The Coastal Post - June, 1998

Deregulated Electricity Market Offers Competition And Requires Caution

By Attorney General Dan Lungren

For the first time ever, we Californians have a choice in who provides our electricity. The deregulation and restructuring of our $20 billion electric industry has not been without glitches and high-pitched debate, but since March 31, a free market has existed-and that's good news for consumers.

California's electricity rates have historically been as much as 50 percent above the national average. The unbundling of electrical services and the introduction of competition in this market will lower prices of electricity to California's industries, retail businesses, farmers and household consumers. While dramatically lower rates may not be apparent immediately, when the market fully opens in 2002, California's business and residential customers should see a significant drop in rates and enjoy the benefits of competition-namely choice of providers and more attentive service.

We may bemoan the dinner-hour phone calls from long-distance telephone companies seeking new customers, but we also know that the open market allows us to shop around to find the best deal and service.

However, with all the options facing consumers, there is considerable potential for unscrupulous businesses to take advantage of consumers who are unfamiliar with the restructured market. Residents who receive calls from individuals who identify themselves as an electric service provider should listen carefully to the promises being made and question the caller if what he or she says doesn't add up.

Since January 1, utility companies have been required to lower rates by 10 percent. Industry experts predict that a legitimate company will be able to guarantee a reduction of 2-4 percent above that now that the market is open. If solicitors offer an even greater rate reduction, residents should be wary about their ability to deliver. To verify that a company is authorized to sell electricity in California, contact the California Public Utilities Commission at (800) 555-7809 or check the website at http://www.cpuc/gov.

A potential fraud that consumers should be aware of is "slamming"-a practice of switching someone's electric service without their consent. Slamming was first seen after the deregulation of long-distance telephone service. California's electric deregulation law requires written authorization from the customer before electric service can be transferred to a new company, and my office will carefully monitor the industry to ensure that electric marketers comply with the law.

One marketing tactic that we anticipate will get a lot of attention is the promise of environmentally friendly "green power." My office is working with other attorneys general across the nation on a Green Marketing Task Force to develop guidelines for this elusive term. Our goal is to articulate a standard that companies must meet which will let consumers know what to expect if they agree to pay a little more for their electricity in an effort to be "green conscious."

While electric deregulation is complex and confusing, it's also another pioneering venture for Californians that will set new standards for consumer choices. We are among the first state to deregulate, and because of the size of our market, we are being watched closely by the rest of the nation. That is why it is incumbent upon us to be diligent in rooting out fraud and prosecuting companies who try to take advantage of customers and the open market place.

In January, my office filed suit against Boston-Finney, a Pennsylvania-based company that, we allege, misrepresented itself to customers and potential employees, and operated an illegal pyramid marketing scheme. Following our action, the CPUC revoked Boston-Finney's certification as an electric service provider and imposed stricter requirements on companies seeking to enter California's deregulated market. The tougher standards result in approximately 200 companies being removed from the CPUC's list of authorized electricity providers.

As the state's chief prosecutor, I have vowed that my office will be vigilant in monitoring the industry for violations of anti-trust and consumer protection laws. Electric customers who believe their provider has defrauded them should first contact the company to try to resolve the matter. If the company is unresponsive, Californians should contact the CPUC at (800) 555-7809 or my office at (800) 952-5225. Individuals can also write to my office at Department of Justice, POB 944255, Sacramento, CA 94244-2550.

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