COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING BEFORE COMMITTEE ON LAW & GOV'T. - - - Room 400, City Hall Philadelphia, Pennsylvania Thursday, May 27, 1999 12:30 p.m. - - - RESOLUTION 990209 - Authorizing Council's Committee on Law and Government to investigate the overall impact of the deregulation on the City and its residents, including, but not limited to, such issues as whether there is a need for City government to fill gaps left by the Public Utility Commission in informing citizens of money-saving options created by deregulation; whether customer decision to switch electric suppliers are being properly honored and implemented; and whether steps can be taken to further reduce the City and School District's cost of purchasing electricity. PRESENT: COUNCILMAN DAVID COHEN, Chair COUNCILMAN ANGEL L. ORTIZ COUNCILMAN MICHAEL A. NUTTER COUNCILMAN FRANK RIZZO - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center, Suite 600 Philadelphia, PA 19103 (215) 561-2220 2 5/27/99 LAW & GOV'T - RES. 990209 I N D E X Nora Mead Brownell, Commissioner. . . . . . . Pennsylvania Public Utility Commission Kevin Cadden, PUC Manager of Communications 6 Sonny Popowski, Consumer Advocate of PA . . . 51 7 Peter Meadows-Adels, General Counsel. . . . . 74 8 Citizens for Pennsylvania's Future 9 Liz Robinson, Director. . . . . . . . . . . . 93 Energy Coordinating Agency in Philadelphia 10 Andrew Altman, Deputy Director. . . . . . . . 102 11 Clean Air Council 12 Andrew Park, Executive Director . . . . . . . 114 Center for Lesbians and Gay Civil Rights 13 Stephen Huntoon, Director of Business . . . . 120 14 Development & Regulatory Affairs, Connectiv Energy 15 Chris van de Velde, Manager . . . . . . . . . 129 Energy Cooperative Association of Pennsylvania 16 Andrew Frishkoff, Executive Director. . . . . 138 Pennsylvania Low-Income Housing Coalition Robert Small, Private Citizen . . . . . . . . 146 Tim Carney, Energy Cooperative. . . . . . . . 151 3 5/27/99 LAW & GOV'T - RES. 990209 P R O C E E D I N G S
The Committee on Law and Government is now in session for the purpose of holding a hearing on Resolution No. 990209. The resolution is a resolution authorizing Council's Committee on Law and Government to investigate the overall impact of the deregulation on the City and its residents, including, but not limited to, such issues as whether there is a need for City government to fill gaps left by the Public Utility Commission in informing citizens of money-saving options created by deregulation; whether customer decision to switch electric suppliers are being properly honored and implemented; and whether steps can be taken to further reduce the City and School District's cost of purchasing electricity. This resolution was introduced by Councilman Dave Cohen, Chairman of the Law and Government Committee, and was adopted by the Council of the City of Philadelphia on April 7, 1999. The first witness will be Commissioner Laura Mead Brownell, from the Pennsylvania Public 4 5/27/99 LAW & GOV'T - RES. 990209 Utility Commission. Commissioner Brownell, we are very pleased that you were able to make it this afternoon.
For our purposes, you have to identify yourself for the record.
Yes. I'm Nora Mead Brownell, a Commissioner on the Pennsylvania Public Utility Commission.
Councilman Cohen and Councilman Ortiz, I am delighted to be here today for a lot of reasons, including that Philadelphia's my home, so I'm particularly glad to see my colleagues and friends from the Philadelphia area. And I applaud your efforts to encourage greater dialogue on consumer education and consumer participation in electric choice. For those of us who have worked hard to make sure that we brought choice to Pennsylvania and brought real savings to individual consumers and not just to large users, it's important that we get the 5 5/27/99 LAW & GOV'T - RES. 990209 message out. So I hope today is just the beginning of a relationship where we can continue the dialogue, both here in City Hall and out in the communities to raise people's awareness, to make sure we're getting the feedback that we need in order to deliver the message that we need, and to work with you in answering any questions that you may have. This afternoon, I'd like to briefly talk about the state of the market, both in Pennsylvania and on the national level, what the PUC has done, and what we're doing in the future, and how we might better work together to get the message out. Councilman Rizzo, welcome. Pennsylvania's just one of a handful of states, as you know, that have begun to implement restructuring. Over the next several years, about a dozen more states will give customers the opportunity to select a new electric supplier. I'm particularly pleased that Pennsylvania is recognized as the national leader, and the reason it's recognized as a national 6 5/27/99 LAW & GOV'T - RES. 990209 leader is because of its consumer education program and because it's one of the first states to bring real choice in the early stages of the transaction to the market. As of April 1, more than 395,000 customers have selected a new supplier. 5 million customers 9 who are eligible to choose. More than 2 million 10 consumers, about 38 percent of the total number of 11 electric customers in the state, enrolled in the Choice Program. What does that mean in Philadelphia? In Philadelphia, almost 14 percent of PECO's customers are served by an alternative supplier. About 13 percent of those are residential customers. 6 of PECO's customers load is served by an alternative supplier. Of that is about 15 percent of the residential load. There are 13 suppliers soliciting residential customers in the PECO territory. That's higher than any other place in the State. And approximately 120 community-based organizations are assisting in the education efforts of the Electric Choice Program. 7 5/27/99 LAW & GOV'T - RES. 990209 Our approach to electric restructuring has been different from other states in that our model's had a longer transition period, and because of the way we structured that transaction period, there is an ability for marketers to come into the market earlier and for consumers to see greater savings earlier. I'd like to talk about that in comparison to other markets. percent of utility customers have picked new suppliers. million customers have selected new suppliers compared with Pennsylvania's 395,000 after a few months. California has 32 licensed suppliers, Pennsylvania has 88. That means that marketers believe Pennsylvania is a place where they can really serve consumers and really have the opportunity to participate in a restructured market. 3 percent 8 5/27/99 LAW & GOV'T - RES. 990209 of customers have chosen to participate. So that gives you an idea of what other restructured markets look like. But when I compare us to those markets, I don't want you to think that that would suggest in any way that we're satisfied that percent is enough. 8 I want to talk a little bit now about 9 what we have done an we are we're focussing effort 10 in the future. Pennsylvania took an approach a 11 bifurcated approach. We've had a statewide -- 12
That 13 percent, that's statewide, that 13 percent you speak about?
That 13 percent is in PECO's residential customers. That's what I was referring to.
That's not 9 5/27/99 LAW & GOV'T - RES. 990209 statewide.
No. It's about 4 percent statewide. It's higher in this market 5 because prices were higher, because the shopping 6 credit allows more leverage, and because there are 7 more marketers marketing. But primarily driven by 8 higher prices than in other places in the State. 9 We developed an integrated 10 communications program using every available tool 11 -- advertising, public relations, direct mail, community-based organizations outreach, to name only a few. We've made special efforts to reach minority, poor, and elderly customers, those customers who are least likely to have the confidence in the process. Our activities to date include -- and I'm going to mention only a few -- communication via direct mail to 5.4 million electric customers, informing them of the opportunity to shop; a second direct mail piece to 2 million customers who enrolled in the initial Choice Program, and they were mailed a "How To Shop" brochure, giving them a greater level of details; a statewide advertising program that included TV, radio, and 10 5/27/99 LAW & GOV'T - RES. 990209 print. And our strategy was to raise awareness via the electronic media because it's important to capture people's attention. And unlike other states, we did a couple of different things in our statewide media program. We had a little fun with, and it some people have said, Why did you have a little fun with such a serious choice? Well, people are very intimidated by this process. It's a new product, so we wanted to get them to feel comfortable, we wanted to build their confidence. The second thing that we did that was somewhat different from other states is, we used that as an opportunity to drive people to information. We gave our 800 number so that people could feel free to call the Public Utility Commission for more information. All of our written materials included not only that 800 number but the 800 number of the local utilities in the event that people felt more comfortable in directing their inquiries there. The statewide program was matched by a local program that was developed and implemented 11 5/27/99 LAW & GOV'T - RES. 990209 by each of the local utilities. Our program also included outreach to more than 1300 community- based organizations on a list that's growing day by day. They have a special 800 number where they can call to get resources that they need to deliver the new message to their consumer. We've had outreach to special groups. As I mentioned -- those with limited income, disabled, visually-impaired, minority organizations. We developed audiocassettes for distribution for the video-impaired. We've worked with the Hispanic community and over 30 organizations, including the Philadelphia Hispanic Chamber of Commerce, to make sure that we're reaching the Latino community. We in fact have engaged the services of Mendosa Harmalin (ph.) and George Beach (ph.) to help us with that outreach. We've had extensive training sessions with all of the executive-level agency in the Commonwealth.
Why didn't you use a 12 5/27/99 LAW & GOV'T - RES. 990209 Latino public relations firm?
Because we wanted to be sure that there was representation on cultural and language issues that we understood. We felt it was important to --
But you said you used Beach Advertising to go towards the Latino community.
No, no. We used George Beach and Mendosa Harmalin, I'm sorry.
I admit that I may be functionally illiterate, having only a couple of degrees, including a law practice, but one night in the midst of everything else, I decided this was a good idea and that I ought to change to another company.
And laboriously, I sat down. There was a form to fill out, and I began filling it out, and then I got to one point where I just picked up the thing and threw it as far away as I could 'cause I was insulted by the fact that I had to figure out what my customer identification number with PECO was -- and, of course, I didn't have that available, but the form called for that, and I had no idea where that number was, I had no idea whether filling out the rest and leaving that blank would be successful or not. And it's -- having a good program is a wonderful thing if it's made easy for people to go ahead and do. Now, the second problem, which I didn't quite reach, was, how was I going to suddenly find out about what company I ought to pick, where would there be information made not so that I have to go out and make a telephone call somewhere.
But why wasn't there some information that I got when I got my electric bill that informed me of my rights. At the same 14 5/27/99 LAW & GOV'T - RES. 990209 time I paid the electric bill, I could indicate that I wanted to switch to another company. Now, I'm sure that there was thought given to this whole process and there may be answers, but could you give me an indication of how it could be simplified, because most people have so many other duties that they have to tend to, that if -- unless it's going to be presented to them in a way which permits them the moment they're attention is directed to it and they have to pay these electric bills, when they pay their bill, can't they do something right then and there? Can't they notify PECO right then that they're switching to some other company? And can't they avoid using a customer number or something so that they could just go ahead and take care of everything? So I'm raising those questions with you, and I hope in the course of what you're stating, you will deal with that. I think what you've outlined is an excellent program. I think you've gone through, you know, a great deal of effort to try to reach people, but I think what maybe attention was not paid to sufficiently was 15 5/27/99 LAW & GOV'T - RES. 990209 how to make it easy for people to comply.
You're right, right. And I wish that, in fact, we knew when we began this program what we now know today. This has been a learning process, and there are things that we did right and things that we did not do right. Some things, of course, were negotiated with the companies themselves. But let me tell you a little bit about what we're doing, and I'm going to ask my communications director, Kevin Cadden, to fill in some of the blanks.
In the initial stages, Councilman, it was very complicated. We had a two-step process, for example, that said that you had to enroll first and choose later. We did that for a couple of reasons, one of which that there was such an overwhelming response in our pilot program, that we weren't sure how many people were going to sign up and whether the systems could deal with that. We're going to be changing that process in the fall and we're going to be allowing people to sign up directly and to sign up directly 16 5/27/99 LAW & GOV'T - RES. 990209 with the marketer of their choice. The second thing is, is that we do routinely send out, and will twice a year and post on our Website, the marketers that are in the market and how to reach them. But we have simplified the other procedures in an order that we just issued last week, and I'm going to ask Kevin Cadden to give you the details about that.
Councilman, I'm Kevin Cadden. I'm the Commission's Manager of Communications.
Okay, thank you. I'm also the Chairman of our Implementation Committee between the suppliers and the electric distribution companies. Last week, at a public meeting, the Commission voted on a new procedures order for next year that resolves the problem with the account number. In September of this year, it will no longer become a two-step process; it will be a one-step process, and the customer will -- will be given an opportunity to restrict the 17 5/27/99 LAW & GOV'T - RES. 990209 release of his account information, his account number to the electric distribution -- yeah, to the electric generation supplier, but absent the customer saying, "No, I don't want my account number released to the electric generation supplier," it will be provided to the electric generation supplier. The only reason I say this is become it's complicated when you switch from an existing utility company to someone else. There's a whole series of data that must flow to the new carrier, including historic use, building information, name, address, account number, and rate class. One thing that we did find out the first year of the program was that while you'll know your address and you'll know that you're a residential customer, you will not know the account number. So the new order will make it easier for customers to switch because generally speaking, the account number will be provided to the electric generation suppliers.
PECO, unless the customer 18 5/27/99 LAW & GOV'T - RES. 990209 says, "No, I don't want to participate."
All right, I'm -- I don't know why somebody -- you know, I don't know what that second -- the question I asked about why that gets involved. Why can't the person just simply write -- check out a box saying, "I wish to switch to. . . (and the name of the company)"?
You can't tell PECO that because PECO's your electric distribution company. You must tell electric generation supplier that you're picking them because they need to know how to schedule load and things like that. You don't tell PECO; you tell whoever you're picking, let's say it's ECAP, you would call ECAP up and say, Hi, I'm so-and-so, and I'd like to select you as my electric generation supplier.
Well, can you tell me why it has to be that way? Why can't PECO -- PECO is under the jurisdiction of the Commission, is it not? 19 5/27/99 LAW & GOV'T - RES. 990209
Would the Commission have the power to direct PECO, when informed by a customer of a desire to switch to another company, can't PECO be directed to send the necessary information to the other company?
That is, in fact, what we have done with our procedures where PECO will be providing that information. There was some considerable debate, and there still is, might add, over who owns the customer information -- whether PECO as the utility owns it, whether the customer owns it, and what latitude the PUC had in directing PECO or any utility to release that information. The debate concluded with our procedures order in which we concluded that the customer owns that, and the EDC, or the utility, PECO, in this case, has been directed to release that information in the fall. So we are simplifying that but you do need, unfortunately, because of the complicated 20 5/27/99 LAW & GOV'T - RES. 990209 nature of the transaction, parties need to have critical information so that they can make sure, in fact, that the load does follow the customers. So fortunately, it's the nature of the transaction.
Commissioner, it seems to me that the simplest of all transactions is that a customer says, "I want to be switched to another company." I agree the customer somehow will have to find out what company, you know, the customer wishes to choose. But beyond that, I just can't understand why PECO cannot be directed to forward all the necessary information. And if the company isn't prepared to take on the customers that are willing to go with the company, I don't think it ought to be, you 21 5/27/99 LAW & GOV'T - RES. 990209 know, operating in the state. So because there's no indication that the volume is so great that there's going to be a scheduling problem of any consequence. Customers would understand the switch will be made, you know, at some appropriate time. But I'm just saying that if you're going to get a customer response, you've got to make it very, very simple for the customer and one operation to make clear their choice. And that thereafter, government ought to assume the responsibility to directing to PECO what it ought to do. Now, PECO has no interest in helping us because, you know, I'm just talking -- not because it's necessarily an evil company, but from what I understand, there's something like $52 million worth of savings in the Philadelphia area that could be generated, say, if every residential customer chose some company other than PECO. They'd get the same services, the same quality they'd reach. The difference would be, it would cost consumers $52 million less, which means that PECO is now getting that 52 million. 22 5/27/99 LAW & GOV'T - RES. 990209 PECO obviously is a private enterprise company and is going to try to hold on to that money. I don't blame them. I mean, any company would try to do that and they would try to sell the notion that they do on TV, you know, "You've known us for a long time, we're reliable, stay with us." But somehow, it seems to me, we in government have a responsibility to get that savings, you know, for the residents. I think we're elected officials by the residents, and our prime responsibility is to them. So that's the reason I'm raising this, and I can't understand why we just can't direct the PECO, when it gets this information, to transmit all the information necessary about the customer.
You -- I -- I think we're in absolute agreement, that we need to simplify the process in every possible way. And in this recent order where that information will be released and it will not be the consumer's responsibility, we hope that it gets to that point. We've also taken some other steps to 23 5/27/99 LAW & GOV'T - RES. 990209 simplify the process. As Kevin indicated, the two-step process will not be in existence anymore. We are intensifying our efforts to reduce the information, the consumer education material, and we've already reprinted several times in ways based on feedback from the community and various market segments, in ways that are more understandable and easier for them to understand. We also took the step of expanding our telecommunications support group so that incoming calls could be supported with all the information that people need, and we have, in fact, noted over the past year that the number of minutes that our customer call service group is spending on the phone with consumers to help them questions is increasing. So we are pleased that people are getting to the place they need to get to to get more information. In addition, though, we're also expanding our efforts in this second year of community with the community-based organizations. We will continue the statewide awareness program because we do know that when we're on television and when we're on the media, it captures people's 24 5/27/99 LAW & GOV'T - RES. 990209 attention, but we intend to and are making plans to get out more at the community-based, expand our network with people like yourself who have credibility with consumers that the PUC, the utilities, and others don't have. I think it's really important for all of us to actively engage consumers in the dialogue.
Would PUC have the right to compel PECO enclose with the bill a notice about the consumer's right to choose and to have that information indicate that the service will be identical? That's my understanding, that PECO is going to continue to serve because they own the transmission lines, they're going to be transmitting the energy. So from the consumer's point of view, the consumer immediately achieves a saving as soon as the consumer picks the company, even if they pick a PECO subsidiary. It's my understanding that PECO has a subsidiary which -- and if the resident picks that subsidiary -- so it's not even really a different company, though it may operate 25 5/27/99 LAW & GOV'T - RES. 990209 under a different name -- they immediately achieve an percent savings. That's my understanding. 4 If I'm wrong, I would hope somebody here would, in 5 the course of the day, correct me. 6 If so, I almost wonder about the 7 mortality of PECO being able to carry out the 8 campaign it's carrying out because you could still stay with PECO through the subsidiary and get a substantial savings. And I think any company that operates, you know, under the privileges that a utility operates has a public duty to see to it that the people are not only served best but most economically because that's part of what constitutes the best kind of service. Am I wrong or right on that?
You're absolutely right, and the utilities-- there will be a mailing going out in June and another mailing going out in September with the information that you've described.
A mailing by PECO. The first letter will be signed by the PUC chairman John Quane (ph.) because we know from focus groups 5/27/99 LAW & GOV'T - RES. 990209 and our feedback that people believe that the PUC has a lot of credibility. Let me just --
A separate mailing. Well, I would urge, if it's possible, that that be rethought and that it go out together with the billing because I think two separate pieces of mail are not going to do it. I think what will do it better than anything else could do it would be if at the same time they get the bill, they have this mailing. And so I would urge consideration of that. Councilman Rizzo? I think --
Thank you, Councilman Cohen. Commissioner, welcome to Philadelphia, and Director.
First of all, with 27 5/27/99 LAW & GOV'T - RES. 990209 no disrespect to my colleague, I think that most people in this region have been overwhelmed with choice information via the mail, communicated on television, radio. I think where the confusion lies is the fact that people aren't aware of the fact that PECO Energy is still here to serve their needs. From many calls that I've received, people are willing to pay more -- believe this or not -- because of their years of service that PECO Energy provided them. And I have had people basically call to ask my guidance because they know that I worked for many years at PECO Energy. And I basically told them what Councilman Cohen just mentioned, that they could save money if they shopped. But many of them, at the conversation said, "I think I'm willing to pay a few more bucks because I have had this experience with PECO Energy." And I said, "Well, you do what you have to do, but if you choose the company, the subsidiary company, Exelon, you'll immediately save 8 percent." And I just can't convince many senior citizens to do that. So I just wanted to make sure that -- 28 5/27/99 LAW & GOV'T - RES. 990209 personally, I feel as though there's been lots of information about the choice in electric energy in this Philadelphia region. Now, something that concerns me more, and I want to make sure that I'm understanding it clearly, I knew about slamming in the telecommunications industry and in the long-distance industry. I'm starting to get calls, Commissioner, from people that have been changed without their permission, that were PECO Energy customers and have been switched without permission. Are you aware that this is occurring, and why is it occurring? Slamming is something that I know that Bell of Pennsylvania Bell Atlantic of Pennsylvania has put a block in their system, where that can't happen. But is slamming occurring to PECO Energy customers where they're being changed without their knowledge?
Councilman, slamming is a big issue both in the telecommunications issue, and we are seeing some reports of slamming which are under investigation under the Electric Choice Program. 29 5/27/99 LAW & GOV'T - RES. 990209 In some cases, that is due to data exchange problems. This is a massive undertaking, and I'm sure your friends at PECO can tell you how much time and energy and money they've spent in trying the make sure that their systems were equipped to support the exchange of data. In some cases, we have found that customers were confused about what choice they had made. We have not seen at this point the broad-based slamming that has happened in the telecommunications industry because of hiring third parties. We have made at the Commission very strong statements and rules on slamming and have indicated that we would have a zero tolerance for slamming. During the pilot programming, although the slamming was unintentional, we did impose fines on a company. It's something that we monitor very carefully. We have weekly reports on our incoming phone systems and informal complaints. So -- and I'd just like to go back and make sure that I -- that I impress upon the group in terms of pricing, all PECO customers receive a 30 5/27/99 LAW & GOV'T - RES. 990209 PUC-ordered percent cut regardless of what they do. If they choose another supplier, including the subsidiary, they potentially could save between to percent more. 6 Many customers are confused and believe 7 that the 8 percent reduction that they have 8 received, which only lasts for a year, is as good as they can do. So I appreciate your comments on our consumer education efforts. We certainly tried, but we still find that many people think 8 percent is as good as it can get. So we really think that we have more to do. And to the extent that customers choose to stay with PECO because they've been with them for years, that's fine; that's what choice is all about -- as long as people are making informed choices. And most people, when they realize they can save 15 or 16 percent rather than 8 percent, generally want to go somewhere else. But PECO is certainly an important institution in this community. We're pleased that their stock price has gone up over 40 percent since restructuring. We expect them then to be a very successful player in a restructured market. 31 5/27/99 LAW & GOV'T - RES. 990209 But we do need to understand that a lot of people still don't realize that there are more savings to be had.
I just believe that slamming is a defensive tactic and a charge being made by PECO, that it has very little substance. And, therefore, I would like to ask, so that we could tell whether I'm right in my allegation or whether Councilman Rizzo is right in saying that there's a slamming problem, we would like to have some specific information from the Commission as to the number of slamming problems that are alleged to exist. My speculation is that it's very little. But if it's more, I would like to get the facts so that we know. But secondly, how does one justify PECO continuing to be able to charge more than all others? What's the basis for what? I mean, why does the PUC permit PECO to charge more than these other companies charge?
The legislation in Pennsylvania, Councilman, allowed our utilities to stay in the generation business -- in this case, 32 5/27/99 LAW & GOV'T - RES. 990209 as the provider of last resort. Although there is a provision in the settlements that will allow us to bid out percent of the customers next year. 5 In some states, the legislature and the 6 PUC took the position that it was an incompatible 7 approach to restructuring in truly competitive 8 markets, and they did order their utilities out of 9 the generation business, that they could not be in 10 the business as of a date certain. Pennsylvania 11 chose not to go that route, so the legislation 12 allows them to serve customers as a provider of 13 last resort. 14 When the transition period ends, when 15 the stranded costs are collected and you get to a 16 fully competitive market, as more and more people 17 choose, I think that you will see price 18 compression, even from the providers of last 19 resort. But it was a political and a policy 20 decision that was made. And I also want to add too that PECO does, in fact, as you alluded to, continue to serve in the transmission and distribution business that is regulated by the PUC. So one of the issues that consumers have talked about, and I 33 5/27/99 LAW & GOV'T - RES. 990209 really want to use this forum to emphasize, is one of reliability. There was some impression left by materials in the market that would suggest that if you chose another supplier, reliability would be an issue. That is not going to be an issue. All of our suppliers are licensed, we look at their credentials very carefully.
In the telecommunications industry, Commissioner, there were a lot of deceptive practices that generated slamming where a person would send back an application for a free credit card. Are there any -- have you identified any deceptive practices when we get this information about how widespread slamming is in the electric industry? Have you yet identified how slamming is occurring? Are there deceptive practices where people are sending back a form asking for information and that form is generating a transfer of their electric service? Do we know of any illegal activities? 34 5/27/99 LAW & GOV'T - RES. 990209
No, not yet. We have a rule, a customer disclosure rule, that was written actually by the woman sitting over there. It requires information that's provided to residential customers to before they switch. And let me explain a little bit about the process. Let's say you, Councilman, were to pick Exelon as your provider. Under the rules of the Public Utility Commission, Exelon would send an electronic transaction to the Philadelphia Electric Company and say, Gee, Councilman Rizzo picked Exelon as its provider. Then PECO, before you are switched, before you are switched, PECO is required to send a letter to you that basically says, "Dear Councilman Rizzo: We have been informed by Exelon that you selected them as your energy company. If that is not the case, please let us know within ten days." So before you are switched, unlike the telephone industry, you get this confirming letter -- not from the new company, but from your existing local distribution company. And we have not seen problems like that yet.
Could you comment on 35 5/27/99 LAW & GOV'T - RES. 990209 this combined billing? When this first started during the pilot, you had to receive a bill from the provider, your alternative provider? Now I notice that my PECO Energy bill includes my Exelon Energy bill. Are all of the companies now able to provide one bill?
Under the terms of the settlement, there are three options available. You can have a -- and I'll just use PECO as an example because we're in Philadelphia. You can have a PECO-consolidated bill, where PECO bill you for their piece of it, Exelon will bill you for their piece of it, and you would pay them one bill. You can also have a split bill where you would pay PECO for their piece. You would get a bill from PECO and you would get a bill from your other company, and you pay both bills. In the future, although we have not seen it, you could also get an EGS-consolidated bill, where instead of sending your check to PECO, if you chose Exelon, you would send a check to Exelon, and Exelon would in fact then reimburse PECO for PECO's piece of the bill. 36 5/27/99 LAW & GOV'T - RES. 990209 So there are three options available. Now, the last one we haven't seen a lot of yet and probably won't for some point in time.
The customer can choose which option they want. So I'm being completely honest with you, there are some companies that will only do -- if you pick them, they will only go the split-bill route.
If you do nothing, if you don't respond, if I tomorrow choose another provider, do you specifically have to --
Does it specifically direct, if you make no decision whatsoever --
If you actually -- if in their enrollment, their sign-up form, you actually do make that decision, some companies, Green Mountain Power for instance, when they send you the disclosure form, they will tell you, "By the way, all we do is the split-bill option." And now, if you don't want to choose them, that's also fine, your choice. 37 5/27/99 LAW & GOV'T - RES. 990209
Commissioner, I'm glad you mention that Green -- what are we doing to make sure, as a Commission, that they're being honest with their consumers? Now, I'm not suggesting what's been the accusations are right or wrong, that much of Green Mountain Power is generated by nuclear facilities. What are we doing to make sure that what they're telling the customers is also truthful?
We have authorized an audit procedure and will be reconciling that. And as I mentioned, all of our providers are licensed. And should we find any breach, such as misrepresentation -- and we have absolutely no 16 evidence that there is misrepresentation. What we do have is evidence that consumers in Pennsylvania feel very strongly about green power, more strongly than we've seen in California. But we definitely have an oversight and an audit procedure to make sure that representations are accurate, and we'll be exercising that very carefully. And I wonder, because I have to go and I'm going to leave my colleague Kevin Cadden, and 38 5/27/99 LAW & GOV'T - RES. 990209 I apologize. I would love to come back, I would love to talk more. I want to talk very quickly about some of the ways in which I think we can work together. I should first mention some savings that we've already seen, the Philadelphia School District recently picked a supplier that will save $3.6 million in 1999. Jefferson Health Systems is estimating a savings at $3.5 million in 1999. We have thousands of other examples. One of the additional things that we want to do in this year is encourage more aggregation, and I know that you're going to hear from ECAP. They've been among the most successful aggregators of low-income and other consumers in Pennsylvania. And we need to do everything we can to encourage more work in that area. Ways in which we might work together, and I think of you've mentioned this, Councilman Cohen, using City mailing taxes, whether they be taxes, PGW, City Water Works, we can provide the materials that would not add to the postage.
And would your education fund pay for that? 39 5/27/99 LAW & GOV'T - RES. 990209
We would add to the materials, yes. We would provide those.
I just want to get ready for negotiations with the Administration.
We'd like to work with City Council to set up a series of town meetings in the districts --
-- where we would provide resources and staff. I spend most of my time on the road talking about electric choice because I believe passionately that competitive markets always work better for consumers than monopolies. There's more innovation, there's more green power, there's more technology. We would like to use U.S. feedback mechanisms. Councilman Rizzo mentioned that --
Well, he can always represent PECO. He does it very effectively, and I hope they appreciate it.
We'd like to hear what you're hearing from consumers. As I told you, we amended our approach in many cases and we amended 40 5/27/99 LAW & GOV'T - RES. 990209 some of our materials based on feedback from our network, and we'd like to expand that network. If you have participated in electric choice, I hope that all of you stand up every opportunity you have to talk about the savings you are experiencing. You don't have to talk about who you chose but I think it's really important for people to look at role models like yourself to talk about the experiences you're having. I think there is no end of opportunities for us to work together, and we are very grateful and will make ourselves available to pursue this in whatever way you'd like. And you're going to hear from a lot of very smart people like Sonny Popowsky, like ECAP, like Steve Huntoon from Connectiv, who I'm sure will have a hundred more ideas for you. They'll keep you busy all day long.
Well, thank you very much. And, Commissioner, we're delighted you were able to make it today, and we very much appreciate the time that you gave us. We understand that you have to leave, and we're just very pleased that you were here. 41 5/27/99 LAW & GOV'T - RES. 990209 And we hope that this is going to be the beginning of the kind of cooperation that consumers will reap great benefits from.
Terrific, and it's a five off-hour dentist appointment so I assure you I'd rather be here.
Knowing where you're going, I agree with your conclusion.
And, Councilman, I'm also here to answer the technical questions you may have about the program.
Well, there was one question that Councilman Rizzo had asked that I didn't quite understand the answer to.
And it was probably my fault but maybe you can clarify it for me. The question was the single billing. What happens if a choice is made for another company and the consumer does nothing?
In the disclosure form, you have to -- you make a decision. Generally, you will default an E -- 42 5/27/99 LAW & GOV'T - RES. 990209
You will get an EDC -- I'm sorry, I don't want to get too technical here. You will get a bill from PECO that would include your supplier charges.
Have you identified any advantage? I just can't understand why a person -- but it's their right to get a separate 43 5/27/99 LAW & GOV'T - RES. 990209 bill. Have you identified any advantage of doing it one way versus the other?
If you were a very large industrial customer, you know, you're now a Luken Steel or a Scott Paper Company, you know, there may be some advantage to you to getting a split bill. If you have a particular -- if you want the green product from Green Mountain and you say, Gee, I want to buy the green product, you know, then you have to get a split bill because that's the way they market their product. I believe the Energy Cooperative Association of Philadelphia also markets a green product, but that's also through EDC, an electric distribution company, consolidated bill.
I haven't done a lot of shopping, but going back to the integrity of the provide that these companies have and some of the things that they offer in lieu of discounts, you know, they give you a rubber duck and tell you that that's a good reason for you to pick them, but there are some -- there are some perks that these companies offer that may appeal to certain 44 5/27/99 LAW & GOV'T - RES. 990209 customers. Mileage on their airline ticket or discounts on some other things that they purchase. Again, does the PUC look at these to make sure that, in fact, the consumer --
You must be able -- under our rules, you must believe to make an apples-to-apples comparison. So -- and let me explain what I mean by that. If you were a typical PECO customer, you are paying about 5.65 cents per kilowatt hour for your generation and transmission service. Under our rules, residential customers and commercial customers at KW, which is a demand 15 factor, and below, must be presented in an 16 apples-to-apples comparison. 17 Now, in the larger industrial 18 customers, there is not that rule but we haven't 19 found that to be a problem. 20 So answer very simply, the electric 21 generation suppliers, the new people on the block, 22 must be able to provide an apples-to-apples 23 comparison. 24
How get an 25 apples-to-apples comparison when there are so many 45 5/27/99 LAW & GOV'T - RES. 990209 things that are different with each company?
In terms of the price of electricity, in other words, if I am ECAP -- and I don't know off the top of my head what ECAP charges. But what they say is -- I want to say it's 4.79 centers per kilowatt hour. PECO charges you 5.65 -- I'm sorry. ECAP charges 4.79 so what you have there is an apples-to-apples comparison.
So you can factor out all the little goodies and look at the bottom line and see what a kilowatt hour of electric service costs?
Okay. That is part of confusion here. When you look at the comparisons, especially if they're all on one sheet, it's really difficult to determine what's the best deal on the sheet, at least from some of the information that I've received. And, obviously, you want to look and see where the best deal is when you make a decision. But I think the average consumer has the difficult time because of all the mish-mosh of things that are available and 46 5/27/99 LAW & GOV'T - RES. 990209 can't get right to the point where they want to be. They're not concerned about any of the other perks. But in all fairness, to a certain consumer, whatever that other company's offering, even if there's, let's say, a tenth of a percent higher, what they're offering could make that a good deal for them.
The purpose of this hearing is very simple. We have had electric deregulation, and the citizens of Philadelphia, it seems, are not taking advantage of lower rates that other companies offer. What is it in your estimation that needs to be done so that the citizens of Philadelphia who now pay -- probably the huge majority of them are now with PECO, and PECO is still the highest electric utility in the area right? Is that correct?
The highest electric 47 5/27/99 LAW & GOV'T - RES. 990209 distribution company.
Right. So what is it that needs to be done so that the citizens and specifically the senior citizens and citizens with fixed incomes can take advantage of what was supposed to be, what was supposed to be a consumer-friendly legislation that passed forcing deregulation in the state of Pennsylvania so that they could then go and get their energy cheaper, so that they don't have to pay the amount of monies that they were paying before? We have the huge majority of individuals paying -- still paying the highest utility rates in the state. What is it that needs to be done so that we can get citizens to take advantage of those companies that are there? We have 88 companies?
Right, 88. And I 48 5/27/99 LAW & GOV'T - RES. 990209 imagine that probably 87 of them probably supply electricity cheaper than PECO.
So that you understand, we have 88 licensed suppliers, not all of them in the residential market, not all of them in the --
I think there are 9 licensed suppliers participating in the 10 residential market in Philadelphia. 11
Councilman Ortiz, could I suggest this? There are many other -- Mr. Popowski, can you stay here for a while?
This was my only question. I just want to get him on the record on this. This is the only question I have.
I would love you to stay here because we would like to bring you back. If there are relevant questions raised by others, we'd like to have your knowledge of a response. 49 5/27/99 LAW & GOV'T - RES. 990209
What is it that you recommend so that we can raise the amount of the percentage of people who are taking advantage of deregulation from percent to 60, 80, 90 6 percent? What is it that needs to be done? What 7 needs to be simplified so that the consumer in 8 North Philadelphia -- 9
What we need is -- well, there are a couple things that we need. We need organizations like the City Council to help us in educating the customers. Right now, as I think Commissioner Brownell said, we have about a 90 percent awareness rate in Philadelphia, so that 90 percent of the people, when prompted, know something about electric competition. 50 5/27/99 LAW & GOV'T - RES. 990209 We know that about 40 percent of the people know actually how to go about shopping for power. That's a number that we have been directed, with myself and my staff, to increase next year. But the specific answer to the Councilman's questions, I believe we need a couple things. We need -- I mean, the fundamental thing is that we need more suppliers to actually go out and market their product. I think that's -- standing here today, that's how I would answer that question. We need marketers out there pitching their product.
Thank you. But you'll be available, you'll be able to stay here for the rest of the hearing?
Thank you very much. The next witness will be is Peter Meadows-Adels, staff attorney, Citizens for Pennsylvania's Future. Okay, and would Mr. Popowski join him so they both could speak, one after the other. What was the name of the previous 51 5/27/99 LAW & GOV'T - RES. 990209 witness who was together with the Commissioner? UNIDENTIFIED SPEAKER: That was Kevin C-A-D-D-E-N, Kevin Cadden.
All right. Now, which one wants to go first? Would Mr. Popowski go first because. . . Julie, would you see that that these statements are given out if they have enough so that the folks in the audience can get it.
I think you ought to be up there so you can follow Mr. Popowski immediately. Yes, please. Mr. Popowski, identify yourself for the record and then go right head, sir.
Thank you, Councilman Cohen. My name is Sonny Popowski. I'm the Consumer Advocate of Pennsylvania. I've been the Consumer Advocate since 1990 and worked for the office of Consumer Advocate in Harrisburg since 1979. My job is to represent the interests of 52 5/27/99 LAW & GOV'T - RES. 990209 Pennsylvania Utility consumers before the Public Utility Commission and other state and federal agencies, courts, and legislative bodies.
And I have to interrupt you to tell you from everything I've heard, you do that job wonderfully well. We're very appreciative.
Well, thank you very much. Thank you. I appreciate that, although I have to confess that, as I say in my testimony, part of what I've worked on for the last years 13 or so has been a series of rate cases that you, I 14 know, are very familiar with, involving PECO 15 Energy, which sort of got us to where we are now, 16 which is facing rates that are among the highest 17 in the country. 18 Now, it's in light of that experience 19 that I know that you shared over the last 20 years 20 with other people who are here testifying, that I'm pretty optimistic about where we are now with respect to restructuring of the electricity industry in Philadelphia and throughout Pennsylvania. On January 1, 1999, the rates for all PECO customers were reduced by 8 percent for 53 5/27/99 LAW & GOV'T - RES. 990209 the year 1999. In the year 2000, the rates will be percent less than they were prior to 1999. 4 And in the year 2001, the rates will be capped at 5 their pre-1999 levels. 6 Now, importantly, while the rates going forward are either being reduced or will be capped in the future for customers who continue to purchase their energy from PECO, the fact is that those customers who shop for electricity can reduce those rates even further. And as I will discuss later in my testimony, the additional savings that can be achieved from shopping are significant, particularly for residential customers who use a lot of electricity in the summer months. Now, the question before this panel, of course, is whether consumers have adequate information and knowledge to take advantage of the lower prices and alternative choices that have been made available to them as a result of electric industry restructuring. Again, I'd like to at least start with the positive side of that issue. There's little doubt in my mind that we are sitting here today in 54 5/27/99 LAW & GOV'T - RES. 990209 City Hall in Philadelphia in the center of what is the most active retail electricity market in the nation. I've attached to my written testimony a set of statistics that my office has compiled regarding the number of customers and the percentage of customer load of each of Pennsylvania's major utility companies that is being served by alternative generation as of April 1, that is after three months of the program. Now, for PECO, more than 205,000 customers had switched suppliers, which is more than the rest of Pennsylvania combined. It's also substantially more than the approximately 129,000 customers who are being served by alternative suppliers in the entire state of California, which was fully opened to retail competition in 1998. Now, I should hasten to add, though, that in my opinion, it's not just the number of customers who have switched that determines whether we've been successful or whether we are failing in electric restructuring in Pennsylvania. The question from my perspective is whether consumers as a whole have benefitted. And 55 5/27/99 LAW & GOV'T - RES. 990209 I think in Pennsylvania, at least so far, that consumers have benefitted. We've seen about $450 million in guaranteed rate reductions for the year 1999. We have seen prospective funding for our low-income universal service and energy conservation programs increased to nearly $100 million per year across Pennsylvania. And perhaps most significantly, we have long-term rate caps in place. What those rate caps mean are that for customers who continue to buy generation from the utilities, even if they don't see lower rates, at least their rates cannot be increased. The rates are capped for a long period of time into the future so that the stranded costs that I think we talked about the last time I testified here, the stranded costs cannot be dumped from the customers who leave back on to the customers who stay. That is, all customers are protected.
Now, with those protections in place, I still think, though, and I would agree certainly with you, Councilman Cohen, that more needs to be done by way of consumer information and consumer education in order to maximize the benefits that 56 5/27/99 LAW & GOV'T - RES. 990209 consumers can obtain from the Pennsylvania Electric Choice Program. If I could get one message out to the residential consumers of Philadelphia at today's hearing, it is that now is truly the time, and the Philadelphia area is truly the place, for people to shop for electricity and to save some real money on their electricity bills. Now, to make that point, I've attached again to my written testimony a copy of an article that appeared in the Philadelphia Inquirer of May 9, 1999, a couple Sundays ago, that I wish I could get every residential electric consumer in Philadelphia to read immediately. " And that's the end of the quote. And the article goes on to explain that for regular, that is the regular typical Rate R PECO customer who uses a lot of electricity in the summer -- maybe 1500 kilowatt hours, has air conditioning -- that customer can save about $20 a month, $20 a 57 5/27/99 LAW & GOV'T - RES. 990209 month during the summer months, June through September, by switching their supplier.
But what needs to be done? Because this is the whole thrust of this hearing. The whole thrust of the hearing is that we have only percent of the consumers enrolled 8 in an energy-saving company, and we have 87 9 percent of the people still paying the highest 10 rate in the state. 11 So what needs to be done in order to 12 say to that 87 percent of the populace, Hey, you 13 can save $300 or $400 or how many of the dollars it is, and if it's going to be a hot summer, you can save even more, okay? What is to be done? Does PECO need to do something? Does the PUC need to do something? What -- how do we get the message to the people in North Philadelphia, people who don't read papers -- a lot of stuff, people who are not in tune to advertising?
Councilman Ortiz, let me raise a question, following up what he is saying. Why couldn't there be one day in a 58 5/27/99 LAW & GOV'T - RES. 990209 given community where people could go, like they go to vote, could go and fill out a little slip that would make that change? Why can't we come up with ideas like that? Because when you tell people to shop, people today, because of the attack on labor organizations, are working many more hours than they ever did before, so many hours on two and sometimes three jobs that I think maybe the labor movement ought to go back 40 or 50 years and start a real fight for an 8-hour workday. Because in many families, that doesn't exist anymore; it's 10, 12 hours. There is no 14 time to shop. How are people going to know, you know, when we say "shop," it really, with due respect to everybody, makes no sense this area. How do you shop? How do you find out about the companies? Where are you going to get the time? Where are you going to get the information? It's an impossible thing, but if we could set up easy ways for doing it -- look, we get such sad stories here, we have hearings on different things, and we have a lot of people living in the row houses in Philadelphia, senior 59 5/27/99 LAW & GOV'T - RES. 990209 citizens coming to us saying, Do you know, because we sometimes have a doctor's appointment in the morning and the City no longer provides cut-rate fares during the rush hours, we got to pay regular transportation. You know what that means to us? It means to us that we give up a meal or two in order to pay transportation. I can't believe those people don't want to save money on electric energy. I mean, it makes no sense whatever. They're going to get the same service as they've always gotten, only they're going to have at least a few extra dollars, and maybe even more as you point out, at various times of the year. So what's wrong is the way in which we're approaching the problem. We're putting a burden on consumers that they have no way of coping with. And I think, therefore, it's our duty, as elected representatives, and you working on behalf of, you know, different governmental bodies to come up with a way to make it easy. Why can't we have one place where people can go at any time and vote to change? And why can't we have a policy? Because maybe people 60 5/27/99 LAW & GOV'T - RES. " It seems to me we've got to find a way to enable people to exercise their right to get electric energy at a lower cost. You know, all of us great minds sit around befuddled by only percent of the 100 12 percent exercising their right of choice. " In different areas, it's a good word; in other areas; it's a bad word. Choice that threatens the public school system I think is a bad word choice. In other areas, it might have a different meaning. So how do we effectuate the ability of people to release themselves from this terrible stranglehold that one company seems to have. They seem to have that stranglehold on the political system everywhere throughout the State and in this City Council and everybody. I know that it seems to have a very tight control for many reasons, and they're urging what to me is nonsense -- be loyal 61 5/27/99 LAW & GOV'T - RES. 990209 to a company that has served you well. What does that mean? "Served you well" by being the one company in the United States that's trying to rejuvenate the nuclear power aspect of the electric, you know, generation? What do you mean "well"? I understand their rates are 47 percent higher than the national average of rates, so how they've been serving us well, it seems to me, is by bilking the Philadelphia residents for a long time, and we ought to put an end to it. Now, maybe you can't say that. You know, I understand that. Maybe Councilman Ortiz and I can say that 'cause we go out to the voters, and they've apparently approved the approach we take of trying to fight on behalf of the rights of consumers.
Now, why can't we come up with a simple -- I think what Councilman Ortiz says is right.
The only two questions for this hearing are: why are they not doing it and how get 'em to do it?
Okay, yeah, you're 62 5/27/99 LAW & GOV'T - RES. 990209 right, that's exactly the question. And I think the brainstorming that you and Councilman Cohen have already done I think have contributed a lot of ideas already. But I think there's three things that have to be done, and now I'd probably add a fourth based on your discussions today. The first thing is I think, as Commissioner Brownell correctly pointed out, I think -- I believe that there is an awareness. That is, people in Pennsylvania and people in Philadelphia are aware that there is something out there, there is electric choice. Now, they've seen TV commercials, they've heard about it. But awareness -- and I think that's the first step, and I think the consumer education program has worked to stimulate awareness so that people know there's something out there. The problem is and what we have to work on now is that awareness is not enough. What you need to -- people need to believe to know in a very simple and straightforward manner how to shop for electricity -- the same way people know that when they drive down Broad Street and they see six different gas stations and they see the price of 63 5/27/99 LAW & GOV'T - RES. 990209 unleaded gasoline, regular or unleaded gasoline, they know how to compare those prices, people know that. What they don't know today, I believe, is what is a kilowatt hour, how much does it cost, how do I compare what PECO's charging me compared to what other people are charging me. We need to get people to the point where they can understand how to shop for electricity the way they shop for gasoline or any other commodity. 55 cents, you can save money every kilowatt hour of the year in Philadelphia. If you use 5,000 kilowatt hours a year, that's how much you've saved. And the fact is that there are marketers today, and I've included a chart in my testimony that was in the Inquirer that shows you have several marketers here in Philadelphia who are charging less than 5 cents. That's a simple comparison. We have -- people know that the minimum charge for a PECO residential customer -- 64 5/27/99 LAW & GOV'T - RES. 55. In the summer -- and that was the point of this article -- in the summer, that rate goes up to over cents a kilowatt hour above 500 6 kilowatt hours. Meanwhile, you've got these marketers out here who are all charging less than 5 cents. We've got to get that message out. It's a simple message. If you can pay less per kilowatt hour, there's another message out there. You can get kilowatt hours that come from certain types of generators. If you want to choose what type of energy you want, there are marketers out there who are certified that are providing green products. So we've done, I think, a decent job of getting consumers -- getting the public aware that there's a choice. We haven't done a good job yet 'cause we just haven't got -- it's not that we've failed; it's just that we haven't yet succeeded in getting customers to understand what it is they're shopping for. Now, I think there's two other things we need. One is, we need the competitive market 65 5/27/99 LAW & GOV'T - RES. 990209 to work. 21 cents per kilowatt hour for all usage above a certain level. " We need to have marketers out there who are going to have straightforward information to convince people that it's worth their while to take the time to learn. And then the third thing we need -- I think what we need is -- what we can't tolerate is information that's out there that discourages people from shopping, and I talk about that in my testimony. You can't have the kind of message out there that you were talking about. Councilman Cohen. That people are afraid that if they switch suppliers that if there's a storm, their lights will go out. That's not going to happen. If you switch suppliers, you will get exactly the same service in the case of a storm that you got when you bought from your regulated PECO supplier.
So we can't have -- you can't have misinformation going out there that discourages people from 66 5/27/99 LAW & GOV'T - RES. 990209 shopping. So I think the three things, in answer to your question, Councilman Ortiz, is: we need basic education about how to shop; we need the market to get out there to get people interested in shopping; and we need to prevent anybody from being out there, especially regulated entities, from being out there discouraging people from shopping by giving misinformation or putting fear into people's hearts that if they switch, they will be somehow penalized. That basically was the thrust of the rest of my testimony, but I think that was the basic question that you've raised.
There are all kinds of ideas. For example, it would seem to me that maybe consideration ought to be given to a proposal like this. A residential customer decides to choose a company other than PECO, sends that information in, just fills out, "Yes, I want to change." And at that point, something else ought to come into play, we ought to be able to immediately notify that residential customer that there are five major things: environmental 67 5/27/99 LAW & GOV'T - RES. 990209 considerations, you might want cost considerations, and maybe a few other aspects that I'm not familiar with. Which one of these do you want? In other words, we ought to be able to terminate the relationship with PECO right away, you know, and make is easy for the customer to shop. Really people don't want to know. This morning -- or yesterday, I got work from my auto repair man that in order for my car to pass inspection, I'm going to have to replace the windshield. Well, maybe there are hundreds of them, there might be thousands of companies that make windshields, but how would I know how to shop for a windshield? And, frankly, I don't want to learn all about windshields. So, you know, I think many consumers don't want to learn all about electricity. They got other real problems. You know, the kid woke up with a severe stomach pain in the middle of the night. Or the boss talked to me and, you know, told me that maybe I'm only going to have my job for a couple of more weeks. They can all kinds of problems. 68 5/27/99 LAW & GOV'T - RES. 990209 So why can't we sever the umbilical cord between the resident and PECO as soon as the resident wants to sever that, and then go on in a separate step to send immediately the consumer specific information, brief as possible, have them pick which box, check out which box which would list the name of the company, and complete the process. Maybe that's the method that could be used. Councilman Ortiz? There are all kinds of methods.
Can the PUC put out a chart that says "cheap," "not cheap," that's it. "Cheap,""not cheap," and, you know, select either from the not-cheap or the cheap, and people will select accordingly.
I mean, that's what this hearing is all about. We're trying to see how people can spend less money on their electricity.
Or "cheap" and "non-polluting" for those that are environmentally concerned. 69 5/27/99 LAW & GOV'T - RES. 990209 What we're trying to get at is our experience is that lower-income people particularly don't have the time, don't have the energy to get involved in studying a new -- a whole new subject matter. What they want is a continuation of electric energy, they would like it as cheaply as possible, and I think many of them would like it in an as environmentally sound way as possible. Now, there ought to be some way of making it easy for people to go in, you know, and get that done right away without making them students of the cost. You know, with due respect, sir, people won't know what we're talking about, I don't know what we're talking about to tell me that a kilowatt hour -- go shop for a company that sells kilowatt hours for less than 5.5 cents. I don't know why they charge 5.5 cents. You know, it's not a subject I'm particularly interested in. And I think that's true of all people. Why can't we find some way that accommodates the consumers instead of making the consumers accommodate to our techniques? That's what I'm looking for. 70 5/27/99 LAW & GOV'T - RES. 990209
Well, I don't disagree with you at all. What I will say is that there will be a letter going out to all customers, as Commissioner Brownell indicated -- and I think Kevin Cadden is still here -- that will identify for every customer what that is the price to compare. That is, every customer will be told, Here's the target, here's the bogey -- 5. -- the average price for PECO is 5.65, the lowest price is 5.55 for regular. Also on that information that will go to every consumer will be a list of the suppliers and their 800 numbers and their Websites of all the other suppliers serving residential customers in Philadelphia. Now, what you're saying, which I think is something that should be considered, is whether in addition, information should be given out about the price that's being charged to each of those consumers. That's why I attached -- like I said, I attached this chart that was in the Inquirer. You know, I think that's a good -- you know, it's a good start. I mean, I wish everybody could cut that chart out, you know, put it up on their 71 5/27/99 LAW & GOV'T - RES. 990209 refrigerator. And that's something that I think the Commission needs to consider, is whether additional information about pricing. One thing I would have to caution you is, prices change. So the price that goes out in June may not be the same price that's charged in August in a competitive market. So you do have to be careful there, but I think the ability to do basic price comparisons, as you said, is a key piece of information that we got to get to consumers in the simplest way possible. The only thing I disagree you with respectfully is, I think people are going to have to start to learn about what kilowatt hours are if they want to be able to shop to make an intelligent comparison because -- like I said, it's just like people can visualize a gallon of gasoline, a gallon of milk, it's much harder to visualize what is a kilowatt hour of electricity. But if people know -- if people understand that they use a thousand kilowatt hours a month and that they can get it for one penny a kilowatt hour cheaper over here, then they'll know. They'll say, Hey, that's $10 I can save. And that 72 5/27/99 LAW & GOV'T - RES. 990209 education, I think, is worth us at least trying to get that message out.
Well, I think it's worth trying but I still haven't learned whether it makes any economic sense to buy, say, top gasoline supreme rather than regular or plus, so that people, even in gasoline, you know, tend to shop blindly because none of us know the facts, but I have no objection to anything that will help educate the consumer, but I think we've got to, in addition to the education, make it easy for them to do. And we thank you because I think our job is done until we reach the goals that Councilman Ortiz talked about. There's no reason why 85 or 90 percent of the people, if they're not brainwashed by the PECO ads, there's no reason why they wouldn't pick the same kind of distribution of electric energy that costs them less. You know, it just makes no sense to be told that low-income people prefer to pay more for electric energy. I mean, I just don't know how we tolerate such advertising. And it seems to me 73 5/27/99 LAW & GOV'T - RES. 990209 that PECO's advertising probably reaches, in my judgment at least, a level of deception. And I would hope that the PUC is very carefully monitoring that. I think they try to indicate that there's something wrong if a person chooses a company other than PECO, and I just don't think that it is an appropriate way for PECO to try to hold on to its customers.
Well, as I said, I'd be happy -- and I think, as Commissioner Brownell also offered, I would certainly look forward to working with you and other members of Council. If there's any way to get out correct information that you need assistance on from me or my office to get out correct information to as many people as possible in the simplest manner, I'd be happy to work with you on that.
Well, we appreciate that. And could I have assurance that you'll be able to stay for the rest of the hearing too?
Because we would like at the very end to have an evaluation from 74 5/27/99 LAW & GOV'T - RES. 990209 you and from the person who spoke together with Commissioner Brownell, their evaluation of the various proposals that are going to come before us this afternoon. Mr. Meadows? Mr. Adels? That's the trouble having three names; you're never sure which is the second and which is the third.
Yes, we have to start learning that. Mr. Adels, we're delighted you're here. Please identify yourself for the record and then proceed.
Thank you. I'm Peter Meadows-Adels. I'm presently general counsel for a nonprofit environmental organization called Citizens for Pennsylvania's Future, which has just started up a few months ago -- in fact, at the same time as Customer Choices has been on the table. As you and Councilman Ortiz may remember, John Hanger (ph.), when he was Public Utility Commission, and I, when I was his legal 75 5/27/99 LAW & GOV'T - RES. 990209 counsel at the Public Utility Commission, were, let's call it, strong proponents and organizers of the electric competition. Commissioner Hanger is now the Executive Director of Citizens for Pennsylvania's Future, and he regrets that he couldn't be here today to testify for you, and I'm in his stead. What I would like to start off with is a little bit of what you don't want to hear, which is to put this in a perspective of how successful the switch to choice has been thus far, without in any way suggesting that there isn't a whole ball game still ahead of us and very far to go. The numbers of residential customers, 13 percent, 32 percent commercial, and 56 percent industrial in the PECO territory, as Sonny referred to, is in the range of twice as good as many areas in the state.
When you say in the range of PECO customers, does that mean Philadelphia?
That means the PECO service territory, the five-county region.
Well, do you have 76 5/27/99 LAW & GOV'T - RES. 990209 any statistics on Philadelphia alone?
Is it possible to obtain that? Because I suspect that the percentage outside the city may be much higher than the percentage within the city. And we would really like to know what percent of people who live in Philadelphia.
PECO would have that data. I'm not aware that there's anybody else who would have that.
Well, is there any way of the Commission requiring PECO to furnish that information?
Yes, sir? UNIDENTIFIED AUDIENCE MEMBER: What was the question, Councilman?
The question is, can we find out what percentage of PECO residential users within the city limits of Philadelphia have transferred away from PECO to some other company? 77 5/27/99 LAW & GOV'T - RES. 990209 (Unidentified audience member responds inaudibly off-mike.)
Okay. Because that's the only relevant statistic. To go into a five-county area does not give us a picture of Philadelphia. I mean, we find that in other areas that we have to study. So we'll appreciate it if we can refine the facts to deal with Philadelphia. Okay.
Those numbers, while they might seem low and unsatisfactory, I do think it's important to remember that that's only after three months of choice. As Sonny mentioned, in California, after well over a year long --
We don't mean to derogate what you've all done; we think you've done a great job. You know, it's just that Councilman Ortiz and I won't be satisfied if you came in here and said that 99 percent of our residents have switched; we would torment you with, what happened to the other percent and why haven't you developed an approach that would win over the final percent? Because we just keep moving and we know you try that too. We want to 78 5/27/99 LAW & GOV'T - RES. 990209 get the numbers up.
And we really think you have done a wonderful job to date.
Part of it is the way market works. Let me just give you some quick statistics about the rate of switching in the long-distance telephone industry, which began in 1984. By 1988, percent of residential 13 customers switched; that's after four years. By 14 1998, 14 years later, about 75 percent of 15 residential customers had switched, although about 16 25 percent of them had switched back to their 17 original provider. 18 That is a slow process that takes place 19 over time. But in 1984, the average price of a 20 long-distance minute was 50 cents. By 1998, as 21 you all know, it's around 10 cents a minute or 22 even less. And there's still more robust 23 competition every day. There's about 400 24 long-distance suppliers now. I just got 25 solicitation the other day for 5 cents a minute 79 5/27/99 LAW & GOV'T - RES. 990209 for long-distance service. It still happens. It takes a long time, but it does happen. The savings which other people have gone over I really don't want to accentuate, but I will say that in my view, the level of savings that are available in Pennsylvania for an average residential customer -- I simplify it as about $75 from the automatic 8 percent rate cut and to about an additional $75 a year if you make a switch. That totals $150. Even if just looking at the switch, that's $75. I believe that that is a sufficient incentive to get people to switch. The problem isn't that they need more. More is always better, more gives you more incentive to switch. And that will occur naturally by the way the rules have been set up in the next year, when the 8 percent rate reduction goes to 6 percent, and then the year after that when it goes back to 0. So more people will switch over time just for that simple economic reason -- apart from all the issues that we'll deal with in a minute about getting the word out properly. One thing that I do want to add, 80 5/27/99 LAW & GOV'T - RES. 990209 though, is to focus a little bit on the effect of choice on the environment. We have seen a dramatic change in the industry on the environmental perspective way beyond my expectations and I believe beyond anybody's realistic expectations for what would occur in this time frame. The Green Mountain, which has had such an obvious public advertising campaign came in a close second to Exelon in gaining market share. If you think of it, could anybody have predicted a year ago that the second largest seller in the Philadelphia area would be a company saying, "Don't buy coal and nukes." Nobody would have predicted that. And that's occurred. And that's occurred largely because of their marketing campaign. Exelon came in number one largely because of their marketing campaign. I would add that even though we might not like every part about it, PECO managed to retain as many customers as they did because of incredibly sophisticated and subtle marketing campaign.
They have the financial resources. 81 5/27/99 LAW & GOV'T - RES. 990209