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<td width="25%" valign="top" align="center"><!--webbot bot="ImageMap" rectangle=" (14,297) (97, 322) http://www.powermarketers.com/adrates.html" rectangle=" (11,230) (95, 257) http://www.powermarketers.com/pmajobs.htm" rectangle=" (12,163) (96, 189) http://www.powermarketers.com/main.htm##_parent" rectangle=" (12,95) (96, 121) http://www.powermarketers.com/power2.htm##_blank" rectangle=" (11,29) (96, 54) ../pmamag.htm" src="../images/magmenu.gif" alt="PMA OnLine Magazine Menu" border="0" align="center" startspan --><MAP NAME="FrontPageMap"><AREA SHAPE="RECT" COORDS="14, 297, 97, 322" HREF="http://www.powermarketers.com/adrates.html"><AREA SHAPE="RECT" COORDS="11, 230, 95, 257" HREF="http://www.powermarketers.com/pmajobs.htm"><AREA SHAPE="RECT" COORDS="12, 163, 96, 189" HREF="http://www.powermarketers.com/main.htm" TARGET="_parent"><AREA SHAPE="RECT" COORDS="12, 95, 96, 121" HREF="http://www.powermarketers.com/power2.htm" TARGET="_blank"><AREA SHAPE="RECT" COORDS="11, 29, 96, 54" HREF="../pmamag.htm"></MAP><a href="../_vti_bin/shtml.dll/calview/9804dd.htm/map"><img src="../images/magmenu.gif" alt="PMA OnLine Magazine Menu" border="0" align="center" ismap width="110" height="350" usemap="#FrontPageMap"></a><!--webbot bot="ImageMap" endspan i-checksum="46590" --><p><a href="../searchpma.htm"><img src="../images/archives.gif" alt="Archives Search" border="0" align="center" WIDTH="70" HEIGHT="40"></a></p>
<p align="left"><font face="Arial"><strong><small>About The Author:</small></strong></font></p>
<font SIZE="2"><p align="left"></font><font size="1">Daniel W. Douglass is a partner in
the Los Angeles office of Arter & Hadden, a full-service law firm with a national
practice in the energy, deregulation and telecommunications areas, as well as related
transactional, corporate, real estate and environmental issues. He can be reached at (213)
629-9343 or e-mailed at <a href="mailto:[email protected]">[email protected]</a></font></p>
<p align="left"><font size="1">Founded in 1843 in Cleveland, Ohio, <strong><a href="http://www.arterhadden.com/" target="_blank">Arter & Hadden</a></strong> is a
national law firm with offices in <a href="http://www.arterhadden.com/cleveland.htm">Cleveland</a>
and <a href="http://www.arterhadden.com/columbus.htm">Columbus</a>, Ohio: <a href="http://www.arterhadden.com/austin.htm">Austin</a>,<a href="http://www.arterhadden.com/dallas.htm"> Dallas</a> and <a href="http://www.arterhadden.com/sanantonio.htm">San Antonio</a>, Texas; <a href="http://www.arterhadden.com/washdc.htm">Washington</a>, D.C.; and <a href="http://www.arterhadden.com/irvine.htm">Irvine</a>, <a href="http://www.arterhadden.com/la.htm">Los Angeles</a>, <a href="http://www.arterhadden.com/sanfran.htm">San Francisco</a>, <a href="http://www.arterhadden.com/sandiego.htm">San Diego</a> and <a href="http://www.arterhadden.com/whills.htm">Woodland Hills</a>, California. The Firm is
comprised of approximately 350 Attorneys and 50 Legal Assistants.</font></p>
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<td width="75%" valign="top"><img src="../images/douglass.gif" alt="California Viewpoint by Daniel Douglass" border="0" WIDTH="375" HEIGHT="75"><p><b><u>April 1998</u><br>
</b><font size="6"><strong>Consumer Protection for Electricity Customers in California</strong></font></p>
<p><strong>by Daniel Douglass -- Arter & Hadden. L.L.P.<br>
</strong><font face="Arial" size="2">(<em>originally published by PMA OnLine Magazine:
04/98</em>)</font></p>
<p> </p>
<font face="Arial"><p ALIGN="JUSTIFY">Consumer protection for electricity consumers has an
interesting history in California. Assembly Bill 1890, the landmark electricity
restructuring legislation which was passed unanimously by the California Legislature in
August of 1996, directed the California Public Utilities Commission to implement the
registration of would-be electric service providers (ESPs). The registration was mandatory
for ESPs which wanted to sell power to residential and small commercial customers and
optional for firms who intended to focus on larger customers. The Commission responded by
issuing a simple one-page registration form which essentially required name, address,
telephone number and the payment of a $100 fee in order to be registered in the state to
sell electricity. </p>
<p ALIGN="JUSTIFY">The Legislature later adopted more detailed consumer protection
safeguards through its passage of Senate Bill (SB) 477. Among other things, SB 477
required that all ESPs offering electrical services to residential or small commercial
customers provide "proof of financial viability" and "proof of technical
and operational ability" as a precondition to registration. The bill also directed
the Commission to develop uniform standards to determine these items. </p>
<p ALIGN="JUSTIFY">This Commission’s usual deliberative process was accelerated by
"<i>l’affaire Boston-Finney</i>." For those of you not familiar with this
episode, a multi-level marketing firm headquartered in Pennsylvania and allegedly run by a
19 year old college dropout, registered with the CPUC and began offering distributorships,
for a fee, to California consumers. Both the California Attorney General’s office and
the Commission began investigating complaints about the firm. On February 19, the
Commission issued a press release which stated, in part, that, "At a prehearing
conference last week, CPUC staff charged Boston-Finney with violating the Public Utilities
Code by misrepresenting the nature of its service and the level of savings to its
customers; operating through dishonesty, fraud and deceit; and, lacking the financial and
operational capabilities to provide service." The press release also said,
"Boston-Finney has also been charged by the California State Attorney General with
running an illegal pyramid scheme and making misleading or false claims."
Boston-Finney’s license to market power in the state was revoked and investigations
continue in both California and Pennsylvania.</p>
<p ALIGN="JUSTIFY">This episode led to editorials in major California newspapers
suggesting that the Commission wasn’t doing its job in terms of providing consumer
protection to California electric customers. In response, the Commission issued a draft
decision on consumer protection issues in early March, solicited comments from interested
parties and issued a final decision in just twenty days. Decision 98-03-072 adopted
interim standards for proof of financial viability and proof of technical and operational
abilities. It also revised the ESP registration form and required all currently registered
ESPs to supplement its registration information and to submit certain required documents.
In addition, it established rules and procedures for ESPs to provide notices to consumers
of the terms and conditions of service offered by the ESP as well as a requirement that
standard service plans be filed with the Commission. All of these various rules and
procedures had an immediate and direct impact on the operations of all ESPs serving
residential and small commercial customers. </p>
<p ALIGN="JUSTIFY">Effective immediately, the decision prohibited all currently registered
ESPs who did not have a signed agreement with a California electric utility from
marketing, advertising, or offering for sale any retail direct access electrical services
to any residential or small commercial customers. In addition, all ESPs were required to
supplement their ESP registration information by completing a new and much more detailed
"Electric Service Provider Application Registration." ESPs are now required to
provide a great deal of background information, including even a completed fingerprint
card for managers, directors and officers. </p>
<p ALIGN="JUSTIFY">All registered ESPs who have already signed up or initiated a direct
access service request on behalf of a residential or small commercial customer, or who
intend to do so, are also required to post with the Commission a cash security deposit or
a financial guarantee bond in the amount of $25,000. As an ESP’s number of customers
increase, the security deposit increases up to a maximum of $100,000. The decision also
proposes a set of final standards regarding proof of financial viability and proof of
technical and operational ability. After submission of comments by interested parties, the
Commission will issue a decision adopting final standards.</p>
<p ALIGN="JUSTIFY">In addition, each ESP is required to provide a copy of all of its
agreements with its scheduling coordinators or declarations from each scheduling
coordinator with which the ESP has an agreement. The ESP is also required to submit a copy
of its notice of terms and conditions when it signs up its first customer or when the
first standard service plan filing of the ESP is due, whichever is earlier. The failure of
an ESP to update the required information or to provide the required information will lead
to a suspension of the ESP’s registration. Any currently registered ESP that cannot
comply with the revised registration requirements, or who does not want to market to
residential and small commercial customers at this time, may request in writing that its
registration be placed on "inactive status." </p>
<p ALIGN="JUSTIFY">Although registration is clearly mandated for ESPs serving smaller
customers, ESPs who intend only to serve large commercial (above 20kW) and industrial
customers now need to decide whether continued registration is worth the hassle of
complying with the foregoing requirements. While tedious, the registration requirements
will not deter any established firm which can demonstrate its technical, operational and
financial viability. In the long run, the new standards should operate to provide at least
some degree of protection to consumers who might otherwise be taken advantage of by
unscrupulous marketers. Interestingly, the Commission is now considering the adoption of
similar standards in the natural gas industry, where previously there has been no
registration requirements imposed on gas marketers.</p>
</font><hr color="#FFFF00">
<blockquote>
<p align="left"><font face="Arial">You may address e-mail to Dan Douglass at </font><a href="mailto:[email protected]">[email protected]</a> .</p>
<p align="left">Founded in 1843 in Cleveland, Ohio, <strong><a href="http://www.arterhadden.com/" target="_blank">Arter & Hadden</a></strong> is a
national law firm with offices in <a href="http://www.arterhadden.com/cleveland.htm">Cleveland</a>
and <a href="http://www.arterhadden.com/columbus.htm">Columbus</a>, Ohio: <a href="http://www.arterhadden.com/austin.htm">Austin</a>,<a href="http://www.arterhadden.com/dallas.htm"> Dallas</a> and <a href="http://www.arterhadden.com/sanantonio.htm">San Antonio</a>, Texas; <a href="http://www.arterhadden.com/washdc.htm">Washington</a>, D.C.; and <a href="http://www.arterhadden.com/irvine.htm">Irvine</a>, <a href="http://www.arterhadden.com/la.htm">Los Angeles</a>, <a href="http://www.arterhadden.com/sanfran.htm">San Francisco</a>, <a href="http://www.arterhadden.com/sandiego.htm">San Diego</a> and <a href="http://www.arterhadden.com/whills.htm">Woodland Hills</a>, California. The Firm is
comprised of approximately 350 Attorneys and 50 Legal Assistants.</p>
</blockquote>
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