Requirements for Natural Gas Suppliers--Guidelines under Chapter 22 Natural Gas Choice and Competition Act Section 2208; Doc. No. M-00991249F0002
[30 Pa.B. 475]
Commissioners Present: Robert K. Bloom, Vice Chairperson; David W. Rolka; Nora Mead Brownell; Aaron Wilson, Jr.
Public Meeting held
July 15, 1999
By the Commission:
On June 22, 1999, Governor Thomas J. Ridge signed into law the Natural Gas Choice and Competition Act, effective July 1, 1999, 66 Pa.C.S. §§ 2201--2211 (act). Under the act, beginning on November 1, 1999, retail customers will have the ability to choose their natural gas supplier. Previously, consumers procured their natural gas supply requirements as a package from the jurisdictional public utility. The package, mentioned previously, included what are now the basic components of competitive natural gas service, commodity, capacity and storage, balancing and aggregation services of the natural gas utility. On June 24, 1999, the Commission issued a Tentative Order at this docket establishing a 14-day comment period. On July 10, 1999, our Tentative Order was published in the Pennsylvania Bulletin.
Comments were filed by the Office of Consumer Advocate (OCA); Statoil Energy, Inc. and TXU Energy Services (jointly as Statoil); the Pennsylvania Gas Association (PGA); the Office of Small Business Advocate (OSBA); Enron Energy Services (Enron) and United Gas Management, Inc. (United). We will discuss the comments as filed within the appropriate sections of this order.
The focus of this Order is the establishment of requirements for natural gas suppliers under section 2208 of the act and other issues regarding licensing of natural gas suppliers. The act at section 2202 defines a natural gas supplier as:An entity other than a natural gas distribution company, but including natural gas distribution company marketing affiliates, which provides natural gas supply services to retail gas customers utilizing the jurisdictional facilities of a natural gas distribution company. The term includes a natural gas distribution company that provides natural gas supply services outside its certificated service territories. The term includes a municipal corporation, its affiliates or any joint venture, to the extent that it chooses to provide natural gas supply services to retail customers located outside of its corporate or municipal limits, as applicable, other than:(i) as provided prior to the effective date of this chapter, pursuant to a certificate of public convenience if required under this title;(ii) total natural gas supply services in de minimus amounts;(iii) natural gas supply services requested by, or provided with the consent of, the public utility in whose certificated territory the services are provided; or(iv) natural gas supply services provided to the municipal corporation itself or its tenants on land it owns or leases, or is subject to an agreement of sale or pending condemnation, as of September 1, 1999, to the extent permitted by applicable law independent of this chapter.The term excludes an entity to the extent that it provides free gas to end-users under the terms of an oil or gas lease. Notwithstanding any other provision of this title, a natural gas supplier that is not a natural gas distribution company is not a public utility as defined in section 102 (relating to definitions) to the extent that the natural gas supplier is utilizing the jurisdictional distribution facilities of a natural gas distribution company or is providing other services authorized by the Commission.
As used in the above definition of a natural gas supplier, the term natural gas supply services includes (i) the sale or arrangement of the sale of natural gas to retail customers; and (ii) services that may be unbundled by the Commission under section 2203(3) of the act (relating to standards for restructuring of the natural gas utility industry). Natural gas supply service does not include distribution service.
II. Requirements for Natural Gas Suppliers
A. License Requirements
In accordance with section 2208(a) of the act, all natural gas suppliers including a natural gas distribution company that provides natural gas supply service outside of its chartered or certificated territory, must hold a license issued by the Commission. A license shall not be required for customers who make de minimis incidental sales or resales to themselves, an affiliate or to other nonresidential retail gas customers.
B. Entities Currently Operating as Natural Gas Suppliers
Section 2208(a) of the act states that no entity shall engage in the business of a natural gas supplier unless it holds a license issued by the Commission. We believe this requirement is applicable to all entities currently operating as natural gas suppliers, in gas pilot programs, as well as all entities yet to engage in such practices. Each entity currently doing business as a natural gas supplier serving customers using existing gas transportation tariffs, as defined in the act, should apply for a Natural Gas Supplier's License from the Commission no later than Monday, August 2, 1999, to provide services on November 1, 1999. This will provide staff sufficient time to perfect the applications prior to the November 1, 1999, implementation date.
C. License Application and Issuance
Natural gas suppliers shall submit, in writing to the Commission, under section 2208(b) of the act, an application for a license. The application shall be verified by oath or affirmation. Attachment A to this Order contains the Commission's natural gas supplier license application. The application may also be downloaded from the Commission's webpage.1
A license shall be issued to any applicant, authorizing the whole or any part of the service covered by the application, if it is found that the applicant is fit, willing and able to perform properly the service proposed and to conform to the applicable provisions of the act and the orders and regulations of the Commission, including those concerning standards and billing practices, and that the proposed service to the extent authorized by the license, will be consistent with the public interest. Otherwise, such application shall be denied.
The Commission will allow an applicant to provide public notice of its intention to file to provide services in a natural gas distribution company's service territory prior to the filing of or the completion of the natural gas distribution company's restructuring filing. When the bonding requirements or the negotiated bonding levels have been determined, the applicant may submit the proof of the bond to the Commission. Upon review, the Commission will issue an amendment to any license which the applicant may have already been granted authorizing the applicant to offer its services in the natural gas distribution company's service territory.
D. Financial Fitness
We place a high priority on maintaining the safety and reliability of the current natural gas supply service in this Commonwealth, therefore, no natural gas supplier license shall be issued or remain in force unless the applicant or holder of the license complies with each of the following:(i) Furnishes a bond or other security in a form and amount to ensure the financial responsibility of the natural gas supplier. The Commission shall periodically review the criteria upon petition of any party. The amount and form of the bond or other security may be mutually agreed to between the natural gas distribution company and the natural gas supplier or the alternate supplier of last resort or failing that shall be determined by criteria approved by the Commission.(ii) Provides the Commission with the address of the participant's principal office in this Commonwealth or the address of the participant's registered agent in this Commonwealth, the latter being the address at which the participant may be served process.
Statoil commented that marketers may not have completed negotiations regarding the bonding requirements to be established within each distribution company's restructuring proceeding in time to submit a complete license application by August 2, 1999. We realize that the bonding requirements may not be fully developed or finalized by the suggested license application filing date. To accommodate adequate time for review of license applications submitted to us, in the absence of a fully negotiated bond requirement between the marketer and distribution company, a detailed explanation of the status of negotiations is to be submitted along with the license application. The bonding, however, must be in place on or before Friday October 1, 1999, with an effective date of November 1, 1999, to obtain a license to serve on November 1, 1999.
The criteria used to determine the amount and the form of these bonds or other securities are to be set forth in the natural gas distribution company's restructuring filings. Furthermore, the amount and form of the bond or other security may be mutually agreed to between the natural gas distribution company and the natural gas supplier or the alternative supplier of last resort and the natural gas supplier.
The license applicant must supply the Commission with proof that it has obtained the necessary bond or other financial security for each natural gas distribution company in whose service territory the license applicant will provide service to retail customers. The license applicant must demonstrate that they have met the criteria required by the applicable Commission restructuring Order or that they have arrived at a mutually agreed alternative. The license applicant shall provide the Commission with a copy of the bonds, other financial security or other negotiated alternatives.
Failure of a natural gas supplier to comply with any provision of the act, or the rules, regulations, orders or directives of the Department of Revenue or of the Commission, including, but not limited to, engaging in anticompetitive behavior, shall be cause for the Commission to revoke the license of the natural gas supplier.
E. Transferability of License
Under section 2808(d) of the act, a licensed natural gas supplier may not transfer its license without prior Commission approval. The Commission requires the licensee to provide this notice at least 90 days in advance of the transfer.
F. Form of Regulation of Natural Gas Suppliers
The Commission may forbear from extending its regulation of natural gas suppliers, except where a natural gas supplier serves as a supplier of last resort, beyond licensing, bonding, reliability and consumer services and protections, including all applicable portions of 52 Pa. Code Chapter 56, relating to standards and billing practices for residential utility service.2 Subject to section 2207 of the act (relating to obligation to serve), nothing in this section shall preclude a natural gas supplier, upon appropriate and reasonable notice to the retail gas customer, supplier of last resort, and the natural gas distribution company, from canceling its contract with any customer for legal cause, subject to the customer's right to have continued service from the supplier of last resort. After receiving notice the customer could then attempt to repair their relationship with the natural gas supplier, seek a new natural gas supplier, or default to the natural gas distribution company, at current tariffed rates or to the provider of last resort. The customer would only be disconnected from the distribution system under Chapter 56 if the customer failed to meet his obligations to the utility or the provider of last resort.
G. City Natural Gas Distribution Operation License Application and Issuance
The act defines a City Natural Gas Distribution Operation at section 102 as follows:A collection of real and personal assets used for distributing natural gas to retail gas customers owned by a city or a municipal authority, nonprofit corporation or public corporation formed pursuant to section 2212(m) (relating to city natural gas distribution operations).
Section 2212(p) of the act states that a city natural gas distribution operation may apply for a license under the procedures under section 2208 (relating to requirements for natural gas suppliers). Subject to the requirement that it qualify for and obtain a natural gas supplier license under section 2208, a city natural gas distribution operation is authorized to engage in the business of a natural gas supplier outside its municipal or corporate limits.
H. Open and Nondiscriminatory Access
A municipal corporation shall, before it is permitted to provide natural gas supply services as a licensed natural gas supplier, demonstrate, and the Commission shall determine, that by the date of the issuance of the license, it will provide other natural gas suppliers open and nondiscriminatory access to its gas distribution system under standards that are comparable to the act, taking into consideration the particular circumstances of the municipal corporation's ownership and/or operation of its gas distribution system.
III. Other Issues
A. Publication of Notice of Filing
Commission regulations at 52 Pa. Code § 54.35 address the publication requirements regarding notice of filing as follows:(a) Notice of filing an application shall be published in newspapers of general circulation covering each county in which the applicant intends to provide service as require by § 5.14(a)(2) (relating to applications requiring notice). Applicants may contact the Commission's Press Secretary3to confirm the identity of the newspapers of general circulation in which notice shall be published.(b) The notice shall be written in plain language and include the name, address and telephone number of the applicant, a description of the proposed services to be provided and the geographic area to be served. The notice shall include the application docket number and a statement that protests related to the technical or financial fitness of the applicant shall be filed within 15 days of the publication date of the notice with the Commission's Secretary, Public Utility Commission, P. O. Box 3265, Harrisburg, PA 17105-3265. The notice in an acceptable electronic format shall be submitted to the Commission's Secretary for posting on the Commission's Internet web site.
52 Pa. Code § 54.35 (footnote added).
The OSBA suggested that the Example of the Form of Notice at Appendix C be modified because the draft ''could be read to suggest that a licensed natural gas supplier is required to make its service available everywhere in Pennsylvania.''
While the Commission wishes to encourage the extension of the benefits of competition throughout the entire Commonwealth it was not the Commission's intention to require competitive natural gas suppliers to provide their services in all parts of the Commonwealth. Appendix C was intended to provide applicants with some guidance on the minimum information expected to be provided by the applicant in its public notice. In point of fact, the applicant may wish to extend its services in only one natural gas distribution company's territory or a portion of the distribution company's territory. Appendix C is merely a guide to provide minimum information. The Commission will review the applicant's public notice to ensure that it reasonably offered consumers adequate notice of the services the applicant proposes to provide.
B. Protests to Applications
Commission regulations at 52 Pa. Code § 54.36 address the requirements regarding protests to applications as follows:(a) Consistent with § 5.14(b) (relating to applications requiring notice), a 15-day protest period commences on the date notice of the application filing is published in newspapers. An interested party may file a protest to an application in compliance with § 5.52(a) (relating to content of a protest to an application) and shall set out clearly and concisely the facts upon which challenge to the fitness of the applicant is based. An applicant may file an answer to the protest within 10 days of when the protest is filed. Protests that do not fully comply with § 5.52(a) will be rejected.(b) Protests may challenge only the applicant's financial and technical fitness to provide the service for which a license is requested. Consistent with the requirements of due process, sanctions, such as revocation or suspension of a supplier's license or the imposition of a fine, may be imposed on parties who intentionally misuse the protest process by repeated filing of competitive protests.(c) A protest to the applicant's technical or financial fitness to provide service will be assigned to Commission staff for review. Staff will determine if the protest fully complies with § 5.52(a) and sets out clearly and concisely the facts upon which the challenge to the fitness of the applicant is based. Staff will determine if the protest is sufficiently documented. If a protest is not sufficiently documented, Commission staff will prepare a recommendation for Commission consideration dismissing the protest and granting the application. If a protest is sufficiently documented, the application will be transferred to the Office of Administrative Law Judge for hearings or mediation as deemed appropriate.
C. Technical and Financial Fitness
The Commission issued a policy statement addressing the fitness of a natural gas marketer or broker (including a natural gas distribution company's affiliate), which has been published at 52 Pa.C.S. § 69.195. In this policy statement the phrase marketers or brokers, or both, includes all natural gas distribution company affiliates, subsidiaries, parents, divisions, and the like providing natural gas supply to respective natural gas distribution company's customers. The Commission will be interpreting the terms marketer and broker as contained in 52 Pa.C.S. § 69.195 et. seq. as applying to natural gas suppliers as defined in the act.
The Commission seeks to insure that natural gas suppliers operating in this Commonwealth possess the financial or technical fitness necessary to meet their obligations consistent with the public interest in system reliability and gas supplies. Assurance of the continuation of reliable service and secure supplies is a prerequisite for opening Pennsylvania's gas markets to full retail competition.
Gas suppliers that wish to deliver gas to retail customers should demonstrate that they have the requisite financial and technical fitness to meet their obligations consistent with the public interest consistent with system reliability and natural gas distribution company's underlying supplier-of-last-resort obligation. Financial and technical fitness is aimed at ensuring that a marketer or broker has the requisite ability to offer service to the public.
Under the act, ''a license shall be issued to any applicant, authorizing the whole or any part of the service covered by the application, if it is found that the applicant is fit, willing and able to perform properly the services proposed and to conform to the applicable provisions of this title and the orders and regulations of the Commission, including those concerning standards and billing practices, and that the proposed service, to the extent authorized by the license, will be consistent with the public interest.'' Applicants who are currently providing natural gas services in Pennsylvania will be presumed to have demonstrated technical fitness.
The OCA states that natural gas suppliers must show that they are technically ''fit, willing and able'' to comply with the standards and billing protections of Chapter 56, the customer disclosure requirements of the act, and any other orders or regulations of the Commission.
The OCA recommends that the prohibition on termination of customer service for nonpayment of supplier bills, as adopted for Electric Choice, should be adopted here. The OCA also submits that the Commission should ensure that the bonding requirements cover the failures of natural gas suppliers to adhere to all requirements established by the Commission, not just those related to reliability or operational fitness. The OCA believes that the Commission should consider whether the license applicant has exhibited a pattern of recurring violations of consumer protection laws. The OCA also recommends that the Commission clearly indicates that failure to adhere to regulatory requirements is grounds for suspension or revocation of a supplier's license or for the imposition of fines.
The OCA believes that Commission should not simply presume technical fitness of current suppliers. The OCA notes that such suppliers have not been required to adhere to the standards which the Commission is currently proposing. The OCA also anticipates that the existing suppliers will want to expand their service offerings to other natural gas distribution territories in which they are not providing currently providing natural gas supply service.
It is clear that the act requires a natural gas supplier to comply with 52 Pa. Code Chapter 56. The proposed license application includes an affidavit which requires the license applicant to acknowledge its statutory obligation to conform with 66 Pa.C.S. § 506 and the standards and billing practices of 52 Pa. Code Chapter 56.
As the OCA has noted, the Commission has stated in our Tentative Order that service to customers can only be terminated under Chapter 56 if the customer fails to meet his obligations to the utility or the supplier of last resort and that no customer may be terminated from the natural gas distribution company service because of failure to meet his obligations to a competitive natural gas supplier.
The OCA recommended that bonding requirements be established which includes consideration of the failure of a natural gas supplier to adhere to all regulatory requirements established by the Commission. At this point, the Commission believes that it is premature to address the criteria which may be employed in the determination of the appropriate bonding requirements. Section 2208 (c)(1)(i) provides that:criteria to determine the amount and form of the bond or other security shall be set forth in the natural gas company's restructuring filing. The parties in these proceedings are free to present criteria for the determination of the appropriate bonding amounts. 66 Pa.C.S. § 2208 (c)(1)(i).
The Commission agrees with the OCA that it is appropriate to consider whether a license applicant has exhibited a pattern of recurring violations of consumer protection laws. The Commission's draft application form requests information concerning whether the applicant, an affiliate, a predecessor of either, or a person identified in the application has been convicted of a crime involving fraud or similar activity. The Commission will also require each applicant to serve a copy of its application on the Office of the Attorney General, Bureau of Consumer Protection, the OCA, the OSBA, the Department of Revenue and each natural gas distribution utility in whose service territory the applicant proposes to provide service. Finally, the Commission will require the applicant to publish notice the filing of license applications in newspapers of general application. Furthermore, the Commission will also post the filing on the its website. The public will be given the opportunity to protest the application before the Commission acts to grant a license.
We also agree with the OCA that the act at section 2208(c)(2) authorizes the Commission to revoke the license of a natural gas supplier. License holders are put on notice that failure to adhere to regulatory requirements shall be grounds for suspension, revocation or restriction of a license or for the imposition of fines against the licensee.
The OCA has also requested the Commission to reconsider a portion of our Tentative Order in which we stated ''Applicants who are currently providing natural gas services in Pennsylvania will be presumed to have demonstrated technical fitness.'' The purpose of this statement was to provide an example of the types of prior and existing activities which could be employed to demonstrate technical fitness. We do not agree with the OCA on this point. The presumption of technical fitness given to such natural gas suppliers is meant to be rebuttable and can be overcome by evidence to contrary. Such evidence may be presented in protests to the application.
Moreover, a natural gas supplier presently providing service in Pennsylvania is not automatically exempted from completing the license application in its entirety. They, like any other applicant, must provide the information requested by the license application to demonstrate such fitness. To do otherwise would be discriminatory to new natural gas supplier.
United Gas Management, Inc. (United) stated that it agrees with the proposed standard regarding technical fitness, in that it recognized that current market participants should be presumed to be technically fit.
United recommends that the Commission should make a similar presumption regarding financial fitness where the supplier has been serving the market for some time and has met the relevant criteria.
We note that the act states that to demonstrate financial fitness a license applicant must furnish a bond or other security in a form and amount to ensure financial responsibility. The act requires the criteria for the amount of the bond or other security be determined in each restructuring filing. We will not adopt United's proposal to presume the ''financial fitness'' required by the act simply because a license application is currently providing competitive gas supply service. Each license applicant must provide the appropriate bond or other security for each natural gas distribution company in whose service territory the applicant proposes to serve.
D. Nontraditional Natural Gas Service Marketers
The definition of ''natural gas supplier'' at section 2202 is very broad. This section also defines ''natural gas supply services'' to include the sale or arrangement of the sale of natural gas to retail gas customers. As the competitive natural gas market place develops, we anticipate that there may be certain community-based organizations (CBOs), civic, fraternal or business associations, common interest groups and other entities that work with a licensed natural gas supplier to market services to their members or constituents. We believe that it may be unnecessarily duplicative to require these nontraditional natural gas service marketers to obtain their own licenses under certain circumstances. We therefore will not require nontraditional marketers to be licensed if they meet the following criteria:
* The nontraditional marketers must conduct their transactions through a licensed natural gas supplier.
* The nontraditional marketer:
(1) May not collect revenues directly from retail customers due to the provision of natural gas services.
(2) May not require its members or constituents to obtain their natural gas service through the nontraditional marketer or the licensed natural gas suppliers with which the nontraditional marketer arranges retail services.
(3) Is not responsible for the scheduling of natural gas supplies, the payment or remission of taxes due from the sales of natural gas services and are not responsible for the payment of the costs of the natural gas to its suppliers or producers.
Additionally, the licensed natural gas suppliers who provide services to retail customers through the activities of a nontraditional marketer must retain responsibility for these sales under the act. The licensed natural gas supplier must maintain the appropriate bonding requirements for such sales. The licensed natural gas supplier must meet the same supply reliability requirements with the natural gas sales as it is required to provide for its own retail sales. The licensed natural gas supplier is also responsible for the nontraditional marketers activities and will be held responsible for any violations of the act, the Commission's regulations, including Chapter 56, or the Public Utility Code, committed by the nontraditional marketer.
Each nontraditional marketer and each licensed natural gas supplier must provide Commission notification of their agreement to market natural gas services to retail customers prior to the nontraditional marketer engaging in natural gas service sales activity.
E. Market Power Remediation--Standards of Conduct
In its comments the OCA submitted that the Commission should look to the Code of Conduct developed for PECO's electric division in the Settlement of its restructuring proceeding for areas where the affiliate standards should be enhanced. The OCA also emphasizes that the Code of Conduct developed in the PECO case was the model utilized in all of the other electric restructuring settlements. The OCA believes the following five enhancements to the Code of Conduct are in order:1. The Policy Statement's provisions are focused on the natural gas distribution company's conduct and do not specifically address the affiliate supplier conduct. Consistent with the PECO Code of Conduct, these provisions should be modified in appropriate places to prohibit improper practices of the affiliate natural gas supplier.2. The Policy Statement addresses non-discriminatory treatment with respect to tariffs and transportation rates, but unlike the PECO Code of Conduct, does not address ''the provision of goods and services.'' It is important to ensure that natural gas distribution companies are not offering any goods and services preferentially to its affiliate and this language should, therefore, be enhanced.3. The Policy Statement does not address the use of shared employees between the natural gas distribution company and its supplier affiliate. The PECO Code of Conduct prohibits the use of shared employees for employees who have responsibility for operating the distribution system. It also requires the physical separation of such employees from the offices of the affiliate supplier. The PECO Code also requires the affiliate supplier to have ''its own direct line management.'' The Commission should consider whether there is a similar need in this context to segregate employees who operate the natural gas distribution company's distribution system and to require separate management.4. The Policy Statement prohibits tying arrangements to capacity release, but otherwise does not clearly prohibit tying of other services. The PECO Code is very clear in prohibiting the tying of ''the provision of any PaPUC jurisdictional regulated services'' to purchase of power from the affiliate supplier. The tying prohibition should similarly be extended for natural gas distribution company's and their affiliates.5. The Policy Statement prohibits any representation that there is any advantage of purchasing from an affiliate because of its relationship to the natural gas distribution company. The PECO Code goes further and prohibits joint marketing and requires disclaimers indicating that there is no such advantage. The PECO Code provides appropriate enhancements and should be utilized for these purposes.
Enron commented that its principle concern is that the interim standards of conduct as proposed in our Tentative Order fall short of the requirements for procompetitive standards of conduct that were mandated to be established by the act. Enron also believes that it is crucially important that the Commission open a docket to establish permanent standards of conduct that will be generically determined and applied throughout the Commonwealth and with respect to all natural gas distribution company operations. In its comments Enron asserts that our reliance upon 52 Pa. Code §§ 69.191 and 69.192 fail to satisfy the minimum standards that have been established both by the General Assembly in the act itself and by the Commission when considering codes of conduct to be imposed on electric utilities in similar circumstances.
In its comments Enron suggested that we embellish items 2, 7 and 8, presented in our Tentative Order as follows:Item 2. This standard should be written so that it is clear that the standard is not limited to these 5 areas, but applies to all natural gas distribution company services.Item 7. This standard should not be limited to discounts, but should also apply to fee waivers and rebates.Item 8. This standard should require that natural gas distribution company disclosure to non-affiliates be contemporaneous with the natural gas distribution company's disclosure to its marketing affiliate or division. Also, a natural gas distribution company should not be permitted to provide information received from non-affiliated customers or suppliers to the natural gas distribution's affiliates.
We agree with both the OCA and Enron's recommendation to amend our second and seventh standards to require nondiscriminatory treatment in the provision of goods and services by a natural gas distribution company to its affiliates.
We also adopt Enron's eighth proposed standard. Natural gas distribution companies must provide contemporaneous disclosure of information. We also agree that a natural gas distribution company may not provide its affiliates information received from nonaffiliated customers or natural gas suppliers. The Commission would view each action as abuses of market power by the natural gas distribution company and its affiliated natural gas supplier. The Commission has sufficient legislative authority to penalize both parties.
Furthermore, we consider these to be consistent with section 2209(c) of the act.
Enron also provided within its comments several proposed additions to our interim standards of conduct:1. The natural gas distribution company shall not give any affiliate or marketing division preference over a non-traditional affiliate in the provision of goods and services such as processing requests for information, complaints and responses to service interruptions. The natural gas distribution company shall provide comparable treatment without regard to a customer's chosen natural gas supplier.
This standard is contained at the PECO Settlement, Appendix H, number 1. We believe this standard is also appropriate for the gas industry and we adopt its inclusion into the interim standards of conduct.2. The natural gas distribution company shall not sell non-gas goods or services to an affiliated or divisional natural gas supplier at a price below the cost of the market price, whichever is higher, for said goods of services. The natural gas distribution company shall not purchase non-gas goods or services from an affiliated or divisional natural gas supplier (''Supplier'') at a price above the market price for said goods or services. No transaction between the natural gas distribution company and an affiliated natural gas supplier shall involve an anti-competitive cross-subsidy and all such transactions shall comply with applicable law.
We cannot agree with the first section of this proposal. By providing the option to use the market price in lieu of cost may not satisfy the Public Utility Holding Company Act (PUHCA), which requires that cost be used for these transactions, therefore we cannot adopt that portion of the recommendation. The last sentence as proposed by Enron, regarding anti-competitive cross-subsidy and compliance with applicable law is adopted from the PECO interim code of conduct, item number 3, and is also applicable to the restructuring of the gas industry. We shall adopt this portion of Enron's recommendation, which establishes a link of consistency between the electric and gas codes of conduct.3. Natural gas distribution company employees who have responsibility for operating the distribution system, including natural gas delivery or billing and metering, shall not be shared with an affiliated or divisional Supplier, and their offices shall be physically separated from the office(s) used by those working for the Supplier. Such natural gas distribution company employees may transfer to a Supplier provided such transfer is not used as a means to circumvent these interim standards of conduct. Any supplier shall have its own direct line management. Any shared facilities shall be fully and transparently allocated between the natural gas distribution company function and the Supplier function. The natural gas distribution company accounts and records shall be maintained such that the costs a Supplier incurs may be clearly identified.
We agree with this proposal. Enron has made this recommendation based upon the PECO Settlement Interim Code of Conduct, and we believe it is equally applicable in this industry's restructuring.4. (a) Neither the natural gas distribution company nor an affiliated or divisional Supplier may directly or by implication falsely and unfairly represent:* that the Pa PUC jurisdictionally regulated services provided by the natural gas distribution company are of a superior quality when power is purchased from an affiliated or divisional Supplier; or* that the merchant services (for natural gas) are being provided by the natural gas distribution company rather than an affiliated or divisional Supplier;* that the natural gas purchased from a Supplier that is not an affiliate or division of the natural gas distribution company may not be reliably delivered;* that natural gas must be purchased from an affiliate or divisional Supplier to receive Pa PUC jurisdictional regulated services.(b) The natural gas distribution company shall not jointly market or jointly purchase its Pa PUC jurisdictional regulated services with the services of an affiliated or divisional Suppler. This prohibition includes prohibiting the natural gas distribution company from including bill inserts in its natural gas distribution company bills promoting an affiliated or divisional Supplier's services, and further precludes a reference or link from the natural gas distribution company's web-site to any affiliated or divisional supplier.(c) When an affiliated or divisional Supplier markets or communicates to the public using the natural gas distribution company name or logo, it shall include a disclaimer that states:(1) that the Supplier is not the same company as the natural gas distribution company; (2) that the prices of the Supplier are not regulated by the Pa PUC; and (3) that a customer does not have to by natural gas or other products from the Supplier in order to receive the same quality service from the natural gas distribution company. When a Supplier advertises or communicates verbally through radio or television tot he public using the natural gas distribution company name or logo, the Supplier shall include at the conclusion of any such communication a disclaimer that includes all of the disclaimers listed in this paragraph.
These recommendations are consistent with the PECO Interim Code of Conduct, and we believe that it is appropriate and timely to include the above within the gas industry interim Code of Conduct.5. The natural gas distribution company must: (a) make interstate capacity available for release, assignment, or transfer to its affiliated or divisional Supplier only through the intestate pipeline electronic bulletin boards and the competitive bidding procedures in place on those interstate systems; (b) not give its affiliated or divisional Supplier any preference over non-affiliated or non-divisional Suppliers, or potential non-affiliated or non-divisional Suppliers, in matters relating to the assignment, release, or other transfer of the natural gas distribution company's capacity rights on interstate pipeline systems; and (c) not condition or tie its agreement to release, assign, or otherwise transfer interstate pipeline capacity to any agreement by a gas Supplier, customer or other third party relating to any service in which its marketing affiliate is involved.
The act addresses standards of conduct under section 2209. Under section 2209(a) the Commission is required to provide interim guidelines for standards of conduct governing the activity of and relationships between natural gas distribution companies and their affiliated natural gas suppliers and other natural gas suppliers. The Commission is also required to monitor and enforce compliance with these standards. Section 2209(c) of the act requires that the standards of conduct provide:(1) No discrimination against or preferential treatment of any natural gas supplier, including an affiliated natural gas supplier.(2) No disclosure or preferential sharing of any confidential information to or with any individual natural gas supplier.(3) Adequate rules prohibiting cross-subsidization of an affiliated natural gas supplier by a natural gas distribution company.(4) Maintenance of separate books and records by the natural gas distribution company and its affiliated natural gas supplier(s).(5) Sufficient physical and operational separation, but not including legal divestiture to accomplish the preceding noted requirements.(6) An informal dispute resolution procedure and a system of penalties for non-compliance with the final set of standards of conduct consistent with existing Commission regulations.
In addition to the following, the previously listed Standards of Conduct, as presented in the act, to the extent not contained within 52 Pa.C.S. §§ 69.191 and 69.192, are to be included in the interim Standards of Conduct. The Commission has addressed the relationship of the natural gas distribution company and their affiliates as the natural gas industry moved towards full competition through a policy statement at 52 Pa.C.S. §§ 69.191 and 69.192. The Commission is of the opinion that these policy statements, to the extent they are consistent with the requirements of the act, may form the basis for the interim standards of conduct for the natural gas distribution companies and their affiliates. Specifically section 69.192 states that the following policies should be applied by the natural gas distribution company or natural gas distribution companies (as defined by the act):(1) The [natural gas distribution company] should apply its tariffs in a nondiscriminatory manner to its affiliate, its own marketing division and any nonaffiliate.(2) The [natural gas distribution company] should likewise not apply a tariff provision in any manner that would give its affiliate or division an unreasonable preference over other marketers with regard to matters such as scheduling, balancing, transportation, storage, curtailment or nondelivery.(3) If a tariff provision is mandatory, the [natural gas distribution company] should not waive the provision for its affiliate or division absent prior approval of the Commission.(4) If a tariff provision is not mandatory or provides for waivers, the [natural gas distribution company] should grant the waivers without preference to affiliates and divisions or non-affiliates.(5) The [natural gas distribution company] should maintain a chronological log of tariff provisions for which it has granted waivers. Entries should include the name of the party receiving the waiver, the date and time of the request, the specific tariff provision waived and the reason for the waiver. Any chronological log should be open for public inspection during normal business hours.(6) The [natural gas distribution company] should process requests for transportation promptly and in a nondiscriminatory fashion with respect to other requests received in the same or a similar period. The [natural gas distribution company] should maintain a chronological log showing the processing of requests for transportation services. Any chronological log should be open for public inspection during normal business hours.(7) Transportation discounts provided to the [natural gas distribution company's] or its marketing affiliate's favored customers should be offered to other similarly situated customers and should not be tied to any unrelated service, incentive or offer on behalf of either the parent of affiliate. A chronological log should be maintained showing the date, party, time and rationale for the action. Any chronological log should be open for public inspection during normal business hours.(8) The [natural gas distribution company] should not disclose any customer proprietary information to its marketing affiliate or division, and to the extent that it does disclose customer information, is should do so to other similarly situated marketers in a similar fashion so as not to selectively disclose, delay disclosure, or give itself or its affiliate any undue advantage related to the disclosure. A chronological log should be maintained showing the date, time and rationale for the disclosure. Any chronological log should be open for public inspection during normal business hours.(9) The [natural gas distribution company] should justly and reasonably allocate to its marketing affiliate or division the costs or expenses for general administration or support services.(10) The [natural gas distribution company] selling surplus gas supplies and/or upstream capacity on a short-term basis (as defined by the Federal Energy Regulatory Commission) to its affiliate should make supplies available to similarly situated marketers on a nondiscriminatory basis. The [natural gas distribution company] should not make any gas supplies and/or upstream capacity available through private disclosure to the [natural gas distribution company's] affiliate unless the availability is made simultaneously with public dissemination in a manner that fairly apprises interested parties of the availability of the gas supplies and/or upstream capacity. The [natural gas distribution company] should maintain a chronological log of these public disseminations. Any chronological log should be open for public inspection during normal business hours.(11) The [natural gas distribution company] should not condition or tie agreements to release interstate pipeline capacity to any service in which the [natural gas distribution company] or affiliate is involved.(12) The [natural gas distribution company] should not directly or by implication . . . represent to any customer, supplier or third party that an advantage may accrue to any party through use of the [natural gas distribution company's] affiliate or subsidiary.(13) The [natural gas distribution company] should establish and file with the Commission a complaint procedure for dealing with any alleged violations of any of the standards listed in paragraphs (1) through (12), this paragraph or paragraphs (14) and (15), excepting for paragraph (9), which should be exclusively under the purview of the Commission. These procedures should be developed in consultation with interested parties during consideration of any tariff guided by this section and § 69.191 (relating to general). The Commission may expect establishment of a complaint procedure or other recordkeeping requirements if warranted by subsequent facts or circumstances.(14) The [natural gas distribution company] should keep a chronological log of any complaints, excepting paragraph (9), regarding discriminatory treatment of natural gas suppliers. This chronological log should include the date and nature of the complaint and the [natural gas distribution company's] resolution of it. Any chronological log should be open for inspection during normal business hours.(15) Parties alleging violations of these standards may pursue their allegations through the Commission's established complaint procedures. A complainant bears the burden of proof consistent with 66 Pa. C.S. (relating to Public Utility Code) in regard to the allegations.
Additionally, the Commission would propose the following interim standards of conduct related to the activities of natural gas suppliers:(1) Licensees shall provide accurate information about their natural gas supplier services using plain language and common terms. Where new terms are used, such terms must be defined again using plain language: Information should be provided in a format which will allow for comparison of the various natural gas supply services offered and the prices charged for each type of service.(2) Licensees shall provide notification of the change in conditions of service, intent to cease operation as an natural gas supplier, explanation of denial of service, proper handling of deposits and proper handling of complaints in accordance with Commission regulations where applicable.(3) Licensees shall maintain the confidentiality of customers' historic payment information and right of access to their own load and billing information.(4) Licensees shall not discriminate in the provision of natural gas supply services as to availability and terms of service based on race, color, religion, national origin, sex, marital status, age receipt of public assistance income, and exercise of rights under the Consumer Credit Protection Act, 15 U.S.C. §§ 1691-1691f; Regulation B, 12 C.F.R. §§ 202-202.14.(5) Licensees will be responsible for any fraudulent deceptive or other unlawful marketing or billing acts performed by their agents or representatives. Licensee shall inform consumers of state consumer protection laws that govern the cancellation or rescission of natural gas supply service contracts. 73 P. S. § 201-7.
The Commission's Executive Director has established a working group, as noted in Enron's comments, to fully develop the final guidelines for standards of conduct. The working group will commence meetings this summer with an intended conclusion to be reached early in the fourth quarter of 1999.
F. Marketing Materials
The OCA recommends that the Commission consider whether there are marketer practices or activities which, in the interim, must be modified to be consistent with the act. The OCA notes that the act eliminates the 5% Gross Receipts Tax (GRT). According to the OCA, the absence of the GRT had provided a major source of savings customers of competitive natural gas suppliers have experienced. Specifically, the OCA recommends that:
1. The Commission require that the procedures for changing suppliers and customer information and disclosure requirements set forth in the Standards for Changing a Customer's Electric Generation Supplier at 52 Pa. Code §§ 57.171--57.179 and regulations pertaining to Customer Information requirements at 52 Pa. Code §§ 54.1--54.9 be applied to natural gas suppliers except where differences between electric and gas service make them inappropriate.
2. The Commission should state that prospective price comparisons between a marketer's bill (exclusive of GRT) is not considered to be appropriate or consistent with the customer information provisions of the act and consumer protection principles.
3. The Commission require that natural gas suppliers must state their rates in the same units of measure as the natural gas distribution company to avoid customer confusion.
We believe that the Commission's regulations at 52 Pa. Code §§ 54.1--54.9 and 54.171--54.179 could form the basis for restructuring in the natural gas industry. Parties should refer to these electric industry standards for guidance until the Commission has developed regulations or these matters are resolved in the restructuring cases.
We agree with the OCA's position regarding the exclusion of the GRT from comparisons of the charges of a natural gas supplier and a natural gas distribution company. While the GRT may remain in effect during the balance of 1999, the Commission believes that it would be inappropriate for a natural gas supplier to cite the savings its service could provide because of the applicability of the GRT to the charges of the natural gas distribution companies. Consumers could easily be misled in making comparisons between the service offerings because few consumers will be aware of the specific elements of the act and its specific elimination of the GRT.
Finally, we agree with the OCA that a natural gas supplier must employ the same units of measures as the competing natural gas distribution company when comparing its services to comparable services provided by the natural gas distribution company or the supplier of last resort. The Commission believes that this is essential so that consumers are provided with the vital information they need so that they may exercise their rights to select among competitive natural gas suppliers, natural gas distribution companies or suppliers of last resort.
G. Sample Disclosure Statement
The OSBA notes that the proposed Terms of Service requires a statement of price that the customer will pay per Mcf/Dth/ccf. The OSBA recommends that this requirement be changed to require an estimated effective rate per Mcf/Dth/ccf where a natural gas supplier offers a lump sum billing arrangement. The OSBA believes that this may allow natural gas suppliers to offer lump sum billing arrangements in lieu of volume-based billing to their customers. The OSBA cites this type of service as being offered in at least one other state.
We will allow a natural gas supplier who proposes to provide a lump sum billing arrangement to provide an estimated effective rate per Mcf/Dth/ccf if the supplier also provides the customers the estimated annual consumption upon which the estimated charge had been based. We do not wish to preclude the possible service options consumers may enjoy yet we believe that consumers must be provided with reasonable information on which they may base their service decisions.
The Commission thanks all of the commentors for providing thorough input on the issues raised by the June 24, 1999 Tentative Order. The comments facilitated the development by the Commission of licensing requirements regarding natural gas suppliers in the Commonwealth;
It Is Ordered That:
1. All natural gas suppliers as defined in 66 Pa.C.S. 2201 wishing to provide natural gas supply services to retail gas customers utilizing the jurisdictional facilities of a natural gas distribution company, or aggregating residential, commercial and/or industrial natural gas load in this Commonwealth shall first apply for a license from this Commission under the licensing instructions and procedures established herein.
2. A copy of this order, accompanying statements of the Commissioners and the appendices be served upon all jurisdictional natural gas distribution companies, the Office of Consumer Advocate, the Office of Small Business Advocate, the Office of Trial Staff, Legislative stakeholders, and shall be made available to all other interested parties and posted on the Commission's web page at http://puc.paonline.com.
3. The Commission's contacts for this matter are Patricia K. Burket, Assistant Counsel of the Law Bureau, (717) 787-3464, and Thomas Maher, Fixed Utility Services, (717) 787-5704, E-mail Maher@puc.state.pa.us, fax (717) 772-1933.
4. A copy of this opinion and order without Appendix A be submitted to the Legislative Reference Bureau for publication in the Pennsylvania Bulletin.
JAMES J. MCNULTY,
[Pa.B. Doc. No. 00-156. Filed for public inspection January 21, 2000, 9:00 a.m.]
1 The Commission's home page address is: http://puc.paonline.com; click on the natural gas icon then select ''Natural Gas Supplier Licensing and Information'' to access the natural gas supplier License Application form.
2 52 Pa. Code Chapter 56 may be purchased from Fry Communications by calling (717) 766-0211 ext. 2339.
3 Pa.P.U.C. Communications Office (717) 783-9970, or FAX (717) 787-4193.
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