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					                             STATE OF NEW YORK
                         PUBLIC SERVICE COMMISSION

                                   At a session of the Public Service
                                     Commission held in the City of
                                       Albany on March 26, 1998


    Maureen O. Helmer

CASE 97-M-0567     -    Joint Petition of Long Island Lighting
                        Company and The Brooklyn Union Gas Company
                        for Authorization under Section 70 of the
                        Public Service Law to transfer ownership to
                        an unregulated holding company and other
                        related approvals.

                          ORDER TO SHOW CAUSE

                 (Issued and Effective March 26, 1998)

                        INTRODUCTION AND BACKGROUND
          A settlement filed December 12, 1997 (the Settlement)
would merge The Brooklyn Union Gas Company (Brooklyn Union) and
Long Island Lighting Company (LILCO) by creating a new parent
holding company (BLHoldCo) whose subsidiaries would include
KeySpan Energy Corp. (KeySpan -- Brooklyn Union’s parent) and
LILCO. KeySpan is also the parent of KeySpan Appliance Service,
Inc. (KAS), a company formed to install and service gas
appliances, and KeySpan Energy Services, Inc. (KES), an energy
services company or "ESCO" formed to provide retail energy sales
and other services. The Settlement was adopted by the Commission
on February 5, 1998 subject to certain conditions and changes
          In addition to resolving questions regarding the merger
of KeySpan and LILCO, the Order provides a plan for the
elimination of appliance repair service by Brooklyn Union
(Settlement, pp. 51-55). Prior to the Order, Brooklyn Union
provided non-emergency and non-safety related appliance repair

 Case 97-M-0567, Order Adopting Terms of Settlement Subject to
Conditions and Changes, (issued February 5, 1998).
CASE 97-M-0567

services to customers on an annual contract basis for a fee. The
Order provides that as of a date no earlier than two months after
the issuance of the Order, and no later than June 30, 1998,
Brooklyn Union will cease to provide such services.
          The Order permits Brooklyn Union to transfer appliance
service related assets to KAS to facilitate the "succession of
KAS to the non-safety related appliance repair service currently
conducted by Brooklyn Union" (Settlement, p. 52). The Order also
provides for a customer notification that allows customers to
choose between having their service contracts assigned to KAS, or
the right to terminate their contract with a pro-rata refund in
some instances. Customers that do not choose an option or that
do not respond would have their contracts assigned to KAS by
default. The notification required by the Order also includes a
list of competing service providers that have expressed an
interest in providing appliance repair services in lieu of
Brooklyn Union. After the transfer date, the Order allows
Brooklyn Union to provide only "screwdriver type" repairs and
prohibits any referral or steering of customers to particular
appliance service providers.
          The Order also provides that "[i]n connection with the
assignment of appliance service contracts to KAS, Brooklyn Union
may provide to KAS service records of customers whose contracts
are being assigned. Prior to May 1, 2000, KAS will not share
with any Affiliate any of its customer service information
regarding ’default customers.’" (Settlement, p. 54). This
provision was designed to prevent Brooklyn Union’s ESCO
affiliate, KES, or any similar affiliate, from gaining an unfair
advantage over competing ESCOs and appliance service providers
during the "roll-out" of appliance services by Brooklyn Union.
          On March 16, 1998, a complaint and petition for
rehearing (the Complaint) was filed with the Commission by New
York State Alliance for Fair Competition, Inc. and Oil Heat
Institute of Long Island, Inc. (the Complainants). The Complaint
alleges that an advertising campaign conducted by Brooklyn Union
in connection with the provision of appliance services identifies
KeySpan Energy Services (KES) as the successor to Brooklyn

CASE 97-M-0567

Union’s appliance service business, and describes a corporate
structure in the advertisement that is in violation of our Order.
On March 19, 1998, the Complainants filed an amended complaint
and petition for rehearing (the Amended Complaint) with the
Commission. The Amended Complaint further alleges that if the
information in the ad is incorrect, then Brooklyn Union has
engaged in false and misleading advertising in violation of
General Business Law §350 et seq.. The Amended Complaint also
alleges the error is compounded by the customer notification
letter, in failing to specifically identify KAS, and by the
inclusion of KeySpan Energy Services in the alphabetical listing
of appliance repair companies, which further violates the
Settlement and undermines the protective measures incorporated in
the Settlement. On March 23, 1998, the Complainants filed a
supplement to the Amended Complaint (the Supplement). The
Supplement cites additional instances of advertisements that, it
is alleged, violate the Settlement. The Complainants seek a
reconsideration of the Commission’s Order adopting the
Settlement, institution of an investigation and evidentiary
hearings, a stay on the effectiveness and implementation of the
prior Order regarding appliance service, prohibitions on the
transfer of records to KAS or other entities, and a prohibition
on future advertising regarding appliance service during the
pendency of the stay.
          On March 25, 1998, Brooklyn Union filed its response to
the Complaint, the Amended Complaint, and the Supplement.
Brooklyn Union denies that it has violated the Order or engaged
in any false or misleading advertising. Brooklyn Union states
that it is not transferring, and has no intention to transfer,
its appliance service business to KES; that it does not intend to
conduct an appliance repair service activity through KES or any
other unregulated gas marketing affiliate; and that the appliance
service business is being transferred to KAS, a corporate entity
separate and distinct from KES, as required by the Order.
Brooklyn Union notes, however, that "KAS also has taken the
additional step of adopting ’KeySpan Energy Services’ as an
assumed name pursuant to section 130 of the General Business Law

CASE 97-M-0567

of State of New York." According to Brooklyn Union, "[t]his step
was taken to promote an overall ’KeySpan Energy’ brand and
minimize the creation of what KAS believed would be customer
confusion that might otherwise result from a proliferation of
separate corporate names that are a ’KeySpan’ derivative."
          To resolve the issues raised by the Complainants,
Brooklyn Union is willing to commit that KAS will cease all
advertising under the name KeySpan Energy Services "[i]n
consideration of all the circumstances surrounding this matter."
However, KAS does desire to employ the brand of its parent
company - "KeySpan Energy" in direct mail solicitations to non-
customers, and KeySpan Energy Corporation intends to continue to
promote itself as a full service provider of unbundled
unregulated energy services, subject to the requirements of the
          The root of the problems raised by the Complainants is
the adoption by KAS of the assumed name "KeySpan Energy Services"
which, not coincidently, is the same name as one of the energy
services affiliates of KAS that pursuant to the Order is not
allowed to receive customer information from KAS. It is not
clear why KAS believed this move would prevent confusion and it
is understandable that this practice caused confusion and
consternation for the Complainants.
          Our paramount concern is to protect and assist Brooklyn
Union’s appliance service customers through a smooth transition
as provided for in the Order. Because the transfer of customers
contemplated by the Order is intended to occur on or about
April 5, 1998, prompt action is necessary to end the confusion
created by KAS, and proliferated by Brooklyn Union in its
advertisements and its customer notification letter.
          Therefore, we will direct Brooklyn Union to subject to
the conditions that (1) KES and any other affiliate of Brooklyn
Union, except KAS, shall not obtain the appliance service
contracts of Brooklyn Union’s appliance repair customers (those
who had contracts as of February 4, 1998) prior to May 1, 2000;
(2) if any such customer’s contract was obtained by KES or any

CASE 97-M-0567

other affiliate of Brooklyn Union, except KAS, in any manner to
date, it will be assigned forthwith to KAS; (3) any customer so
assigned back to KAS shall be notified in writing of the reasons
for the transfer; (4) Brooklyn Union and KAS shall cease all
advertising and doing business under the name KeySpan Energy
Services, or any other name that due to similarity with the name
of an energy services affiliate would cause confusion as to the
identity of KAS; and (5) KAS shall be allowed 90 days to
eliminate the KeySpan Energy Services name from signs, business
cards, stationery and service person uniforms. This resolution
of the matters presented best protects customers given the
circumstances and avoids the need for the relief sought by the

It is O R D E R E D:
          1. The Brooklyn Union Gas Company shall submit a
written statement of its unconditional acceptance of the
conditions contained in this order, signed and acknowledged by a
duly authorized officer, by March 30, 1998. If such acceptance
of this order is not so filed, Brooklyn Union shall, by March 30,
1998, show cause why the reconsideration and other relief
requested by the Complainants is not warranted and we shall issue
an order suspending the appliance service transfer provisions of
the Order. All statements shall be filed with the Secretary of
the Commission and served on all parties to this proceeding.
          2. This proceeding is continued.

                                   MAUREEN O. HELMER


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