring costs of the type that regulators would traditionally include in the rate base of the regulated
firm; and (3) the unregulated affiliate can enhance its own reputation among consumers by using the logo of the
regulated parent firm, even if elements of the regulated firm's reputation do not apply to the affiliate. When these
factors are present, a regulated incumbent will have a heightened incentive to overinvest in reputation-building
because it can expect to incorporate a greater share of these investments into its rate base than if the assets were

not shared with the affiliate. Moreover, the affiliate would realize additional profits from its increased sales in the
unregulated market. The principal obstacle to deterring this conduct is that it may be extraordinarily difficult to
distinguish competitive from anticompetitive levels of investment in reputation-building. Harm to competition and
consumers may result from such overinvestment and subsequent cross-subsidization.
Harm to competition may occur because the unregulated affiliate's access to the logo of its regulated parent gives it a
cost advantage through potential cross-subsidization that otherwise equally efficient competitors cannot match. The
anticompetitive results may include (1) higher-than-necessary average operating (i.e., non-logo-related) costs for the
industry and higher prices for consumers due to the continued operation of the affiliate, which can survive with higher-
than-necessary costs due to the cross-subsidization; (2) greater market concentration and less competition than
would occur absent the cross-subsidization;(20) and (3) discouragement of potential entry that likely would have
occurred absent the cross-subsidization, including entry involving innovative products and production processes.
Second, consumers may be deceived by the fact that an affiliate has a name very similar - and a logo identical -- to
those of the incumbent, when in fact the affiliate is a firm separate from the incumbent. For example, an element of a
parent firm's reputation might be the credibility of its pledges of high-quality services that are backed by the parent's
financial stability as a government-franchised monopoly. If a consumer imputed this same credibility to an affiliate's
promises of high-quality service because of its use of the parent's logo and similar-sounding name, when in fact the
affiliate did not have access to the revenues of the monopoly, the consumer could be injured if the affiliate were
unable to fulfill its promises in the way the consumer expected. Under such circumstances, the use of the logo by the
unregulated affiliate could harm consumers and competition in much the same way as deceptive advertising.
At the FTC Public Workshop on Market Power and Consumer Protection Issues Involved with Encouraging
Competition in the U.S. Electric Industry, the Commission heard testimonial evidence of consumer confusion when an
affiliate of the incumbent utility used a name and logo similar to those of the incumbent utility.(21) Indeed, even the
use of disclaimers that described the relationship, or lack thereof, between the incumbent and the affiliate did not
clarify consumers' misimpressions about the relationship between the incumbent and the utility. The risk of consumer
deception in West Virginia is heightened by the fact that the Plan includes detailed information on separating the
operations of an incumbent electric utility and its affiliates, such that even the use of the term "affiliate of the electric
utility" in this circumstance may mislead consumers. On the other hand, simply prohibiting affiliate use of the
incumbent utility's name and logo may not solve the problem either, because affiliates can still choose a name that is
similar to the prohibited one.(22)
As an alternative to the prohibition of an affiliate's using the name and logo of the incumbent utility, the PSC may wish
to require the affiliate (and any other firms granted the right to use the logo) to pay the parent for the right to use the
logo.(23) Because the logo is an asset, use of the logo by other firms, including affiliates, represents an asset transfer
from the parent firm, and the PSC may wish to treat it like other asset transfers.(24) To avoid cross-subsidization in
such a transaction, the use of the parent logo must be fairly valued, or determined by competitive bidding.(25)
V. DER Interconnection to the Transmission and Distribution Grid
Section 6 of the Plan requires the PSC to establish grid interconnection standards not only to ensure distribution
safety and reliability, but also to prevent barriers to new technology. One such new technology is distributed energy
resources (DER), which the PSC has recognized as holding significant promise to benefit both consumers who use it
and consumers who elect to continue to rely exclusively on power from the transmission and distribution (T&D)
grid.(26) Indeed, the Commission has noted that DER "has the potential to provide an alternative to the monopoly
transmission and distribution facilities of a public utility."(27)
The competitive concern is that incumbent utilities have the incentive, and may have the ability, to manipulate grid
interconnection standards in order to raise the connection and operating costs of DER facilities located on the
customer side of the meter.(28) Incumbent utilities are likely to have these incentives because DER is a substitute
both for electric power generation services and for T&D services. For these reasons, interconnection rules should

minimize or eliminate the discretion that incumbents may have to increase the costs, risks, and lags associated with
connecting DER facilities to the T&D grid and with subsequently operating them.(29)
To maximize the benefits of DER to consumers, the PSC may wish to provide a regulatory setting as neutral as
possible so that DER can be tested fairly by the market in competition with other forms of generation, transmission,
and distribution. This may require establishing rules or procedures for interconnection that prohibit discrimination
against DER by incumbent, regulated distribution (and transmission) companies. Incumbent utilities are likely to have
incentives to discourage diffusion of DER beyond their own use of such units. In considering such interconnection
rules, the PSC may wish to balance the need for system reliability and safety(30) with rules and procedures that are
no more restrictive than necessary for these purposes, and also to avoid giving incumbent generation and T&D
suppliers substantial discretion to discriminate against use of DER by customers, entrants, and marketers.
Another element in providing a fair market test for DER technologies is to facilitate entry and diffusion of
complementary technologies. In particular, the economic viability of DER technologies often rests on the ability to
obtain and react to accurate and timely electric power price information.(31) Typically, this means access to time-of-
day metering. To ensure a successful fair market test, the PSC may wish to remove any regulatory impediments to
obtaining time-of-day metering for customers contemplating DER investments.
In crafting these rules, the PSC may wish to coordinate with other states in the region and across the country in
adopting DER interconnection standards. State-by-state differences in DER interconnection rules may themselves
raise the costs and undermine the viability of DER. A number of other states are considering interconnection
standards, as are professional societies.(32) To promote efficient uniformity among state rules, the PSC may wish to
announce that it is expecting to incorporate national interconnection standards (when they are completed) into its own
standards, even if the national standards have not been completed by Janaury 1, 2001.(33)
Lastly, the PSC has asked whether ownership of DER assets by incumbent utilities is appropriate.(34) This question
raises the same discriminatory access issues discussed in FERC Order Nos. 888, 889, and 2000. The record is
compelling that behavioral rules often are not adequate to prevent discriminatory conduct (or the appearance of
discriminatory conduct that also increases the perceived risk of investing). Structural remedies are likely to be more
effective. The PSC, however, has allowed distribution utilities to continue to own substantial generation assets in
other contexts.
The PSC may wish to determine whether ownership of DER investments by the regulated distribution utility creates
unique incentives or means to raise costs of DER connections on the customer side of the meter. If there are such
unique incentives or abilities, then specific prohibitions against DER investments by incumbents may be appropriate.
If not, then additional restrictions may not provide any relief from incentives to discriminate.(35)
VI. Emergency Service Rules to Provide Power to a Customer Whose Supplier Exits
The PSC requests comment on the rules it should establish to provide protection to consumers and emergency
service providers in the event a supplier defaults or fails to deliver. In the event a consumer's designated supplier
fails, assuming the consumer remains connected to the grid,(36) it is preferable to have the backup or alternative
suppliers designated in advance. Depending upon the method used to select a backup supplier, the consumer may
face higher than expected prices and/or the backup supplier may not be that consumer's preferred alternative
supplier. For example, a consumer who has selected a "green" supplier may be concerned that an arbitrarily selected
alternative supplier is less environmentally oriented than other available alternative suppliers.
There are a range of methods to select a backup supplier, including (1) conditioning supplier licenses or certifications
on the supplier's having a suitable backup plan, (2) implementing bonding requirements for suppliers, (3) having the
independent transmission grid operator or distribution company provide backup services, (4) soliciting bids for the
service, (5) requiring the consumer to select the backup supplier,(37) or (6) allowing the PSC to designate the default

provider. The backup supplier would be obliged to supply power to the consumer in the event the consumer's existing
supplier exits.
Regardless of the option chosen, designation as the alternative supplier may impose costs on the alternative supplier
in terms of acquiring the generation contracts of the failed supplier or maintaining additional reserves.(38) Thus, the
provision of insurance in the form of "emergency supply" would carry a charge. One policy to minimize these charges
would be for the state to allow competition for the alternative supplier designations as well as for the primary supplier
designation.(39)
VII. Conclusion
The benefits of competition in the electric power industry may be realized sooner if the PSC conducts a study of
existing market power and implements standardized information disclosures before consumers begin to choose their
electric power supplier. As it implements the Plan's prohibition on joint marketing, the PSC may wish to consider the
competitive implications of restricting an affiliate's use of an incumbent electric utility's name and logo and ways to
protect consumer privacy without dampening incentives for new entrants to compete for customers. The PSC also
may wish to consider certain competition issues as it implements interconnection standards for distributed energy
resources and emergency service provider requirements.
Respectfully submitted,
________________________
Jeremy I. Bulow, Director
John C. Hilke, Electricity Project Coordinator
Bureau of Economics
________________________
Joan Z. Bernstein, Director
Mary K. Engle, Assistant Director, Enforcement Division
Bureau of Consumer Protection
Federal Trade Commission
600 Pennsylvania Ave., N.W.
Washington, D.C. 20580
May 19, 2000
1. This comment represents the views of the staff of the Bureaus of Economics and Consumer Protection of the
Federal Trade Commission. They are not necessarily the views of the Federal Trade Commission or any individual
Commissioner.
2. This comment represents the views of the staff of the Bureaus of Economics and Consumer Protection of the
Federal Trade Commission. They are not necessarily the views of the Federal Trade Commission or any individual
Commissioner. Inquiries regarding this comment should be directed to John C. Hilke (303-844-3565).
3. The staff of the FTC has commented to FERC on electric power regulation in Docket No. RM99-2-000 (regional
transmission organizations) (Aug. 16, 1999); Docket EL99-57-000 (Entergy transco proposal) (May 27, 1999); Docket
RM98-4-000 (Sept. 11, 1998) (merger filing guidelines); Docket No. PL98-5-000 (May 1, 1998) (ISO Policy); Docket
Nos. ER97-237-000 and ER97-1079-000 (New England ISO) (Feb. 6, 1998); Docket No. RM96-6-000 (merger policy)
(May 7, 1996); Docket Nos. RM95-8-000 and RM94-7-001 (open access) (Aug. 7, 1995). The staff of the FTC also
has submitted comments to various state agencies, including the Arkansas Public Service Commission, Docket No.
00-048-R (Apr. 13, 2000) (market power analysis) (Arkansas Market Power Comment); Virginia State Corporation
Commission, Case No. PUE990349 (Feb. 11, 2000) (regional transmission entities); New Mexico Public Regulation

Commission, Utility Case No. 3106 (affiliate codes of conduct) (Dec. 6, 1999); Public Utilities Commission of the State
of California, Docket No. R.98-12-015 (distributed generation) (Mar. 17, 1999) (California Distributed Generation
Comment); Alabama Public Service Commission, Docket No. 26427 (restructuring in general) (Jan. 11, 1999)
(Alabama Competition Comment); Louisiana Public Service Commission, Docket No. U-21453 (affiliate transactions)
(Oct. 30, 1998); Mississippi Public Service Commission, Docket No. 96-UA-389 (Transco proposal) (Aug. 28, 1998);
Louisiana Public Service Commission, Docket No. U-21453 (stranded costs) (Aug. 7, 1998); West Virginia Public
Service Commission, Case No. 98-0452-E-GI (electric restructuring) (July 15, 1998); and Maine Department of the
Attorney General and Public Utilities Commission, "Interim Report on Market Power in Electricity" (May 29, 1998).
The FTC staff comments are available at: <http://www.ftc.gov/be/advofile.shtm>.
4. The Plan provides that price caps will be applied to the unbundled cost of electric power for a transition period. At
the end of the transition period, the price caps will be lifted gradually. Plan, Section 9.
5. In recent testimony to the Subcommittee on Energy and Power, the Commission noted that following
implementation of electric industry restructuring in the United Kingdom, empirical research determined that the two
private generating firms that dominated the industry were exercising market power. These findings prompted
subsequent orders for divestiture of generating capacity in the U.K. In addition, evidence from the initial deregulatory
efforts in California indicates that market power problems in generation also exist there. See Testimony of the Federal
Trade Commission Before the Committee on Commerce, Subcommittee on Energy and Power, United States House
of Representatives, at 8-9 (May 6, 1999) <http://www.ftc.gov/opa/1999/05/electrictes.shtm>.
6. Letter to the Honorable Thomas E. Bliley, Chairman, United States House of Representatives, Committee on
Commerce, regarding the Electricity Competition and Reliability Act, H.R. 2944 (Jan. 14, 2000)
<http://www.ftc.gov/be/v000002.shtm> (Bliley Letter).
7. Arkansas Market Power Comment, supra n. 2.
8. "Information Disclosure for Electricity Sales: Consumer Preferences from Focus Groups," Regulatory Assistance
Project (Mar. 19, 1997) <http://www.rapmaine.org>.
9. The National Association of Attorneys General (NAAG) adopted a resolution in March 1997 supporting "the
establishment of appropriate and adequate consumer safeguards [in] . . . the restructured retail electricity
marketplace," including uniform disclosures in plain language of "price, duration of contract, quantities, and other
material terms." The National Association of Regulatory Utility Commissioners (NARUC) and the New England
Governors' Conference, Inc. also have issued resolutions supporting states' adoption of mandatory, uniform
disclosure standards (NARUC in November 1996 and the Governors' Conference on June 3, 1997).
10. On March 3, 1998, the New England Conference of Public Utility Commissions (NECPUC) issued a Model Rule
on Information Disclosure, intended as "a common starting point for commissions in the region developing information
disclosure policies," based on the belief that "a uniform regional approach is in the public interest." The Model Rule is
available from the Regulatory Assistance Project web page at <www.rapmaine.org/nepage.html>.
11. S. 1047, introduced May 13, 1999 by Sen. Frank Murkowski and referred to the Senate Committee on Energy
and Natural Resources and the House Commerce Committee.
12. Bliley Letter, supra n. 5, at 4.
13. The feasibility of requiring disclosure of fuel source may depend on availability of tracking mechanisms through
which sources of supply may be substantiated and verified. Likewise, reasonably reliable data for emissions must be
available to substantiate any required disclosures. Other questions would be whether fuel source and emissions data
would be based on historical or projected information, and the degree of precision required for such data.

14. Information about the California uniform disclosure and label requirements is available at
<http://www.energy.ca.gov/sb1305/documents/index.html>; the NECPUC proposal is available at
<http://www.rapmaine.org/nepage.html>.
15. "Label Testing: Results of Mall Intercept Study," National Council on Competition and the Electric Industry (April
1998) <eetd.lbl.gov/nationalcouncil/publications.html>.
16. For suppliers that do not wish to incur the expense of maintaining and substantiating information for the label, the
PSC may wish to allow suppliers to report system average information or to indicate that supplier-specific information
is not shown.
17. For example, some contract terms may be more suitable for required disclosure in a contract document, whereas
in advertising, it may be advisable to require that only the one or two most important terms be disclosed.
18. Plan, Section 17(b)(3).
19. Plan, Section 17(b)(12).
20. If entry is difficult or delayed, market share gained through cross-subsidization also may have persistent effects
even after the cross-subsidization has been discontinued.
21. See, e.g.,Testimony during Panel IV: Affiliate Rules and Codes of Conduct, Transcript of Federal Trade
Commission Public Workshop: Market Power and Consumer Protection Issues Involved with Encouraging
Competition in the U.S. Electric Industry (Sept. 14, 1999).
22. We note that one interpretation of Section 17(b)(8)(c), which prohibits an incumbent electric utility or any of its
affiliates from stating or implying that generation services are being provided by the incumbent electric utility rather
than the affiliated electric energy supplier, could be to prohibit an affiliate from using the exact name of the
incumbent.
23. Payments to the incumbent utility for use of its logo could reduce prices for distribution services by substituting for
revenues that the firm otherwise would be authorized to collect through distribution charges.
24. In some situations, firms may sell the right to use a logo to independent entities, contingent upon conditions and
restrictions placed on use of the logo to avoid, for example, consumer deception.
25. The Maine Public Utilities Commission has established rules requiring affiliates to pay the incumbent utility for use
of the goodwill reflected in the utility's name. The payment is determined according to how soon the utility succeeds in
earning its authorized return on equity. Maine Public Utilities Commission, Docket No. 98-077 (July 7, 1998). The
rules provide a three-year initial payment period followed by a reassessment, with an additional three years of
payments, if necessary, to bring down the value of the goodwill asset to zero. Corporate Goodwill, Public Utilities
Fortnightly 16 (Oct. 15, 1998).
26. In most locations DER applications are expected to operate in conjunction with the grid. An expected application
of DER is for it to operate only during periods when electric power prices are relatively high. This benefits the
customer with DER, which is less expensive than power from the grid during these periods. DER customers also may
benefit from having a connection to the local utility's distribution grid because (a) the grid may be a backup supply of
power when the DER unit requires maintenance; and (b) the grid may afford the DER customer an opportunity to sell
power to other electric power consumers if the DER unit has excess capacity. At the same time, customers who rely
exclusively on power from the grid may benefit because reduced load on the grid during peak periods may allow the
grid operator to avoid dispatching the highest-cost plants during peak periods.

27. Bliley Letter at 14.
28. Another competitive concern is that utilities will attempt to raise the costs of providing natural gas service to fuel
DER facilities. Where the same utility provides both electric and gas distribution services to an area, the utility may
have incentives to raise the costs of DER rivals by manipulating both electric and gas interconnections. The PSC may
wish to include provisions on natural gas access for DER facilities in areas served by a gas/electric combination
utility. See, e.g., Federal Trade Commission, "Analysis of Agreement Containing Consent Orders To Aid Public
Comment in In the Matter of Dominion Resources, Inc. and Consolidated Natural Gas Company," FTC File No. 991
0244 (Nov. 8, 1999) <http://www.ftc.gov/os/1999/11/dominionana.shtm>.
29. A useful analogy may be the rapid pace of innovation in customer-installed telephone technologies once
telephone companies' discretion to block interconnection was effectively eliminated. Use of the Carterfone Device in
Message Toll Telephone Services, 13 F.C.C.2d 420, recon. denied, 14 F.C.C.2d 571 (1968). These same concerns
for economy, certainty, and timeliness are likely to be important in designing dispute resolution mechanisms for DER
interconnections.
30. Safety and reliability considerations are likely to be important both in original equipment and in equipment service
and repair.
31. In many areas, the most economically viable application of DER technologies is likely to be peak-load shaving -
producing power from DER equipment primarily during peak load periods. To have an incentive and ability to pursue
a peak-load shaving generation strategy, the DER owner must face prices that reflect the higher costs of power from
the grid during peak demand periods. The DER owner following a peak-load shaving strategy must also be able to
determine the onset and end of peak demand periods.
32. The State of California, for example, is considering interconnection rules. In addition, the Energy Policy
Committee of the Institute of Electrical and Electronics Engineers (IEEE) USA is developing interconnection
standards for distributed generation.
33. If any particular conditions require unique interconnection rules for some end uses in West Virginia, the PSC may
wish to address them separately.
34. In this discussion, we are not commenting on situations where the incumbent utility might lease DER facilities to
customers who control the operation of DER facilities on the customer side of the meter.
35. We note that even if the incumbent regulated distribution monopoly does not have generation assets, it has
incentives to raise costs of DER interconnections because DER substitutes for T&D services as well as generation
services provided from the grid.
36. Because electric power is essential to consumer health and safety, the PSC may wish to ensure that, in the event
of a supplier default, the consumer remains connected to the grid. Regarding the transition period between the two
suppliers, the PSC may wish to adopt rules ensuring that the entity supplying electric power to the grid to serve the
customer's continued load is paid for these services and that consumers are charged accordingly.
37. Designation of an alternative supplier could be completed as part of the same process as designating the primary
supplier. For example, each customer could be asked to list a first and second preference among available suppliers.
Designating an alternative supplier is akin to the common industrial practice of having primary and secondary
suppliers, where a secondary supplier is retained to reduce the risk of costly supply interruptions. It is possible,
however, that some consumers may be deterred from choosing a new supplier altogether if they have to choose an
alternative supplier in addition to a new primary supplier.

38. The least costly scenario would likely be to supply the customer with electric power purchased from the wholesale
spot market. Although this type of service may involve few costs for reserves, it would likely involve exposure of the
consumer to the risk of high wholesale spot market prices. If generation services used to satisfy a consumer's load
are removed from the grid, it may be important to transfer the failed supplier's generation contracts or facilities to an
alternative supplier in order to maintain grid stability in the event of failure of a supplier.
39. Where advanced metering and billing technologies allow a customer to purchase power from different suppliers at
different times of the day, the customer may effectively have already expressed a preference for alternative suppliers.