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
-- to do it. So one issue, whether we like it or not, the way rules are set is that the market is going to provide much of the information. And we can say that the marketers should be doing more on advertising or more on real customer education. That's up to them to do it. They will do it over the longer period of time if the profits are there if they do it. I do think we've seen enough to say that it certain can have an impact. On the environmental side, an average Pennsylvania statewide customer that uses about 770 kilowatt hours, so that would include both people who use electricity for heat as well as not for heating. They currently produce about 11,000 pounds of CO2 a year. That's a tremendous amount, a tremendous impact on the greenhouse gas problems that we've had. They also use about 100 pounds of sulfur dioxide and about 30 pounds of nitrogen oxide. These are all releases from combustion of 82 5/27/99 LAW & GOV'T - RES. 990209 fossil fuels that are devastating our environment right now. If those customers switched to a non-emitting source, such as wind, all of that tonnage of waste dumped into our air is gone. When we say that we're trying to build an opportunity for choice, part of it is to choose to choose the cheapest you can get. And for other people, it's to choose the best that you can get, or some combination of the two that meets somebody's needs. Right now, there are -- I'll simplify it to say three categories of green products on the market. One, which is natural gas, which is dramatically better than anything we have in the old system but still not renewable energy. And at the other extreme, there are companies who are selling 100 percent renewable or 50 percent renewable. Customers can pick the right balance of clean green and cheap that fits their needs. These products are not necessarily more expensive. That's a big misconception that's out there in the market, that you have to give up savings in order to buy clean. If you're comparing it to the way 83 5/27/99 LAW & GOV'T - RES. 990209 regulated rates were, there are many green products out there right now, including the 100 percent green products, which are cheaper than what people have been paying PECO for the last generation, or at least ten years.
I think that's a very important point you make, and I think the Clean Air Council, who's represented here, I'm sure is going to represent at a issue.
And if you take it into consideration of we've got the 8 percent rate production, there are still several green e-certified products that are -- permit some savings, not as much, over the rate that you would be paying to PECO if you continued to be a PECO customer today. All right, the savings are there. There have been other huge changes in the industry that have gone much, much faster than anybody expected. There have been companies who have come in, for example, and bought all of GPU, the company that serves in the area just beyond the Philadelphia region. They've sold all of their power plants. This company has come in and said that they are going to close many of the 84 5/27/99 LAW & GOV'T - RES. 990209 older coal-fired plants completely and that they are going to install significant investment for emissions improvements on others. One company bought a huge plant out in western Pennsylvania, in Homer City, and they have indicated that they are going to spend a huge amount to clean it up. It's a coal plan as well. In addition, there are many companies coming in and building these natural gas plants, which, as I've said, are not renewable, but they are dramatically better than the coal or the nuclear --
And if the Philadelphia Gas Works were to go back and decide to enter the electric energy field, they could serve both the cost as well as an environmental factor. It would be a plus factor.
They really are different issues. For the electric generation from natural gas as a fuel, PGW could be a supplier to those.
Yes. And that's clean. 85 5/27/99 LAW & GOV'T - RES. 990209
Even if they did switch and go into retail, correct. Anyway, my point is that between these kind of items, as well as the opportunity to have really dramatic technological change, wind energy is going to be on the market basically as soon as we can build it. There are right now new technologies for fuel cells -- and I really don't want to go into too much detail right now -- that are only a couple years away from the market if people will buy it, all right? The technology is there. As we've seen in the telephone industry, the amount of new innovation in the telephone industry, after the implementation of choice in 1984, has literally changed not only the telephone industry but our society. The Internet is, at least in part, due to the fact that AT&T no 20 longer had a monopoly on the phone system, all right? I can't predict what the changes are going to be as a result of choice in electric. But at least for the ability to innovate with new technologies to produce cleaner and cheaper 86 5/27/99 LAW & GOV'T - RES. 990209 energy, it's going to happen. It might not happen overnight, it might take a few years, but it will be there. I'm very confident that that will occur.
I am going to ask you to summarize because -- and I'm going to ask all speakers to try to be as brief as they can because the hearing has to end by 4 o'clock, and we have many, many speakers to hear.
I want to focus on a few things that I think the City can do directly.
I think the bill stuffers in PGW and the Water Department envelopes is a very good idea. However, I want us all to acknowledge that people don't always read bill 18 stuffers. All these people have already gotten the bill stuffer in a PECO envelope more than once, and they haven't gotten the message. Some people don't read those. However, if we're going to do it, I do think it should have the information they need to make a decision. It should say the price of each supplier willing to cooperate with the program and 87 5/27/99 LAW & GOV'T - RES. 990209 the phone number or other way to contact them to just simply make the deal. That can transform what is perceived as a complicated buying process to one which is very simple. It's really not that hard. One thing that we are going to do, Penn Future, is to have a Website up and running within probably about two weeks that will have all those prices on it. Obviously, that's not accessible to everybody, but there are other ways in which the City or community organizations can work with that. For example, your Council office, I know that you have tons of things that you're doing, but you could have one person access the Website on a weekly basis or a monthly basis.
I'll tell you why I'm not enthusiastic about the Website. I think it's going to reach the affluent middle class, but if you're talking about bringing, say, these to poor, the Website is still, you know, a distance away.
I absolutely agree. But what your office can do or a MOCS office or a block captain that the City interacts with or any 88 5/27/99 LAW & GOV'T - RES. 990209 community organization in the city is to have one person access the Website and hand out the information to everybody who comes through their door.
Well, I intend to make a real effort to have the Democrat party -- and I hope somebody will to the same in the Republican party -- is not only arm all of the committee people with information and have them go to the greatest extent possible as part of registration campaigns, to go also with information about choice on the electric --
Mm-hmm. Basically, every church, every union, every Lions Club --
-- in the city, if they can get one person who can take the responsibility to find out the basic information and share it --
Well, I think the committee person, whichever party, you know, has direct contact with everybody in an electoral division.
Right. One of the things 89 5/27/99 LAW & GOV'T - RES. 990209 that my organization is going to do, as well as several of the other organizations who are testifying today, is to try to help organize those networks of people to get the word out. In my view, the real answer to your question is to get the word out through groups that are already out there -- apart from addressing them at meetings. Every time I go to a meeting, even if's on another subject, to somehow to get it through, slip it in.
To make it easy for somebody who want to do it. For example, if there is a church meeting on a Sunday, there's no reason why people cannot fill out their form and leave it with the church. And three ought to be a way of taking what they've left with the church, maybe at the same time as they make the donation, maybe it will be another hat in which they can put their choice. We've got to find ways to reach the people and make it easy for them to exercise their right.
Well, I certainly agree with that. The line between that is, it's one 90 5/27/99 LAW & GOV'T - RES. 990209 thing to give people information on what you need to do to make your own choice, and it's a second thing to tell them, I've looked through it for you and this is the best deal for you, or this is the best deal that there is, or this is the one that I'm doing. That second level takes not only a level of trust, the listener has to trust the speaker, but at least for public officials, or for that matter, in my role in a nonprofit organization, I try to avoid endorsing a single company.
So it does get a little complicated. But there are other things that can be done. Any leader in the city -- whether it be the committee person or the union member or the church leader -- can go around and try to put together a group of 30 or 50 100 members, parishioners, delegates, whatever the label is, and go to one of the companies and say, All these people have agreed to buy together, give me the best deal that 91 5/27/99 LAW & GOV'T - RES. 990209 you can do.
And then that person goes to a second one and does the exact same thing and does whatever level of shopping he wants -- whether it's ten minutes of research or ten days or week of research. But you can still make it happen. What we need to do is to identify the leaders in the community who are willing to take on that kind of role and to make it a part of the daily practice.
Well, you -- that last suggestion of yours, I think, is excellent for a lot of reasons. I don't want to take the time to -- but I think you offer every neighborhood organization an opportunity to perform a public service by announcing that at the next neighborhood meeting, they will have the opportunity to save money on their electric bill, there will be full information given. And if we can find a way to carry that out, we're going to be trying to do this that in the city. 92 5/27/99 LAW & GOV'T - RES. 990209 Thank you very much for being with us today and for making your contribution. I think we're going to get this where it becomes a visible and discussable area in every living room in the City of Philadelphia. Thank you both very much.
You raised a point earlier that I just wanted to mention without going into detail about assigning customers to a particular supplier.
Under the rules, the decisions, the way it's occurred, there will be process that assigns a portion of the customers to alternative suppliers beginning in 2001. And the rules for that have not been worked out, but that is something which will occur in the future.
Well, if we can move up that timetable, you know, and permit, you know, for people who are interested in the environment, if that's their main consideration, have whatever companies are available in that area, permit some 93 5/27/99 LAW & GOV'T - RES. 990209 committee to, you know, make the choice, I think people would have confidence in a government body that would try to do that. Well, thank you very much. I think it's been very helpful. Liz Robinson, Executive Director of the Energy Coordinating Agency. (Liz Robinson comes forward.)
I'm Liz Robinson. I'm the Director of the Energy Coordinating Agency in Philadelphia, and it's a pleasure to be here. I congratulate Council for having the interest in this subject to hold these hearings, and particularly you as the chairperson of the committee. We appreciate it very much.
I am going to address -- the people who have spoken before me have 94 5/27/99 LAW & GOV'T - RES. 990209 eloquently described much of this, and I'm going to limit my comments and be very focused in the interest of time. The first subject I'm going to address is a subject nearest and dearest to my heart, which is low-income issues, and the second is environment. In the materials that I have submitted to you, our current termination figures in the City of Philadelphia for low-income and other residential households, these figures go back now years. This a record of terminations in the 14 city from 1980 through 1998. 15 And I have the bad news to report that 16 we have now hit a new all-time record in utility 17 terminations in the city. We have hit a number 18 close to 81,000 total residential terminations in 1998. This is gas, electric, and water combined. And this is relevant in this context because you've been acutely pointing to the benefits, the potential benefits to low-income households from reducing their costs by shopping for lower-priced suppliers in electricity. We are seeing not an all-time record for PECO but a very high number of 95 5/27/99 LAW & GOV'T - RES. 990209 terminations for PECO in 1998. The purpose of submitting these termination statistics here is just to simply reinforce and underscore your point and your concern that low-income people really indeed need to be participating in customer choice in order to reduce their bills. There is a lot of confusion in the low-income community about electric choice in addition to the normal confusion that the average customer has about this subject, which is still quite considerable. Low-income customers are often confused about whether they can participate in any of the bill payment assistance plans. PECO has a plan they call Customer Assistance Program, CAP, C-A-P. And there's a myth in the low-income community already very well-established that you can either be in the low-income payment plan or you can change your supplier. But if you want to be in the low-income payment plan, you have to stay with PECO. In fact, that is not true. The benefits are potable; that is, the benefit of shopping are portable. You can carry your CAP benefit with you to your next supplier, but the average low-income 96 5/27/99 LAW & GOV'T - RES. 990209 customer doesn't understand that and doesn't believe it and feels that they will lose their eligibility for CAP if they move to a new supplier. So the -- as difficult as it is to help the average customer understand what's going on, it's more difficult to help the low-income customer understand. So we have our work cut out for us in getting this message across in the low-income community. And I am thrilled to hear City Council describe its willingness and its desire to become actively involved in this process and really communicate to the citizens of Philadelphia how they can benefit immediately.
Don't let me give you the wrong impression. I'm not sure that Councilman Ortiz and I necessarily represent the majority of City Council on this subject matter. I think we do represent the views of a very substantial portion of the membership. But PECO has been the -- has been a very difficult problem. It took us many years before we got the City administration ready to 97 5/27/99 LAW & GOV'T - RES. 990209 even seek renegotiation of an electric contract between the City of Philadelphia and PECO. And when they did, they immediately effectuated a $5 million a year savings; they probably could have gotten double or triple that savings. But PECO has tentacles that reach everywhere. And they've convinced the world -- that is the Philadelphia world -- that their well-being and economic health, meaning their economic excess health is important to the community so that it's difficult for those of us in political life apparently to tangle much with PECO. But there is a strong body grouping within the City Council that feels no private company ought to be immune from the kind of investigation that this committee is carrying on and from the educational efforts that all of you are making to make sure that consumers are treated fairly. And we want to thank you because it's because all of you in the audience who have worked so hard for so many years that make it possible for us in City Council to move forward. So I think today is a very good beginning, but I don't want to overstate it 98 5/27/99 LAW & GOV'T - RES. 990209 because if the Councilmembers were really on your side, you would have seen many more of them flock to participate in these hearings today. So, you know, just be observant as to who's here and who's not here. And from that point on, I think we'll be making progress.
I should just also state that the PUC is beginning to get information back about who is switching and who is not and they are finding that at this time, low-income customers are not switching at the same rate as the general population. Apparently, the numbers are slightly lower, so we are --
The Commission is studying -- the Pennsylvania Utility Commission is studying which customers are switching and which are not, and they are finding so far that low-income people are not switching at the same rate; they are switching at a lower rate.
That's what our 99 5/27/99 LAW & GOV'T - RES. 990209 concern is.
Right, right. I have the same solution that you've heard before, which is from the very beginning of this process, it was clear to me that customers wanted not only to know who the companies were but what they were selling and what the prices were. And the Commission made the right decision and required all the companies to use the same unit of measurement, which is a kilowatt hour. So companies must report their fees and their charges in that form. It's very simple for customers to compare prices because it's an apple to an apple. You know, what's the price of your apple? And what the Commission does need to do, though, is require companies to disseminate the information so the customers have the prices in front of them as well the products so that that companies that are selling environmentally-benign energy, those renewable energy sources need to be made clear, and the prices for all of their supplies need to be made clear. Until that material is available in 100 5/27/99 LAW & GOV'T - RES. 990209 print -- not on Websites, but available in print for the average person to lay their hands on in the privacy of their living room, we will not see customer choice penetrate deeply into the residential sector, I'm convinced and have always been convinced of that, that information needs to be in one place, one sheet of paper clearly in front of them, people have it in their hands, and they can take it home and digest it and make a decision that they need to make about their supplier. That is not available yet in Pennsylvania. To its credit, the Energy Cooperative Association of Pennsylvania produces that information in print, in exactly the form that I'm describing. They're the only entity that I'm aware of that's producing that information in print. The problem with Websites is, low-income people don't have them, they don't use them.
Yes, yes. So, you know, 101 5/27/99 LAW & GOV'T - RES. 990209 Websites are nice for you and me, but they are not appropriate for the general person yet.
You're very welcome. I'm going to talk just two seconds about one other subject.
Or five seconds, if you will, on environmental. Councilman Rizzo asked the question earlier, how does the Commission know that these environmental products are really what they say they are? And I'm sorry he's not here to hear the answer. But there is a national certification program for renewable energy called Green E, which the Energy Coordinating Agency is hosting in this region. Green E certifies that the claims made by suppliers are accurate and verifies at the end of the year that those renewable energy supplies have indeed reached the market in which they were sold. So there is no way for a supplier to misrepresent what they are describing to their customers. And Green E was created to build 102 5/27/99 LAW & GOV'T - RES. 990209 confidence in renewable energy. And renewable energy, by the way, is not just good for the environment; it's going to be good for the economy of Pennsylvania. So we're looking forward to job creation, economic development coming through as a result of the expressed interest in improving the environment.
I'll see that Councilman Rizzo gets a copy of your answer.
It will give me a great deal of personal pleasure to be able to reassure him. (Laughter.)
Thank you very much. Andrew Altman, Deputy Director of the Clean Air Council. The sergeant-at-arms will get the material from you and he will do the distribution. Thank you. And if you have copies, more copies for members of the audience, we'll be glad to make them available too. 103 5/27/99 LAW & GOV'T - RES. 990209 It's a pleasure to have you hear, Mr. Altman.
Well, thank you very much, Councilman, and thank you for convening this real important hearing. And I think the timing is just right because as people look at their summer electricity bill, they're going to be wondering how to get rate cuts. But also in September and throughout the summer as the PUC starts their education campaign for the next wave of customers who are allowed to shop around, it's good to be riding that wave and letting people know in as many ways as possible that they can and letting them know how. I am going to skip to the meat of my testimony and let the written record be the full record.
And skip to the meat. My name, for the record, is Andrew Altman. I'm Deputy Director of Clean Air Council, which is a statewide member-supported environmental organization. 104 5/27/99 LAW & GOV'T - RES. 990209 Clean Air Council has been very active the last three years working to infuse environmental concerns into the ongoing implementation of electricity deregulation in Pennsylvania, so we have a long history with this issue. And I'd like to make three quick observations and then give my recommendations for what the City should do to increase the number of customers shopping.
Lost in all the talk about savings is the over-arching issue of public health and the environment, and that needs to be emphasized. Electric power plants pollute, they are the leading industrial cause of air pollution in the country. Millions of children are sent to the hospital emergency room every year with pollution-induced asthma attacks. Meanwhile, nuclear plants and PECO is -- about two-thirds of its energy comes from nuclear, which every day creates deadly radioactive waste, which will remain toxic for tens of thousands of years. Most importantly to most people, though, nuclear plants continue to 105 5/27/99 LAW & GOV'T - RES. 990209 pose an unacceptable risk of accidents. The good news is that consumers are showing a significant interest in using the power of choice to build demand for cleaner electricity products, and you have all of those numbers. The Clean Air Council has a sustainable energy education program which offers free presentations on electricity customer choice and helps consumers made educated purchasing decisions, and we found through those presentations that there's a large interest in choosing based on environmental impact. And I emphasize that this program is ongoing. Clean Air Council offers free presentations to any roomful of people you can put together, so I urge City Council to help us find audiences for this presentation. The Clean Air Council believes the City of Philadelphia should take the following steps: 1. The City should help raise environmental and consumer awareness through PGW and Water Department bill stuffer. 2. City Council members should take Clean Air Council's Clean Power Challenge and 106 5/27/99 LAW & GOV'T - RES. 990209 commit to buying cleaner electricity for their District offices and for their homes, and publicizing those choices will help give confidence to your constituents that it's okay to switch. 3. The City should require a modest level of new clean electricity supply when it shops around for a new supplier, and I'm assuming it will because it's going to save taxpayer money by doing so. With the City's enormous customer load, this commitment will send a signal to renewable energy investors and developers that there is significant customer demand for them to take the risk in building new renewable energy capacity. And, again, by the City shopping around, the public signal sends a message to constituents that it's okay for them too.
And if I may insert at that point, I think the City has a second responsibility. The City almost always--- by "the City," I mean the City administration headed by the mayor, whoever the mayor is, kind of looks at its obligation being soley that of the budget. It 107 5/27/99 LAW & GOV'T - RES. 990209 seems to me that City government has a representative role and the City government ought to be, when it is contracting for itself, ought to be also contracting on behalf of the residents. It ought to say to any company it deals with, We also represent some 500,000 households that use electric energy. We are prepared to make a recommendation, you know, to these people and put it in all of our mailings to the people of Philadelphia that we recommend. And we want that consideration both in the price and in the environmental aspect to enure not only to the benefit of the City government as fiscal unit but to the benefit of all the people. It seems to me that if the City of Philadelphia took its role properly, it would act as a bargaining agent on behalf of all the residents of the City of Philadelphia. It could not compel them to go to any particular supplier, but it would certainly play a large role if the City of Philadelphia said, You know what, because we're in a position to influence so many, we're going to get the rate down to 4 cents a kilowatt hour as a result of our negotiations in 108 5/27/99 LAW & GOV'T - RES. 990209 guaranteeing that we're going to bring with us, you know, or make our best efforts to bring with us large numbers of City residents. And it seems to me that's the appropriate role. We're elected by the residents of Philadelphia not just to worry about the City budget but to also worry about the budget of the people, you know, that have elected us to the office. And whatever we can do to make low-income people live a little bit better with their limited income, I think that's our responsibility to achieve. So I'd just like to add that to your role of what the role of the City ought to be.
I appreciate that. And in fact, I'll jump ahead because this is a point I was going to make later on, that there is a role for the City to do what's called aggregation. Take your idea of recommending a supplier to its residents and actually aggregate the residents, put them in a pool and go out and shop with this large aggregate pool so that residents will be able to get a price that's better, lower than what they can get on their own. Because with the 109 5/27/99 LAW & GOV'T - RES. 990209 increased capacity together, they'll be able to get, through the City, a better price and probably a better environmental benefit.
And the Clean Air Council firmly believes that the City should look at aggregating residents. The City should also look at doing mailings on its own through whatever means that you find appropriate, through constituency mailing lists from City Council or tax lists or mailings or what have you. And put in the type of information that people have been talking about earlier -- comparison of price, a comparison of fuel mix, a comparison of which suppliers are Green E-certified and which are not, and other ways of finding out more information. And I would suggest again that if you'd like information from Clean Air Council on these free presentations that we offer to community groups, we'd be glad to provide you with that type of information to put in a mailing to your constituents. There's one more observation I'd like 110 5/27/99 LAW & GOV'T - RES. 990209 to make, and it refers to some of the issues you brought up about PECO's standing in Philadelphia. Clearly, PECO is a good corporate citizen, as the term goes. But some people might ask if encouraging consumers to switch from PECO would hurt PECO, its employees, or its shareholders. And in the company's own press release of April 27, 1999, just a few days ago, it strongly contradicts that notion. And I'd like to read into the record just some of the highlights, a couple of the sentences from their own press release that show that encouraging customers to switch from PECO really isn't hurting PECO so far, and probably won't. These are quotes. PECO benefits from, quote, a well- balanced settlement, enabling the company to recover more than $5 billion -- that's $5 billion -- in stranded cost.
I think it was an unconscionable decision that was made to compensate PECO for that amount of stranded costs. I'm just inserting that.
It's a done matter, 111 5/27/99 LAW & GOV'T - RES. 990209 but I thought the folks in Pennsylvania were hurt badly by that decision.
And it was a negotiated settlement, and I'm reading it in so that it shows that PECO thought it was a very good beneficial settlement.
Sure. They were only asking for about 7.5 billion. Everybody knew that was inflated maybe a hundred times more than what it ought to have been.
Another quote. A total annual return on common stock of 78 percent, the highest total shareholder return among the nation's largest investor-owned utilities. So 16 that shows that shareholders are doing very well. 17 Quote, new plant acquisition could add 18 3200 megawatts of generating capacity to the 9200 19 the company already owns. So they're doing well, 20 and they're out to expand their generation 21 capacity. 22 Quote, PECO Energy distribution has 23 retained approximately 87 percent of its customers 24 as competition began in Pennsylvania. 25 And, finally, Exelon Energy -- and this 112 5/27/99 LAW & GOV'T - RES. 990209 is very important. Exelon Energy, the company's unregulated affiliate, is now the largest alternative supplier in the state, end quote. So even when customers are switching from PECO, the distribution company, a lot of them are switching to PECO's unregulated affiliate, Exelon. And so -- one more thing about whether or not PECO's being hurt. In an attempt to retain market share, PECO has engaged in questionable ad campaign tactics. Last week, the PUC determined that one particular PECO message violated the PUC's requirements that PECO's message not be in conflict with the PUC's public education message. And in addition, the PUC determined that PECO had not given consumers full and complete information regarding their opportunity to switch suppliers. In the PUC's own words, quote, PECO, in its advertising campaign, has created confusion regarding customer choice. PECO's advertising sent mixed signals concerning customer choice, end quote. Now, unfortunately, the PUC refused to take any action to correct the misinformation widely disseminated by PECO, and so the City of 113 5/27/99 LAW & GOV'T - RES. 990209 Philadelphia would be doing its residents and businesses a service by helping to provide them with accurate information to let them know that, in fact, switching is okay and that they can reap environmental and economic benefits from switching.
In conclusion, the Council strongly urges the City of Philadelphia to actively promote customer choice by helping to raise public awareness of the economic and environmental benefits of shopping and by entering the marketplace for its own electricity needs as well as those of the residents. And Cleaner Air Council is more than willing to help in any way that we can in working with the City.
We appreciate it and I hope we're going to be in a position to take advantage of that offer. Thank you very much.
Delaware Clean Air Council has been very active in all the 114 5/27/99 LAW & GOV'T - RES. 990209 environmental campaigns that I've participated in in the last years, and they've done a fabulous 4 job. 5 The other Andrew, Andrew Park, is he 6 here? 7 (Andrew Park comes forward.) 8
Would you be good 9 enough to identify yourself for the record and 10 proceed. 11
Welcome to you to too. It's 14 nice to see you again. 15 My name is Andrew Park. I'm the 16 Executive Director of the Center for Lesbians and 17 Gay Civil Rights. 18 I've given you my written testimony and 19 at this point, all the offices have it, so I'm 20 just going to dispense with it, which will cut my time in half hopefully, and get to the point of why I'm here. What I want to do is tell you why we are here to testify on behalf of the lesbian and gay community, why this issue is important to us 115 5/27/99 LAW & GOV'T - RES. 990209 and why we want to see effective implementation of the Electric Choice Program. Each year, Philadelphia celebrates the Gay Pride Festival in June and the National Coming-Out Festival in August. These are two of the largest festivals in the city, and indeed, each of these festivals are celebrated in every major city in this country and in this state. PECO owns the crown lights on top of its corporate headquarters. And this year, the Center for Lesbian and Gay Civil Rights made a request to PECO to announce these events, along with 2,000 other events that they publicize at the top of the crown lights, including mayoral candidates' forums, political issues, National Prayer Week, social issues. PECO said that they would not advertise these events because the word "gay" was too controversial and the words "coming out" were too controversial. Now, many consider this somewhat a trivial issue. But let me tell you why it's an important issue to the lesbian and gay community. Being able to say the word "gay" is an integral part of our identity. For communities of 116 5/27/99 LAW & GOV'T - RES. 990209 color, sometimes your identity is defined in part by the color of your skin. For religious communities, it's defined by maybe conduct of worship. " Coming out is part of the essence of being a gay person in Philadelphia, and the ability to say the word "gay" and to have that word accepted equally is part of achieving equality in the City. So having the word "gay" on the crown lights is a vitally important part to our community and to the individual identities of the people within it. Now, a few years ago, before electric choice, we wouldn't have had many options. But because of electric choice, what we can do is switch power companies. What I'm not talking about is a boycott; what I am talking about is individual lesbian and gay people being able to place their dollar -- and the gay dollar has just as many cents in it as a straight dollar. Being 117 5/27/99 LAW & GOV'T - RES. 990209 able to please that dollar where they want to go. And so we've launched a campaign to inform people that companies like Green Mountain Energy, like Edison Source offer domestic partnership benefits to their employees nationwide; PECO does not. In fact, PECO's nondiscrimination policy does not protect gay people outside the limits of Philadelphia. Therefore, the Power Team Division, located in King of Prussia, does not have a requirement that prohibits it from firing its employees if they're gay. We are asking individual members of the lesbian and gay community to consider switching away from PECO because each of them can decide how they want to associate their dollars. We couldn't have done this now but the Pennsylvania Electric Choice Program is now our method of protest. And an effective electric choice program will be able to allow people to respond to this electric company in doing what electric companies rarely do: decide whether a gay dollar is more or less valuable than a straight dollar. It's an unusual thing for a corporation 118 5/27/99 LAW & GOV'T - RES. 990209 to do that, and it makes no sense, but the Electric Choice Program allows individual lesbian and gay consumers and their supporters to respond in kind. One of the things we have heard are difficulties in switching. We have had people call particularly Edison Source to switch from PECO to Edison Source, and PECO not release the customers to Edison Source.
And we'll be pursuing these kinds complaints through Edison Source and any electric company that comes to us through our constituents through complaint to the Pennsylvania Utility Commission. But the bottom line is, we are here to urge you and applaud your efforts and everybody's efforts in this room to strengthen the Pennsylvania Electric Choice Program to give the true power back to the consumers. Thank you.
Thank you very much. I think that gives everybody a very interesting insight, and economic dollars and economic boycotts are certainly one method that has been in existence for a long time to right 119 5/27/99 LAW & GOV'T - RES. 990209 wrongs. And we applaud what you're doing and the activities of your group, and we wish them well.
Since we're creating a record here, I just wanted to add that the Energy Cooperative does offer domestic partner benefits to its employees as well. Is there anybody else that I need to correct the record for? (No response.)
Thank you very much for bringing this important issue to our attention. Stephen Huntoon, Director of Business Development for Connectiv Energy.
Would you be able to answer the question raised by the speaker before us? Connectiv is a utility, is it not?
Does it have a 120 5/27/99 LAW & GOV'T - RES. 990209 policy that includes recognition of domestic partnerships?
We'd be very appreciative if could you could inform us of that. Because, you know, the City has such a policy currently in effect, both as a result of executive order and as a result of an ordinance 11 that was passed by City Council. So that is a matter that this body is concerned with.
And identify yourself for the record, please, and then proceed.
My name is Stephen Huntoon, I'm the Director of Business Development and Regulatory Affairs for Connectiv Energy. We appreciate the opportunity to appear before you all this afternoon. I have a power point presentation that I can make available for Council that summarizes 121 5/27/99 LAW & GOV'T - RES. 990209 the key points of my testimony today. I thought I'd take a quick look back to why choice for customers, and in the case of Southeastern Pennsylvania for the last ten years, that PECO Energy's rates have been above the national average.
Excuse me, would you hold it just a minute. Could the voice be made louder? (Addressing sergeants-at-arms.)
Okay, thanks. For about the last ten years, PECO Energy's rates have been above the national average in an amount that's about $1 billion a year. And most of that extra $1 billion has left the region. PECO has, of course, in its role as a utility, contributed dollars in the form of sponsorships and local projects and other initiatives. But when you add up all of those 122 5/27/99 LAW & GOV'T - RES. 990209 amounts, it doesn't get to 1 percent of that $1 billion that leaves the region in extra costs. So looking back -- and I think Sonny Popowski has alluded to this. In looking over the record and whether regulation has really done a good job for consumers here, the decision was made a couple years ago to try competition.
Let me just ask you about that $1 billion 'cause I must have missed something. Could you just explain how you arrive at that $1 billion figure.
Yeah. The trade association for the electric utility industry in this country, the Edison Electric Institute, provides rate surveys of all of its members. And they calculate average residential rates and they present the average rate paid by a residential customer in each of the utility service territories across the country. You'd make that calculation for each rate class -- residential, commercial, and industrial -- and add up the total, compare it to what the total would be if these classes were paying the national averages, and the difference 123 5/27/99 LAW & GOV'T - RES. 990209 is a billion a year.
No, that's in PECO's service territory. It was $1 billion a year. Now, that was before the 8 percent rate cut that we just got so it's not as much as $1 billion, but for the last 10 years, it has been about $1 billion a year.
I also want to reinforce the point that Andrew Altman alluded to earlier about whether PECO's really hurt by customers that exercise the right to choose and the right to save money. As you all know, PECO was awarded $5 billion in stranded costs allowance. And that 124 5/27/99 LAW & GOV'T - RES. 990209 $5 billion covered them as if every customer of theirs was lost as a sales customer. So to the extent customers do not switch, PECO is actually receiving more money over and above the basis for awarding them stranded costs that made them whole in the first place. So this is not a question about whether PECO's going to be hurt in any way. It's whether customers are going to avail themselves of the opportunity to save the tens of millions or hundreds of millions of dollars that are available for them. I just want to take a quick look at how we've done so far with electric choice but I won't -- don't want to repeat too much of what anyone has said previously so well. Choice is going well in Pennsylvania as a whole, and a lot of people are saving an awful lot of money. But I do I think it's fair to say, as this hearing today illustrates, that residential participation in choice has been disappointing. And I have presented a chart that shows how across the Commonwealth, residential participation is not anywhere near the level the 125 5/27/99 LAW & GOV'T - RES. 990209 participation that it is for the larger customers and that's, I think, is what has been a disappointment for those of us that have been involved in this project for the last couple of years. The other problem I think that we've had has been that wholesale prices have gone up considerably from the time that the stranded costs awards were made. And that's made the available savings less than they otherwise would be, even though the savings are still very significant for customers that wish to choose. I also think that there are a couple of perception issues that have been discussed that I just agree with. I think, to some extent, there's a perception that people have that the time to enroll may have expired; some others that may have the perception that the time to choose a supplier may have expired. Whereas, in fact, everything continues to be open and customers can choose at anytime. And it's also been talked about previously that the marketing campaign that PECO conducted led some people to think that in 126 5/27/99 LAW & GOV'T - RES. 990209 choosing, customers would not get the benefit of the percent rate cut. And they also, the 4 marketing campaign, the safe thing to do was not 5 to do anything, for customers not to save money 6 that was available the them. 7 What are we doing about it? Well, 8 customer and supplier groups are trying to reform the wholesale energy market and also to bring new electric generation into the Mid-Atlantic region that would tend to reduce wholesale prices and increase the amount of savings that will be available to choosing customers. And as you know from earlier today from Commissioner Brownell and from Mr. Cadden, the Commission is continuing its public education campaign, and we strongly support that. Customer and supplier groups have been trying to stop misleading marketing by PECO, but we have been unsuccessful in that regard to date. The Commission recently decided that it did not have jurisdiction to remedy misleading marketing by PECO, which creates an ironic situation where competing suppliers are subject to Commission oversight for misleading information, but the 127 5/27/99 LAW & GOV'T - RES. 990209 incumbent monopoly ironically is not. On the positive side of what's recently happened, the Commission has decided to make the process for next year relatively hassle-free for customers. Customers will not have to do anything, starting this fall and going into next year, if they want the right to choose. And we do view that as a positive. That's going to help.
As far as what the City can do, I would second what's been said by your witnesses already. I think the City can support any or all of the efforts that I've already talked about and helped its citizens save ten of millions of dollars. And, in particular, I agree with what's been said previously that the City can use it's utility bills to educate customers and to make savings information available to its citizens each and every month. So that any time someone has the spirit and moved to choose, they'll have that information readily available or it's going to be in their mailbox within the next couple of weeks and they'll know where to look for it and act on it. So I know the time is short. I really 128 5/27/99 LAW & GOV'T - RES. 990209 appreciate the opportunity to appear before you. And what you can do for your citizens I think would be a great boon for them.
Well, we appreciate your being here. We also think that you ought to take to heart the message from the State representatives from the PUC about increased marketing. You're one of the competing companies, right?
We have invested more to marketing to small customers in the PECO service territory than any other company -- besides the PECO affiliate.
All right. I don't know whether there would be any antitrust implications if the smaller companies got together and decided on a joint marketing campaign. But if your attorneys say that's all right, I think that might be one approach 'cause I just think it's important to see to it that the main supplier, PECO, is not permitted to continue to mislead the people into believing that loyalty to PECO as a company is worth the amount of savings that people are losing. 129 5/27/99 LAW & GOV'T - RES. 990209
Well, there's customers groups and the supplier groups which I can say in that regard, Councilman, are working together to try to stem that problem.
And you'll get us that information on the domestic partnership situation?
Because -- since this matter concerns Philadelphia residents, we're very much interested. Thank you. Chris van de Velde, Manager of the Energy Cooperative Association of Pennsylvania. (Chris van de Velde comes forward.)
Are you a competing company or are you an association? 130 5/27/99 LAW & GOV'T - RES. 990209
We are a competing company. We are an electric supplier and licensed by the Public Utility Commission. And we are at this point the most successful of the aggregation efforts probably in the country.
We are not quite as cheap as Exelon. When they saw our price, they decided to lower theirs yet another mill, which is fine. If we drive them out of business, oh, so be it. It won't happen, of course. They have the deep pockets.
Since I asked the last witness about the domestic partnership policy of their company, could you tell us whether your company has such a policy. That relates to the obtaining of medical benefits.
We are still in the formation stage. I will assure you that as we put our benefits package together for employees, it will have total choice for all members of the workforce. It is, however, a very small workforce but it will not be exclusionary in any respect. 131 5/27/99 LAW & GOV'T - RES. 990209
I'm not going to go back over all of the parts that you've heard already this afternoon. Much of my testimony would have touched on some of that. I want to thank you also for your perseverance here by the hour this afternoon and also your understanding of the importance of this issue to the citizen of Philadelphia. The Philadelphia Inquirer did an editorial, a lead editorial Sunday, I guess, about a month, a month and a half ago pointing out how much effort you at City Council and City leadership have made to reduce the wage tax in this city. And it's a very symbolic and important piece to be doing.
As I said before, we have to end by no later than 4 o'clock. And, therefore, I understand people have been told, properly so, as to the amount of time they would have, but we've really got to reduce the time per 132 5/27/99 LAW & GOV'T - RES. 990209 witness. We'd appreciate it if witnesses would do what this witness said what he's going to do, not repeat points made before.
But I would urge that a witness confine themselves to no more than three to five minutes so that we can hear from everybody that took the time off to be here today.
I'll probably be out of here in about minute and a half.
I just want to draw your attention back to the juxtaposition of the efforts that Council has made in the last few years to try and reduce taxes, particularly the wage tax in this town. And the interesting contrast or reference to that that the Inquirer editorial made pointed out that the amount of savings that the average person in Philadelphia can get is substantially greater out of the electric choice than just out of the wage tax.
So it's very easy. 133 5/27/99 LAW & GOV'T - RES. 990209 If you want to help every constituent you have save $67 a year tomorrow morning, give them one of our contracts.
That's so incredible, you know. That's the message that really has to get out, you know? It's the mayor, the -- all of the mayoral candidates made a huge issue out of lowering a minuscule, a minuscule percentage of the wage tax that does not amount to the amount of money that people would be able to save if they just switched their electrical supplier.
And that's, you know, the Inquirer boards and the Daily News and all of the pundits continuously would say, That's a great thing. This really is an economic benefit, not only for people, but also for business and people who want to come in to the business into the city. And we keep emphasizing the wrong things at times when we try to educate the mass of people in our city, but that's. . .
The second piece. 134 5/27/99 LAW & GOV'T - RES. 990209 There are two things. There would, one, be a bit of advice or a suggestion to the PUC and its representatives that are here today that go to the simplification of the process. They've touched on it, they've made some headway, they've clearly recognized that some of the pieces that were put together last year can be simpler in this coming year. And I love their ads that said, "Where do you think you are, Pennsylvania?" I thought it was very clever. Except that they didn't tell anybody anything. They didn't say what you'd save if you changed or shopped or, you know, found another supplier. They didn't tell you how to go about doing it. They just led you to believe that it was wonderful to live in Pennsylvania, and I agree, but it doesn't get to the issue that we're talking about. So I would urge that the PUC make two specific changes in the ads and in the material they're going to put out in the coming months. First, get specific, put a price list together. Tell people what is happening and where the prices are. PUC can order all of the suppliers to give 135 5/27/99 LAW & GOV'T - RES. 990209 them that data on a monthly basis. They can post that on a Website, they can put it in printed material and make it available on telephone calls, you know. The customer, as you suggested, Councilman Cohen, ought to be able to just sit down for 30 seconds and say, Okay, here's my prices, here's my choices, here's what I want to do. I also agree with the idea that you threw out this afternoon, that it ought to be possible to do it when you get your local bill 14 from your local distribution company, be it PECO, PP&L, GPU, or anybody. I don't think that there's so much load shift, particularly for residential customers, that the suppliers can't keep up with it. The second thing that I would suggest goes to the City and the City Council's opportunity. The City will go out for bid again on its electric. You know, if I really want to be outrageous, I would urge you that you say to somebody, including PECO, If you can't stops false and misleading ads, you can't qualify to bid on 136 5/27/99 LAW & GOV'T - RES. 990209 our supply. That obviously isn't going to happen in the real world. But I would urge that this committee particularly put together a negotiation strategy hearing for City agencies. You do over $80 million worth of buy a year in terms of electricity between the School District, the City, some of the major authorities of this city, and you have a great deal of buying leverage when you go to the marketplace. It seems to me you ought to be able to put together a strategy session before the bidding negotiations process starts that says, What do we want to get out of it, what are the range of things? Are there some environmental issues we'd like to see the bidders address?
May I make a public offer to you and to all companies that are seeking a share of the market?
This committee, address it to me, Councilman David Cohen, Chairman of Law and Government Committee, City Hall, Philadelphia. 137 5/27/99 LAW & GOV'T - RES. 990209 Give me your ideas on what you think ought to be that kind of a strategy. We will study them. I'm suggesting that for all companies, we will try to influence the approach of the City. That may be one method of overcoming the long-standing position that PECO has had. They've always been the big one; everybody else has been a midget when there's been competitive bidding. We'd like to equalize the playing field. And we think that the City might well do better by dealing with some other company than by dealing with PECO. Or if PECO wins, let them win fairly and squarely. I think the point you made about putting an end to their deceptive advertising is also well-placed. And if that's a conclusion that other companies have reached, they also ought to include those kinds of suggestions as well. We thank you very much.
Thank you. Is George DePasquale, President of Action Alliance here? Is there any other 138 5/27/99 LAW & GOV'T - RES. 990209 representative of Action Alliance here? (No response.)
Seeing none. They do a great job. And I would urge everybody to make a special effort to be in touch with that organization because they reach more senior citizens than any other group. Alec Meltzer, Pennsylvania Consumer Action Network, is he here?.
He told he wasn't going to be here, that it was going to be submitted.
There's no one in person. Roger Clark? Is he here? (No response.)
Andrew Frishkoff, Executive Director of Pennsylvania Low-Income Housing Coalition.
Why don't you come 139 5/27/99 LAW & GOV'T - RES. 990209 forward too 'cause you're going to be the next speaker. The time limitation remains, but they're the only speakers I have on my schedule list. If there's anyone else who is not on my list who wishes to be heard, please come and join at the table so that you will follow these two speakers. If not, we'll consider them as the final two speakers today. All right Mr. Frishkoff why don't you go ahead.
Thank you. My name is Andrew Frishkoff. I'm the Executive Director of the Pennsylvania Low-Income Housing Coalition and also a cofounder of our Community Power Program. I'll also try to limit the remarks beyond what we have in writing. Thank you for the opportunity to speak here today on behalf of the Low-Income Housing Coalition, which is the State's largest affordable housing organization, advocacy organization in the state, and also for our Community Power Program. When we saw what was happening with the electric deregulation, we believed that low-income 140 5/27/99 LAW & GOV'T - RES. 990209 people would be excluded for many of the reasons that we heard today -- lack of marketing, lack of information. We created the Community Power Program to try to be an expert shopper.
Could you take the microphone and hold it much closer to you.
We created the Community Power Program to be an expert shopper specifically for residents and owners of subsidized housing, public housing, Section 8 and others who we believed would be the last ones marketed to by any utility companies. But we also opened up the program to CDCs and residential consumers and small businesses who wanted to participate. Unlike the aggregation, which others have talked about, we've tried to do more on a bidding and shopping basis where people don't commit themselves to us but we go out and try to find the best price in all parts of the State. We're statewide. And then allow people to 141 5/27/99 LAW & GOV'T - RES. 990209 participate through our program that way. In this case, our last bidding round targeted Exelon as offering the best prices statewide so that's where we went with last year. And we market their prices to our consumers with our name at the top so they know that we've done a good shopping service. They trust us as a brand. And I want to talk a little bit about that brand piece very briefly. We think that in addition to all of the public service information that we've heard talked about -- stuffers, bill stuffers -- there really needs to be a State effort to require more marketing and participation by the suppliers. We do a fair amount of work in the banking world with the Community Reinvestment Act, and we think there should be a parallel program for electricity deregulation in Pennsylvania where the PUC would require that all participants, suppliers, and generators would need to have a marketing plan that includes geographic and prevents redlining, prevents exclusion of certain customers simply by lack of effort. What we see right now is that while 142 5/27/99 LAW & GOV'T - RES. 990209 some people are worried that every night they're going to have the phone ring with a new electricity offer, low-income people will never have the phone ring. The marketing efforts are, for the most part, going to bypass low-income people and what we need to see is that all suppliers are (unintelligible) for their fair share of the low-income residential market as well as the small-business market. This would, again, parallel the Community Reinvestment Act for banks where banks are required to lend in low- and mod-income neighborhoods and are required to publicly disclose where they've made their loans. We think that that needs to be the second component for State policy.
Disclose where they've made their loans. Every year, banks must disclose that they've made, say, five loans in your census tract, for instance, to various classes of bank customers. And we would like to see the same for 143 5/27/99 LAW & GOV'T - RES. 990209 electricity, that suppliers would have to disclose where they've picked up customers.
Other than the breakdown, which I have trouble with, but I understand that some companies only deal with commercial and/or industrial, maybe some only deal with industrial, I don't know. That there's some companies that exclude residential.
I think that clearly ought to be off-limits. Any that excludes residential, I see no justification for their being able to come in and skim off maybe the cream of the crop as far as heavy users of electric energy are concerned. Are there companies that are excluding residential?
How many of the 88? Do you have any information on that?
I'm not sure if anyone from ECA knows. I believe that it's --
All right. You can come back on at the very end, and I would like you 144 5/27/99 LAW & GOV'T - RES. 990209 to deal with that. It sounds like a very fair proposal that you're making.
And the other piece. You had requested information, what's the rate of participation in Philadelphia, for instance?
Right now, that's not required that utilities disclose that publicly. We would like that information disclosed publicly, not just by service area, but by zip cope, municipality.
Well, I would appreciate it if you would make that request specifically to the Public Utility Commission and send me a copy of your request so that we will know it and we will follow up with the Public Utility Commission to find out what their disposition is. It just always -- we found it always misleading to include statistics for a five-county area. We think Philadelphia's different. No 23 other area has anywhere near the size of low-income families that we have. And frequently, we get a totally wrong picture. I don't know 145 5/27/99 LAW & GOV'T - RES. 990209 whether that applies here or not, but the only way to be sure is to get that information.
I think that's correct. We would also like to echo previous statements supporting the City's exploration of aggregation. New Jersey's deregulation law really encourages municipal aggregation. And there's nothing prohibiting Philadelphia from engaging in some sort of aggregation progress with Philadelphia residents.
Well, we would like to have any knowledge that anyone has of the use of this aggregation principal. I call it "representation," but I kind of like aggregation; it sounds more impressive.
And finally, I think Philadelphia has won additional opportunity. That's problematic but should be explored again. We're one of the few parts of the state where there are two utility brand names that are etched in people's minds -- PECO and PGW. While PGW's first experiment in the electric deregulation seems to have been a failure, they 146 5/27/99 LAW & GOV'T - RES. 990209 really have an opportunity, I think, to attract a large customer base because many people do associate their name with energy. And despite their problems, many people use them if they had a good price. And, secondly, PGW's future clearly is in jeopardy in the long term. If the State deregulates the gas industry, then we will see some subsidies disappear that are currently in place. And if PGW were able to actually generate income for itself on the electricity side in addition to saving customers money, it would be money that could go back into their current subsidy program for low-income and elderly customers. My written testimony goes into more detail, but most of the people made other good points. Thanks.
Mr. Small, move the microphone as closely to you as possible, and identify yourself for the record.
My name's Robert Small, and 147 5/27/99 LAW & GOV'T - RES. 990209 I'm not with any organization, okay? I'm just testifying as a consumer.
Well, okay, I don't actually live in the city; I live in Delaware County, but I work in the city.
This is about PECO. I began what I call the long tortuous journey to what's becoming PECO-free as soon as it was announced so that I could apply for it. Through January and February of 1998, I happened to be home on medical leave, so I would call PECO every day to find out what was happening with my application. Eventually, I realized I needed to contact the PUC, which I did, which led to this decision in March of '98. However, even after the decision, it had little effect. And after almost a year, a number of phone calls, letters, whatever, which I didn't bring all of them -- just these. 148 5/27/99 LAW & GOV'T - RES. 990209 Finally, in January of 1999, the issue was finally resolved. But it took me almost a year and a half from the time I first inquired. And at that point, I began to wonder whether the issue would ever be resolved and whether a person who couldn't call in on a daily basis, which is a lot of working people, etc., and wasn't fully obsessional could ever change electric suppliers. You have to really be obsessed and keep calling. I should also add that if most of the people involved with PECO whom I happened to deal with on this, and I called people both in my area and in Philadelphia and in Harrisburg. If most of the people have any contact with nuclear items, I'm scared -- really, seriously. And I felt that when I finally left PECO, I had completed a major life victory. In other words, it took me a year and a half from the time I initially applied and having plenty of time to make phone calls. Now, the other part of this is where I work. I work for the state of the Pennsylvania in the Welfare Department. A number of my clients who have gone through the same thing have just 149 5/27/99 LAW & GOV'T - RES. 990209 given up. In other words, most people are not going to call every day, write letters, do faxes, etc., go to the Public Utility Commission after a couple of months. Most people are just going to say, Well, I tried and that's it. So I think that part of doing the outreach is you need to make it -- not just explain to people, Okay, this is how you do it, but you may have to explain to people, Okay, if you apply and three months later, nothing's happened, then you need to go to the PUC.
I had gone through PECO and I had applied through Connectiv at the time.
Right. In other words, they had said, You're in a group that can transfer. We were in --
It's just the reverse of the slamming arrangement that 150 5/27/99 LAW & GOV'T - RES. 990209 Councilman Rizzo spoke about.
I would like to know and I hope the gentleman from the PUC will be able to tell us. I'm very concerned that there may have been many deliberate efforts by PECO, you know, to prevent transfers away. I agree with you, Mr. Small, that not many people would have the persistence that you displayed, and you're to be commended for it. And we think that's very important information to have on the ordinary. And we thank you for it.
And the last thing I'd like to say again is, I know with my work with low-income is that they -- in other words, my clients, for instance, if they disagree with a decision that the State makes, they know to appeal, okay? But they don't always know that if they apply to PECO and they don't get the transfer, they'll just say, Oh, okay, well, maybe we can't do it then, okay? So I think that's -- and I'm not sure how, but I think some kind of special outreach 151 5/27/99 LAW & GOV'T - RES. 990209 needs to be made that tells people, Okay, if it's three months or six months later and you haven't gotten the transfer, then you need to go to Public Utility Commission, and this is how you do that anyway. Anyway, thanks for letting me testify here today.
Well, I think that's a problem we have to deal with. And I thank you very much for bringing it to our attention. (Unidentified from audience comes forward).
Yes? The final witness, identify yourself for the record. The final new witness.
My name is Tim Carney. And I work with the Energy Cooperative. I just want the record to show that Alec Meltzer, who is home sick, provided written testimony for the committee, and it has been passed out Alec works 152 5/27/99 LAW & GOV'T - RES. 990209 for the Pennsylvania Consumer Action Network, and they've submitted written testimony for today's hearing.
And we will ask that that testimony be made a part of the record. Thank you. The gentleman in the rear. (Gentleman in the comes forward.)
My name's Roy David. I live in Queen Village. I have a couple of questions as a consumer, and then I would like to make what I hope will be a contribution.
We don't know that answer. I would say it's approximately half a million, maybe more. (Tim Carney answers inaudible, off-mike.)
Well, you have to come up forward for the answer to get into the record.
This is Mr. Carney. 153 5/27/99 LAW & GOV'T - RES. 990209 Yes?
In the PECO service territory, there is roughly 1.5 million residential, commercial, and industrial customers.
But we don't know what -- of what number, what is the number that is applicable to Philadelphia. And then the last number I will want will be the Philadelphia residential users, and we may get some of that information from the gentleman when he returns, the gentleman who was with Commissioner Brownell.
So my guess is there's probably a little bit higher than that in Philadelphia.
So my guess is, the electric customers in Philadelphia is a little bit higher than that.
As a consumer, I would like 154 5/27/99 LAW & GOV'T - RES. 990209 to -- I've heard many -- much talk about simplification of the presentation of information.
As a consumer, I would like to be presented with this: Here is how much the average consumer pays. If I switch, I will save approximately how much. Just that. That's one suggestion. It would simplify it for me. The other is this: I just learned about this meeting, and I can't speak at length, but you probably won't want to hear anybody speak at length at this point. I have been working on a marketing plan for alternative energy companies. I've been working on it for sometime. And I would -- it's not quite complete. I hope it will be complete in the next couple of weeks. And if possible, I'd like to be able to contact you or any of the representatives from the energy companies to discuss this.
Well, I gave my address earlier. It's just City Hall, Philadelphia, Pennsylvania, Councilman David Cohen, Chairman of Law and Government Committee. My telephone number is 686-3446. 155 5/27/99 LAW & GOV'T - RES. 990209 And if I'm not there, my staff will be there and will be able to take the message. And we'll do everything we can. I think if you talk to some of the folks here, you can get that information, but we'd like to facilitate any contact you'd like to have with any of the folks that have appeared here.
And we appreciate your coming and telling us that, and we may have a comment as to whether your suggestion for a simple explanation of the price, you know, of the savings, we'll see if the gentleman from Commissioner Brownell's office can answer that. You're not from Commissioner Brownell's, you're from the Commission, right?
And I think I suggested to Mr. Popowski that he might remain 156 5/27/99 LAW & GOV'T - RES. 990209 also? Why don't you come forward, and we could have your final comments, the both of you. (Sonny Popowski comes forward.)
I'd like to ask you to start with the very last question. Is it possible to put the information together so it can answer that customer's simple question of how much will I likely save based on upon what I've been billed? I've always told people they could save roughly 10 percent. I've said that because I think it's accurate and also it's easy to estimate. If your bill is $45, then 10 percent of that would be $5.50 a month.
And if you have a graduate degree in mathematics, you multiply that by 12 and --
It is possible to do that. The question becomes, does the Public Utility Commission, as a regulatory body, get into 157 5/27/99 LAW & GOV'T - RES. 990209 the pricing information business in a deregulated market? Historically, we have answered the question, no, we do not do that.
Well, since historically we're in a different mode of operation with respect to this phase, I would respectfully urge the Commission to reconsider because old -- you know, past decisions may not be applicable to this new situation. We've all agreed this is entirely different, we're not even sure where it's going to go. We hope it will benefit us. None of us apparently feel confident to be able to predict with certainty what new technologies will emerge. So let me just say that I think it would be good if the Commission, and I would ask if you'd be find kind enough to relay it to at least Commissioner Brownell and perhaps to other members of the Commission, I think they ought to review that question.
Respectfully, I just think it's a different situation. Mr. Popowski, I see you ready to get 158 5/27/99 LAW & GOV'T - RES. 990209 into this. Go ahead.
Sure. I'm not a part of the Commission. We're independent of the Commission, and we can certainly advocate to the Commission those kind of ideas. Also, I'm a member of the Consumer Education Council. This is an issue that has come up where we've tried to figure out where to draw the line and what kind of information the Commission can put out as a public agency versus what kind of information comes out from the market itself. I lean to in favor of the kind of approach that you're taking; that is, the more information, the better. But as I said earlier, prices change and you do have to make sure that you get it right. And you don't want to be -- you don't want the Commission in the position of saying, Here's the price that you're going to pay and make a public statement to that effect, and then when a consumer goes --
Well, you can say "as of today," and that the price has changed.
Yeah. And that -- like I say, that's why I'm, you know attaching that 159 5/27/99 LAW & GOV'T - RES. 990209 Inquirer article to my testimony. I think it's a great way to do it. But the way, the Inquirer article has the cents per kilowatt and it does talk about the average savings, as this gentleman requested. Again, average savings are different depending on whether you have an apartment or whether you have a big house, whether you have air-conditioning, whether you have electric heat. So that's not quite as simple. But the principle is something I think we have to discuss, which is, is there a several way to get information to all consumers where they can make a simple price comparison? I think it's worth pursuing.
Well, we think it's in good hands when we leave it in your hands to come up with an approach. And this committee would just like to be kept informed about that. The question about price changes can be used negatively. On the first occasion that I addressed the subject to the Council meeting, a fellow Councilmember got up immediately and said, "But don't be deceived by these stories of savings because the savings may be short-lived, 160 5/27/99 LAW & GOV'T - RES. 990209 and prices may change very quickly." So it can be used in a negative way too, and I hope we can do it without creating that negative implication. It seemed to me the purpose of that statement was to support the notion of "stay where you are and don't change."
And the prices generally for residential customers are 12-month prices.
Right. What I was saying, when I said that prices changed, the price to that individual consumer will stay where it was set when they signed the contract.
And if it changes adversely, the consumer will be free to pick another company; isn't that right?
If that customer signs 161 5/27/99 LAW & GOV'T - RES. 990209 up for months, they are guaranteed that rate for 12 months. And at the end of the 12 months, if the rate goes up, they can switch to somebody else. Again, I think that's one of the reasons I think there's very little risk involved, by the way, in switching because you can always switch back.
Any other 10 observations you have or any other matters that 11 either of you gentlemen would like to add before 12 we finish?
I would just say I think there are a lot of excellent ideas today. And I would like to work with you, and if the City wants to take this step, either through the Water Department, gas bills, tax bills, anywhere you want to put out information, I'd be happy to work with you to make sure that we get out the most accurate information possible. I think that's a great idea, and whatever we can do, I'd offer our services.
And, apparently, we 162 5/27/99 LAW & GOV'T - RES. 990209 could, in our internal dealings with the Mayor's Office, we can say that the cost of the printed message will be borne by of PUC's Education Fund?
You can say that the Public Utility Commission's consultants will help you develop the material. I didn't say that we would pay for the cost of printing the documents for all the residents of Philadelphia. That's something I would have to take back to my commissioners.
And I'm not in a position to promise that, but I can certainly advocate that.
I understand that. Well, we'd like to advocate that. All right. Anything further? We want to thank everybody for their patience, everybody that's remained this time. And then I have one last question probably aim add you, sir, though. Mr. Popowski 163 5/27/99 LAW & GOV'T - RES. 990209 may also be in a position to deal with it. At City Council today, we passed a resolution to investigate the proposals that we hear are being booted about to have the Philadelphia Gas Commission sort of dis-established and to have jurisdiction of the PGW transferred to the Public Utility Commission. We are very concerned in Philadelphia about that happening because we don't think that would be in the best interest of Philadelphia consumers. We had to note the partnership nature of the rumors. We don't know whether they're sound or not but we understand some groups met with the Majority Leader of the House, and they confirmed that there is serious thought being given to that proposal. Do either of you have any thoughts with respect to that? I raise it particularly since I've been advocating for some time now that PGW go back into the electric business because I think, first, that would help the environmental area; and, two, it might help PGW. And we never understood why after a first effort to get into the electric energy field, they withdrew. 164 5/27/99 LAW & GOV'T - RES. 990209 Now, if either of you have any thought with respect to that matter, I would be very pleased to hear it.
I participated on behalf of the consumers of what are called the investor-owned utilities -- that's who our office represents -- during the process that led to the current draft of the legislation. The current draft of the legislation, as I understood it, would not include PGW. I have not taken a position on whether that should be amended, and I purposely haven't and I don't think I can because I don't represent the consumers of PGW. That's an issue that I think has to be decided by the General Assembly with input from the representatives of PGW. In other words, we were broken down basically into working groups. I was involved in the legislation that affected consumers of investor-owned utilities, that's who I represent. And I, therefore, have not taken and I don't think I can take a position.
I can understand that. 165 5/27/99 LAW & GOV'T - RES. 990209 How about you, sir?
All I do is electric issues, Councilman, and haven't followed the gas legislation.
Yes, sir, in the back. Do you want to come forward? 'Cause the only response that can appear on the record is the response that comes through the microphone. If you just have this gentleman come forward and switch the microphone to him. (Steve Huntoon comes forward.)
Councilman, I'm Steve Huntoon. I previously testified. I'm with Connectiv Energy. We support the ability of PGW's 525,000 customers to be able to choose a competitive supplier in the same way in which we've supported the ability of the Commonwealth's 5.2 million electric customers' right to choose a supplier. 166 5/27/99 LAW & GOV'T - RES. 990209 PGW's commercial rates are the third highest among the largest 50 gas utilities in the country. Their residential rates are the 13th out of the top 50 gas utilities in the country. And we support the ability to choose. We really do not -- are -- don't have an opinion about whether the Philadelphia Gas Commission should regulate PGW or whether the Pennsylvania Public Utility Commission should regulate PGW, other than it's our understanding that so long as the Philadelphia Gas Commission is the regulatory body, it's unlikely that consumers would have the ability to cheese a competitive provider. And if that is the case, then it seems like the Pennsylvania Public Utility Commission's oversight would be the only way to give the 525,000 customers a choice.
All right, thank you. I'm just interested in the different points of view because we're beginning the discussions and debates. Actually, beginning at 3 o'clock this afternoon, there is a briefing going on by Councilwoman Tasco, who is one of the 167 5/27/99 LAW & GOV'T - RES. 990209 authors of the resolution that we adopted today on the question of PGW. We thank you all for attending. And the hearing will stand in recess until the call of the Chair. Thank you all very much. (Adjourned at 2:40 p.m.) - - - 168 C E R T I F I C A T E I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia of Thursday, May 27, 1999, were reported fully and accurately by me, and that this is a correct transcript of same. RE: COUNCIL COMMITTEE ON LAW & GOVERNMENT RESOLUTION NO. 990209 __________________________________, JOSEPHINE CARDILLO, Registered Professional Reporter