Opinion ID: 2365347
Heading Depth: 1
Heading Rank: 3

Heading: Nature Of The Order

Text: As noted, the only issue that we need to address on the merits is the first one raised by the utilitieswhether Order No. 76292 constitutes a regulation under the APA and is ineffective by reason of the failure of the PSC to comply with some of the statutory requirements for the adoption of a valid regulation. That issue cannot be considered in a vacuum, however. Whether the Commission's directives constitute a regulation in the first instance, which the PSC denies, depends on what they do, and that needs to be explained, at least in summary fashion. The order does the following things: (1) It imposes the following seven standards of conduct on transactions between utilities and their affiliates, whether core-service or non-core-service: (a) Neither a utility nor its affiliate may represent (i) that any advantage accrues to a customer or others in the use of utility services as a result of the customer or other dealing with the affiliate or (ii) that their affiliation allows the affiliate to provide a service superior to that of other suppliers. (b) If an affiliate's advertising material identifies the affiliate's association with the utility, it must state that the affiliate is not the same company as the utility and that its prices are not set by the PSC. (c) Joint promotions, marketing, and advertising between a utility and an affiliate are prohibited. (d) A utility may not condition or tie the provision of regulated utility services to any other product or service. (e) A utility may not give any preference to its affiliate or customers of its affiliate in providing regulated utility services. (f) With certain exceptions, a utility may not disclose customer-specific information obtained in connection with the provision of regulated utility services absent the informed consent of the customer. (g) A utility that offers discounts, rebates, fee waivers, penalty waivers, or other special provisions to its affiliate or customers of its affiliate must offer the same benefit to all similarly situated non-affiliated suppliers or their customers. (2) It imposes the following additional seven standards of conduct in transactions with core-service affiliates (CSA): (a) Joint sales calls may not be initiated by the utility or a CSA; if a customer requests a joint sales call, it is permitted. (b) A utility and its CSA must operate from separate locations. (c) A utility may not provide sales leads to a CSA or appear to speak on behalf of a CSA. (d) If a utility responds to a customer request for information about competitive core services, the utility must provide a list of all providers of that service and may not highlight or promote its CSA. (e) A utility must process all requests for service by any provider in the same manner and in the same period of time that it processes requests for service by its CSA. (f) A utility must apply all terms and conditions of its tariff related to the delivery of energy services without regard to whether the supplier is a CSA. (g) Any information provided by a utility to an energy marketing affiliate must be disclosed to all non-affiliated suppliers with respect to its system, the marketing or sale of energy to customers or potential customers, or the delivery of energy to or on its system. (3) It declares, with respect to the transfer of assets between a utility and an affiliate, that (i) the definition of utility asset includes intangible and intellectual property, and (ii) asymmetric pricing will govern in such transactions. (4) It prohibits utilities and their affiliates, both core-service and non-core-service, from sharing operational, managerial, market research, public relations, advertising, customer service, and accounts receivable employees. It also, for the first time, puts limits on the sharing of legal and accounting employees. Accounting personnel may be shared for the purpose of establishing corporate accounting policies and standards, producing consolidated financial and tax statements, and preparing consolidated records or reports. Legal personnel may share responsibilities for OSHA and ERISA compliance or preparation of IRS or SEC filings, but not for contract negotiations or regulatory affairs. Joint costs for shared employees must be allocated on the basis of a fully-distributed cost methodology. (5) It precludes a utility from lending to, or guaranteeing the debt of, an affiliate if that would create a reasonable likelihood that the utility's cost of capital, credit-worthiness, or ability to provide regulated services will be adversely affected. Loans must be from the utility's retained earnings and must be arranged on an arm's length basis, be at market rates, and contain standard penalties for default. Stockholders, rather than ratepayers, must bear the loss of a default. (6) It expands the reporting requirements by requiring most energy utilities in the State to file periodic Cost Allocation Manuals. Those manuals must embody the four cost allocation procedures adopted in Case No. 8747 and must contain or identify the corporate organization, the location and officers of each corporate entity, an index of operational and managerial employee units of the utility and each affiliate, an index of shared services, methodologies and procedures for cost allocations of service and asset transfers, complete descriptions of all affiliate transactions, of utility services shares with each affiliate, and of all cash management transactions between a utility and any affiliate involving loans, securities, debt guarantees, or changes in capital structure, and descriptions of employee transfers between a utility and an affiliate. (7) It exempts affiliates of gas and electric utilities from promotional practice regulations that the Commission had earlier adopted in the form of regulations (COMAR 20.40.01.01-06). Those regulations, on their face, apply to utility affiliates. (8) It rejects an outright ban on the use of a utility's brand name or logo by affiliates but, in contrast to its decision in Case No. 8747, declares that the use of brand names or logos constitutes the transfer of a valuable asset, requiring that some compensation be paid to the utility (and, indirectly, the ratepayers). In order to implement that provision, the Commission stated that it would docket two separate proceedingsone to determine the appropriate value to be imputed to the utility for the use of the utility's name and logo, and the other to determine the appropriate value for unquantified or other intangible benefits transferred. (9) With certain exceptions, it adopts for all electric utilities the GENCO (Generating Company) Code of Conduct that, in a company-specific case, it had adopted for BGE. GENCO Codes deal with the relationship between a utility and its electric-generating operations. Some electric utilities, such as Potomac Electric Power Company, had decided to divest all or most of their generating assets; others, such as BGE, had decided to keep the generating operations within the corporate family but move them to an affiliate. In the latter case, the Commission was concerned that there be a level playing field for electric generation, to assure that customers actually receive the benefits of competition. In Case Nos. 8794 and 8804, the Commission, as part of an overall settlement agreement, adopted a GENCO Code for BGE that required that, (1) until June, 2006, the BGE GENCO must be operated as a separate subsidiary from BGE and BGE's retail marketing affiliate and it sell all of the generation output of the assets transferred by BGE into the wholesale market, (2) until June, 2003, the BGE GENCO may not offer power or ancillary services at prices or terms more favorable to an affiliate for resale to retail electric customers in the BGE distribution service territory, and (3) so long as BGE serves as the provider of Standard Offer Service, [3] it may not market or promote its Standard Offer Service. With limited exceptions, the order in this case adopts those principles for all electric utilities having a GENCO affiliate. It requires that a GENCO be a separate subsidiary from the retail marketing affiliate and from the utility until June, 2006, that it may therefore not market the electricity produced from its generation assets, that, except for Standard Offer Service, it must sell all generation output into the wholesale market, and that the utility may not market Standard Offer Service.