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<title>Rhode Island Examiner Fines Provident Gas For Affiliate Favoritism</title>
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<td width="75%" valign="top"><p ALIGN="left"><font face="Arial"><b><big><big><big><strong>RHODE
ISLAND EXAMINER FINES PROVIDENT GAS FOR AFFILIATE FAVORITISM</strong></big></big></big></b></font></p>
<font SIZE="2"><p></font><font size="4"><strong><font face="Arial">BY GEORGE SPENCER</font><font size="4" face="Arial"><br>
</font><font face="Arial">RESTRUCTURING TODAY</font></strong><br>
<small>(<em>originally published by PMA OnLine Magazine: 09/98</em>)</small></p>
</font><i><b><p></b></i> </p>
<p><font face="Arial">A Rhode Island Division of Public Utilities & Carriers (DPUC)
examiner came down hard on Providence Gas for allegedly favoring its marketing affiliate,
Providence Energy Services but many details were not available at deadline. </font></p>
<p><font face="Arial">Providence Gas denies the charges.</font></p>
<p><font face="Arial">The gas company was fined a slap-on-the-wrist $1,000/violation for
23 violations possibly because the market is new and its a first offense.</font></p>
<p><font face="Arial">Aurora Natural Gas of Dallas had accused Providence (RI) Gas of
providing "advance information and undue preference" to its sister company,
Providence Energy Services (PES), formerly Providence Southern.</font></p>
<p><font face="Arial">The complaint was filed with the PUC and later transferred to the
Division of Public Utilities & Carriers where a hearing officer held two rounds of
hearings. </font></p>
<p><font face="Arial">The agency found yesterday that PGC's "ability to make
objective decisions regarding its Business Choice Program was compromised by the nature of
its relationship with its marketing affiliate, PES."</font></p>
<p><font face="Arial">The examiner listed five ways PGC favored PES regarding use of
non-dedicated phone lines and lowering costs of telemetering for PES customers for
example. The decisions favoring PES impacted negatively the competition, the examiner
added. </font></p>
<p><font face="Arial">A former Providence Gas employee testified that his former bosses
tried to pressure him into cutting special deals with PES. Craig Peterson resisted the
pressure then quit last fall. Peterson now works for Aurora (RT, 5/6/98). </font></p>
<p><font face="Arial">Aurora Nov 26, accused Providence Gas of four violations of the
state affiliate rules. Three of the four alleged violations center on how Providence Gas
has been installing new, more advanced metering systems. The systems use telephone lines
so that gas use can be monitored continuously allowing the marketing company to make the
most economical purchases of supply. </font></p>
<p><font face="Arial">Aurora claims Providence Gas provided "advance knowledge"
to Providence Energy about whether dedicated telephone lines were needed for those meters.
</font></p>
<p><font face="Arial">The agency found "most revealing" that the company
"was simultaneously engaging in (1) ... joint marketing of PGC, PEC and PES; (2)
joint management of PGC and PES operations through common management personnel which
resulted in the lack of adequate separation between PGC and PES; (3) corporate branding of
PGC, PES and other affiliates; (4) provision of market sensitive customer information to
PES personnel; (5) a tie-in of the compensation of senior PGC personnel responsible for
the rate unbundling policy and implementation to the financial performance of PES; (6) the
creating of a corporate structure where both PGC and PES personnel have reporting
responsibility to the same person."</font></p>
<p><font face="Arial">The DPUC was a bit surprised at the attitude revealed by
parent-affiliate teamwork. </font></p>
<p><font face="Arial">"The totality of the evidence convinces the divisions that
these activities created divided loyalties that clouded the judgment of those PGC
personnel responsible for making fair and impartial decisions for all parties affected by
PGC's unbundling initiatives," the agency wrote.</font></p>
<p><font face="Arial">Bottom line: "We thus find that PGC's activities were
inconsistent with, and an impediment to, the development of viable competitive supply
markets with its service territory."</font></p>
<hr>
<p><font FACE="Arial" SIZE="2"><strong>Restructuring Today</strong> is published 247 times
a year for those watching the convergence of electricity, telephone and gas markets. It's
issued on business days by US Publishing at 4418 MacArthur Boulevard, Washington DC 20007.
Phone 1-800-486-8201 or 202-298-8201 and fax to 1-202-298-8210. One year's subscription is
$487 in US funds (plus 8% sales tax in the District of Columbia). George Spencer, editor.
E-mail: <a href="mailto:[email protected]">[email protected]</a></font></p>
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