Electric Deregulation Makes New Consumer Safeguards Vital

Op-Ed
The Bergen Record
Appeared 2/6/97

Electric Deregulation Makes New Consumer Safeguards Vital

by Blossom A. Peretz, Esq.
Director, Division of the Ratepayer Advocate

How much do you know about the electric service you purchase every month . . . and how much do you want to know?

If you are like many residential utility customers, your answer to both questions ranges from "not much" to "less than that." Because New Jersey customers have never had a choice in which company supplies their electricity, there has never been an incentive to learn more.

But that is about to change because of a recent proposal by the New Jersey Board of Public Utilities that could allow you to choose your electric power supplier, just as you now choose among long distance phone companies. This proposal is the subject of public hearings this week and next. Within two months, the Board will decide whether to adopt its Energy Master Plan proposal.

The Board's proposal calls for a phase-in of retail choice that would give all New Jersey residents and businesses the option of choosing their electric supplier by April 1, 2001. At least fiveas early as April 1998. With choice, there will also be the option not to choose. No one will be left without electricity; every customer will continue to have the option of purchasing electricity from his or her traditional electric utility.

I have spoken with consumers around the State who are wary of this major transition. Some of them ask why the Ratepayer Advocate is in favor of "fixing something that isn't broken." And, indeed, I expect that there will be some resistance and confusion for customers who will be faced with choices in who supplies their electricity.

My response to these customers is that, while the current system of regulation has provided very reliable service, the price has literally been too steep. New Jersey residents and businesses pay among the highest electric rates in the nation. Our rates are between 40 - 50 percent above the national average.

The cornerstone of the BPU's restructuring proposal is the recognition that the generation of electricity -- which accounts for the greater part of you electric bill -- is no longer a "natural monopoly." It can be provided more cheaply when there are a number of competitive suppliers in the market place. The delivery of electricity to your doorstep, however, will remain a monopoly and will be regulated by the BPU. (It doesn't make economic sense to have a number of suppliers stringing or burying electric wires along a street).

I am convinced that a competitive electric supply is ultimately the only way to reduce the costs of electricity to New Jersey customers ... and not a moment too soon.

I am also convinced that significant price reductions will take time. In the meantime, the Ratepayer Advocate has recommended that a 10% percent decrease should be in place for all consumers on October 1, 1998. It will make little sense to go through the difficult transition to competition only to find that rates have not changed, or that they have increased.

During the phase-in period for retail choice, it is also possible that some utilities will file for a rate increase or request approval to recover certain costs from customers that are not currently permitted. This raises important questions about the benchmark that the BPU will use for a proposed rate reduction. We are urging the Board to use current rates as the "baseline" for the 10% rate reduction we have requested.

In addition to the provision of meaningful rate reductions, we believe that consumer protection and the needs of low-income customers are major issues that need careful attention as we restructure.

In a restructured electric utility industry, as the number of service providers and service options increase, opportunities for consumer confusion and the importance of consumer protection will increase dramatically. Having experienced the difficulty of getting the "best deal" in long distance phone service, we are all skeptical about the quality of information we will receive about electric service options and whether we it will allow us to make informed choices.

The benefits of competition will occur more quickly if we work together to minimize consumer confusion that deregulation can create. That is why, this week, I have called upon the Board of Public Utilities to form the Utility Consumer Protection Board. Its members would include the Ratepayer Advocate, BPU Staff, Division of Consumer Affairs, representatives of citizen organizations, such as Citizens Action, utilities, marketers, social service agencies, and state and municipal government representatives.

This standing committee should begin to work immediately to draft a consumer protection and information plan of action and to draft, if needed, a comprehensive legislative proposal. The Board should establish a firm timetable for the completion of these activities.

Finally, we must use this opportunity to consider new low-income assistance programs. Current utility programs for New Jersey's low-income customers are plainly inadequate: there are no low-income discount tariffs, and fuel funds, where they exist, are voluntary. Electric service is a life-sustaining commodity. Its provision to all, at reasonable and affordable rates, must be assured, and I believe that now is the time for a thorough review of existing programs and development of new programs to protect the most vulnerable among us.

That is why the Ratepayer Advocate is urging the Board to provide utilities and marketers with incentives to aggregate groups of customers, not just in affluent suburbs, but in our large cities. "Aggregation" is a way of combining the demands of small customers so they can negotiate lower prices as a group.

Ultimately, electric utility reform cannot be successful unless it lowers the price of electricity for all New Jersey residents and businesses. In my role as consumer advocate, I am dedicated to making sure that all customers benefit from competition and that none of our citizens are abandoned with the break-up of the regulated monopoly infrastructure. The role of consumer protection remains even more vital in the competitive environment.

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