Overview of OCA and its Activities During 2005 The Office of Consumer Advocate (OCA) has served Pennsylvania utility consumers since its establishment by the General Assembly in 1976. The OCA represents Pennsylvania utility consumers in matters before the Pennsylvania Public Utility Commission (PUC) and other state and federal agencies and courts. The OCA is a statutorily independent office, administratively included within the Office of Attorney General, Public Protection Division. The following report highlights some of the OCA’s major activities during 2005. The OCA has continued to provide vigorous professional representation for Pennsylvania consumers before both state and federal regulatory agencies and courts. The OCA participates before the PUC in all major rate cases, many small rate cases, and many non-rate proceedings that have a significant impact on consumers. OCA also participates in numerous matters before the Federal Energy Regulatory Commission (FERC) and the Federal Communications Commission (FCC) that have a substantial impact on Pennsylvania consumers. The OCA also participates actively on policymaking committees of non-government organizations such as the PJM Interconnection, whose decisions have a critical impact on electric competition and service in Pennsylvania. Through its educational activities and toll-free call center, the OCA also seeks to protect and inform consumers about changes in their utility service, particularly as we move from a fully regulated to a more competitive utility industry. In the electric industry, the OCA continues to be involved in the implementation of the Pennsylvania electric restructuring program. The OCA’s primary focus has been to ensure that all Pennsylvania consumers benefit through the strict enforcement of rate caps and other protections that were included in Pennsylvania’s landmark 1996 Electric Choice Act. The OCA has also sought to ensure that customers continue to be protected even after rate caps expire through the development of stable, reasonably priced “provider of last resort” service. The OCA also devoted substantial resources to matters involving the continued reliability of electric service as well as the impact on consumers of electric utility mergers. Since much of the decision-making that affects Pennsylvania electric consumers now occurs at the federal and regional level, the OCA has greatly expanded its participation in key electric proceedings before the FERC and in the committees of the PJM Interconnection. In addition, the OCA has sought to protect consumers from any adverse consequences of electric restructuring, including intervening in bankruptcy proceedings of energy suppliers. In natural gas, the OCA continued to address the implementation of Pennsylvania’s Natural Gas Choice legislation as well as the specific restructuring proceedings that followed from that Act. As one result of that Act, the OCA has been given the statutory authority to represent the customers of the Philadelphia Gas Works in proceedings regarding that municipal utility’s service and rates before the Pennsylvania Public Utility Commission. The OCA also continues to represent consumers across Pennsylvania in the annual PUC review of every natural gas distribution company’s retail purchased gas costs. This issue has become increasingly prominent in light of the record high prices in the wholesale natural gas market. As in the electric industry, the OCA seeks to ensure that natural gas consumers continue to have access to a reasonably priced “supplier of last resort” service from their regulated natural gas distribution company. The OCA also participates in proceedings at the FERC that involve the major interstate pipelines that serve Pennsylvania’s retail gas distribution companies.
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In telecommunications, the OCA has participated in a number of major merger proceedings as well as cases involving telephone competition in Pennsylvania. The OCA has focused on the goal of ensuring that Pennsylvania maintains and enhances the provision of universal telephone service to all consumers throughout both urban and rural areas of the state. This has included efforts to expand Lifeline telephone discount programs to low-income consumers who might otherwise not be able to afford service as well as efforts to extend deployment of new advanced services to rural areas. The OCA also has been successful in a number of cases in helping communities in several parts of Pennsylvania to obtain larger toll-free calling areas that better reflect their local community of interest. In addition, the OCA increased its efforts to protect Pennsylvania consumers from telecommunications scams such as “modem hijacking.” In the water industry, the OCA continues to represent consumers in base rate increase and acquisition proceedings involving both large and small utilities. In addition, the OCA supports efforts by consumers and communities to obtain extension of water service to their homes at reasonable cost. The OCA also has supported the development of programs that assist low-income consumers in paying their water bills. A summary of some of the OCA’s most significant activities and cases in 2005 follows.
Utility.com Refunds In December, 2005, the OCA mailed refund checks totaling approximately $200,000 to about 20,000 Pennsylvania consumers who had received electric generation service from Utility.com, an Internet-based energy supplier. Utility.com was a California-based electric generation supplier that sold power to Pennsylvania consumers for 20% less than the utility’s generation rate. When the Company abandoned service in 2001, it did not provide the 90-day advance notice to customers required by Pennsylvania regulations. The OCA filed claims in a California proceeding seeking restitution for Utility.com’s Pennsylvania customers who had to buy higher-priced generation during that 90-day period. The OCA obtained approximately $200,000 as a result of those claims and distributed those funds to about 20,000 former Utility.com customers. This amount is in addition to $125,000 in refunds that the OCA obtained in 2001 for about 1000 former Utility.com “budget billing” customers in Pennsylvania who had paid Utility.com in advance for generation they never received.
Modem Hijacking Settlement In March, 2005, the OCA entered into a first-of-its-kind settlement with Verizon to remove from Pennsylvania customers’ bills disputed unauthorized international calling charges that had resulted from a scam known as “modem hijacking.” These charges, which can amount to hundreds or even thousands of dollars per month, result from Internet scammers accessing a consumer’s computer through a dial-up modem connection. The scammers then program the computer to place costly long distance phone calls to foreign locations. Consumers are often unaware that they have been victimized until they receive their next monthly telephone bill. Under the settlement, Verizon agreed to remove these charges from the bills of Pennsylvania Verizon Long Distance customers and to give credits or refunds to customers who already had been
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required to pay those bills. To date, the OCA’s efforts have obtained over $200,000 in refunds and credits to over 2,000 Pennsylvania consumers.
Cashpoint Bankruptcy Proceedings The OCA completed its activities in early 2005 in a matter involving a bill payment company called Cashpoint that had collected monthly utility charges from thousands of Pennsylvania consumers, but had gone bankrupt before some of those payments had been turned over to the utilities. As a result, many of those customers were being asked by their utilities to pay twice for the same service and were threatened with termination if they did not make payments on bills that they believed they had already paid. The OCA entered Cashpoint’s New York Bankruptcy Court proceeding on behalf of Pennsylvania consumers and urged the Court to issue an Order requiring Pennsylvania utilities to refrain from taking any collection or termination action against customers who had made payments to Cashpoint. While the Judge concluded that he could not issue such an order because some of the utilities were not parties to the proceeding, he did request that all utilities inform the court whether they would voluntarily refrain from taking any collection or termination actions against those customers. Several Pennsylvania utilities responded immediately that they would not take such actions, and ultimately all Pennsylvania utilities agreed not to threaten termination or to impose any additional charges on those customers. Thus, all Pennsylvania utilities honored their customers’ payments to Cashpoint, as OCA had advocated.
Exelon Merger During 2005, the OCA protested PECO Energy Company’s application for PUC approval of the merger of Public Service Enterprise Group, Inc. with Exelon Corporation. The OCA sought $200 million of rate reductions to reflect a sharing of the merger benefits as well as a commitment to improved reliability, customer service, low income programs and limiting job loss in Pennsylvania. Following the submission of testimony, many of the major parties, including OCA, reached a proposed settlement agreement. The settlement included a number of key issues forwarded by OCA, including $120 million of rate reductions over a four year period, extension of the transmission and distribution rate cap through 2010, implementation of a plan to improve customer service and reliability, as well as significant improvements to PECO’s low-income universal service programs. Under the settlement, PECO also agreed to provide $27.2 million in funding between 2007 and 2010 to renewable energy, energy efficiency and economic development efforts. In addition the settlement contains numerous workforce and corporate structure protections. The PUC Administrative Law Judge recommended approval of the settlement and the case was pending before the Commissioners at the end of 2005.
National Fuel Gas Base Rate Proceeding The OCA filed a formal complaint against a proposed rate increase of $22.7 million by National Fuel Gas Distribution Company. Through its expert testimony, OCA contended that the company should receive an increase of no more than $7 million. After extensive negotiations, the company agreed to reduce its rate request by more than $10 million
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and to accept a rate increase of $12.0 million. In addition, the company agreed to withdraw its requests for a distribution system improvement charge and an uncollectibles tracking charge, both of which could have resulted in additional rate increases between base rate cases and both of which were vigorously opposed by the OCA. The PUC approved the settlement in March 2005.
Collection System Improvement Charge Appeal In March 2005, the Commonwealth Court ruled in favor of OCA’s appeal of a PUC decision that had allowed Pennsylvania American Water Company’s Wastewater Division to impose a collection system improvement charge on its customers. The OCA had argued that the PUC lacked statutory authority to approve the collection of this charge, which was intended to permit rate increases for certain investments made by the company between base rate cases. The OCA argued, and the Court agreed, that, without specific statutory authority, it was improper for the PUC to increase rates for this one component of rates without considering other countervailing cost decreases or revenue increases. The PUC and the utility filed Petitions for Allowance of Appeal with the Supreme Court. The OCA filed Briefs in Opposition. The Petitions were pending at the end of 2005.
Extended Area Service (EAS) Complaints During 2005, the OCA was successful in helping consumers in several rural and suburban telephone exchanges in obtaining larger local calling areas that better meet their community needs. These “extended area service” complaints involved customers in the Warren Center area of Bradford County, the New Florence and Seward areas of Westmoreland County, the Uhlerstown area of Bucks County, and the Loyalsock area of Lycoming County. In all of these cases the OCA discussed local needs with affected consumers, analyzed relevant toll calling patterns, and engaged in discovery in preparation for litigation. In the Warren Center EAS case, the OCA obtained a reasonable flat-rate calling plan commensurate with the Warren Center consumers’ toll calling patterns to three surrounding exchanges. In the New Florence and Seward EAS case, the OCA achieved a settlement that provided for two-way EAS between these adjacent communities at a substantial consumer savings. The Settlement required immediate toll-free calling from New Florence to Seward, and a limited 24-month, $1 facilities surcharge for toll-free calls from Seward to New Florence. Seward consumers readily approved this surcharge. In the Uhlerstown and Loyalsock EAS cases, the OCA filed formal complaints with the PUC on behalf of these consumers. In both cases, the OCA achieved settlements in the consumers’ favor. The Uhlerstown area consumers will be polled to determine if they are willing to pay an additional 25 cents per month to call to the Doylestown, Pennsylvania area toll-free, a substantial savings over present toll rates. Loyalsock area consumers are now able to call to the Muncy, Pennsylvania area toll-free at no additional cost.
Line Extension Supreme Court Appeal In May 2005, the Pennsylvania Supreme Court heard oral argument on the OCA’s appeal of a decision in which the PUC permitted Pennsylvania American Water
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Company to charge potential customers substantial “contributions in aid of construction” before providing service to members of a community that was physically located within its service territory. The OCA had argued unsuccessfully before the PUC that the people of this community were in desperate need of public water service and that the company had a public service obligation to provide that service without imposing exorbitant advance charges to fund construction. On appeal to the Commonwealth Court, the Court ruled 5-2 in favor of the PUC, but President Judge Colins and Judge Smith-Ribner joined in a dissent favoring the OCA’s position that the application of the Commission’s line extension rules was unreasonable in this case. The OCA filed a Petition for Allowance of Appeal with the Supreme Court and the Court agreed to hear the appeal. The appeal was still pending before the Supreme Court at the end of 2005.
PPL Rate Case Appeal The OCA filed an appeal with Commonwealth Court of the PPL rate case in which the Commission had allowed the Company to increase its base rates by $137 million. In the underlying order, the PUC had explicitly adopted $12.2 million in downward rate adjustments that had been proposed by OCA’s expert witnesses. The Commission, however, overruled the OCA’s objection to the Company’s request for retroactive recovery of storm expense that had been incurred during the period in which PPL had agreed to a long-term rate cap. The OCA argued that the retroactive recovery of those charges was inconsistent with the rate cap and with the Pennsylvania electric restructuring law. The OCA appealed the adverse decision on this point to the Commonwealth Court and that appeal was still pending as of the end of 2005.
Consumer Outreach and Education During 2005, the OCA devoted substantial resources to educating consumers about changes in the utility industry. The Consumer Advocate, Consumer Liaison, and other members of the OCA staff have helped plan and participate in consumer presentations, roundtables, and forums across the Commonwealth to help educate consumers about changes in the utility industry and to advise them about cases that affect them. In addition, the OCA keeps consumers and members of the General Assembly informed through regular letters and bulletins about upcoming cases and public hearings. The OCA provides consumer information and education through its website at www.oca.state.pa.us. The OCA also maintains a toll-free consumer call center at 800684-6560. The call center is staffed from 8 a.m. to 6 p.m. every weekday and assists consumers who have individual complaints or questions about their utility service.
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