Martha M. Hamilton

Wednesday, October 20, 1999, at 11 a.m.

Say what you will about monopolies — they made life easier.

Now in addition to the confusion of shopping for the best deal on an airline ticket and long distance services, consumers are confronted with the prospect of shopping for natural gas and electricity. And utility companies are trying to figure out the best way to survive in a competitive environment.

It's all very confusing for everyone. Martha M. Hamilton has been following the changes in the utility industry for The Washington Post.

Below is today's transcript.

Martha Hamilton: Hi, there. Thank you for joining us today to talk about utility deregulation. It's a complicated issue -- and I say that as someone who's been thinking about it and writing about it for several years. Let's go right to the questions.

washingtonpost.com: Martha, what are the reasons for the movement to utility deregulation?

Martha Hamilton: It's being driven by large industrial and commercial users of natural gas and electricity who believe they can reap substantial savings from competition. But it's also being pushed along by changes in technology that may someday mean that a large number of smaller power plants may supply the electricity now generated in large utility-run plants.

Baltimore, MD: Is the best thing to stick with the "old line" company such as Baltimore Gas & Electric or to switch? If you do switch and notice that you are being charged more, can you change back to your old company without being charged?

Martha Hamilton: I think for many of us there's an element of comfort in staying with the company you know. But whether you stay or switch should depend on who is offering what appears to be the best deal. Before you switch, however, you need to know the answer to the other question you raise. Some companies may charge a termination fee if you decide to switch back.

Sterling, Virginia: With so many companies competing for gas, electric, telephone services, as a consumer how do you know if you are getting the best deal?

Martha Hamilton: That's a really good question. The deals often come in different types of packages which makes it hard to do exact comparisons. Having said that though, you can compare per-unit costs for gas or electricity. Although, in some cases one provider may offer a fixed rate while another may offer, say, a 5 percent discount to whatever the utility charges.

Bethesda, MD: Do you believe that the consumer education programs which many states have enacted will actually help consumers make informed decisions about choosing suppliers and promoting competition?

Also -- a comment: Your article overlooked a significant source of information on restructuring as it will impact Montgomery County Maryland. Visit the Montgomery County Energy and Advisory Committee -EAQAC- Electric Utility restructuring site at http:--www.his.com-israel-loce-eaqac-eaqeur.html for our past reports on restructuring. Also, we have posted a bill and explained what it means and how it may change at http:--www.his.com-israel-loce-eaqac-eaqbill.html

Although EAQAC is a voluntary organization, we currently have more substantive information about restructuring in Montgomery County and Maryland on line than the Maryland Public Service Commission or the Office of People's Counsel. Check our site out!!

Thanks for your extensive coverage of the industry.

Carolyn Elefant, Esq.
Law Offices of Carolyn Elefant
Vice Chair, EAQAC
loce-his.com

Martha Hamilton: I think that state consumer education programs are important, but most consumers are going to throw away bill inserts and ignore other sources of information. I say this as a consumer who has found it hard to focus on information about telecommunications deregulation. It's so complicated that the natural response is to look the other way. But it's important to be able to find the information you need when cold weather or something else makes you finally decide to explore whether you can lower your gas bills.

Thaks for telling us about yet another place to find information.

rockville, md: Martha, we are Washington Gas users but the other day I got a bill from Washington Gas Energy Services. What is the difference?

Martha Hamilton: Washington Gas is the utility, and Washington Gas Energy Services is an unregulated subsidiary that is out there competing for customers' business. If you switch--to Washington Gas Energy Services or any other competing provider, you will still receive a bill from Washington Gas, but it will also list the charges from the natural gas supplier as a separate item.

Washington, DC: How can you be sure that the company you choose won't go belly up?

Martha Hamilton: Before companies can compete for your business, they must be licensed by state regulators who will look at such issues as a company's finances before granting that license. It's not an absolute guarantee that the company will always be solvent, but it's some insurance that the companies are sound.

Distric of Columbia: Why doesn't the District have a deregulation plan yet while 4 states are deregulated and most other states at least have plans in place

Martha Hamilton: Actually 23 states are somewhere in the process of deregulating electricity. There is competition in D.C. for natural gas customers, but the program is only a year old. One reason that D.C. is behind the pack in deregulating electricity is that there aren't many large industrial or commercial consumers of power here, and they are the ones who have pushed deregulation forward in other states. City Council member Sharon Ambrose has introduced a bill to deregulate electricity in the District.

Manassas, VA: Ms. Hamilton:
I work in public relations for NOVEC, an electric cooperative providing electric service to nearly 100,000 customers in Northern Virginia. If I can be of assistance to you in providing answers to customer inquiries, please feel free to contact me at 703-392-1644 or e-mail mcurtis-novec.com
Cooperatives are customer-owmed and our major objective is to ensure that all of our customers have an opportunity to benefit in a restructured environment and that none benefit at the expense of others!
Sincerely,
Mike Curtis

Martha Hamilton: Cooperatives have been an important factor in rural areas of the nation for decades.

Arlington, VA: Is there enough experience with competition in the energy industry to get an idea of how complicated fee structures will be? Will we see an array of plans as confusing as the ones the telephone companies have?

Martha Hamilton: I may be overly optimistic, but I think there is a growing emphasis by utilities and regulators on trying to make bills more reader friendly. And they have a long way to go! I know that when competiton began in Maryland for natural gas customers, initially customers received two bills -- one from the gas provider and another from the utility for delivering it to the customer. That really confused customers, so the billing structure subsequently was changed. But, as for the array of plans, as more marketers get into the arena all attempting to differentiate themselves one from another, I expect there will be some hard multiple choice questions for consumers.

Aurora Il: In theory every one wins. But I suggest that as in local phone service - after long distance degregulation- costs for the average residential user will infact raise to off set large rate breaks given to large commercial customers. Ohms Law is not going to change so real deregulation should start in the wholesale segument of the market.

Martha Hamilton: Well, you may be right. But in many states that have deregulated, reduced costs for residential customers have been mandated as part of the deal. Then there is the trickle-down theory of deregulation -- that the benefits will be passed on to consumers by the big energy users whose costs will be lowered.

Fairfax, VA: Are there any companies offering package deals on all utilities. I would be interested in a one bill concept for all services.
1 Electricity
2 Telephone
3 Satellite TV
4 Lawn Care
5 Car insurance
6 Manicures -if it applies-

Martha Hamilton: Yours was the first question that made me laugh out loud. I think that would be a marvelous package. There are many companies that hope to compete in the deregulated marketplace by bundling services together and selling them to customers. In our own backyard, we have Starpower now, a joint venture of Pepco and RCN which offers long distance, cable TV and Internet services through conduits that run alongside Pepco's wires.

Washington, DC: Since the deregulation of utilities is just getting underway, I'm sure the
% of savings is not that signficant inititally. Do you anticipate savings to increase
as more people chose a different provider? Also, a friend of mine markets ACN Energy and I signed up for it.
The savings are about 2% right
now and I'am helping him out by trying his service. He gets
a % of my gas bill. I'm thinking about getting involved so I can get paid off
of my friends gas and electric
bills!

Martha Hamilton: In Maryland where competition for natural gas customers has been underway for awhile, state regulators estimate that overall customer savings have been 5 to 10 percent.

alexandria,va: If I choose a new company to provide me gas services, who will be responsible for the maintenance of the service. Will it be my new company or the monopoly -washington gas-

Martha Hamilton: The local utility is responsible for delivering the gas to your home or business. In most programs, if your provider fails to deliver the natural gas to the utility, the utility becomes the back-up provider to ensure that you aren't left without natural gas or power. Who is financially responsible gets sorted out later.

Washington, DC: 1. What is the status of the natural gas pilot program in DC?

2. How has the natural gas pilot program affected tax revenues for the DC govt?

Martha Hamilton: D.C.'s natural gas program has been underway for about a year. Most of the switching has been done by business, but about 8 percent of the volume of gas supplied to residential customers now comes from suppliers competing with Washington gas. I don't know of any impact on the District's tax revenues from the program, but there may have been some.

washingtonpost.com: Do you believe it's likely the consumer protections provided in the old system of state-regulated regional monopolies will be retained?

Martha Hamilton: Most states have tried hard to maitain consumer protections, such as programs that provide heat and electricity to low income consumers. And the regulators haven't been eliminated. They're still there to look out for consumers. And in jurisdictions with People's Counsels, such as Maryland and D.C., you have a state office charged with looking out for the consumer interest.

Atlanta, Georgia: Our firm is a low volume user of natural gas in all of our locations except one relatively high usage location.

Is there a vendor who can make recommendations for low cost natural gas providers for all states?

Martha Hamilton: There are certainly vendors who are active in more than one state, including such companies as Enron and Columbia Energy Group. And I believe there are some web sites that show which companies are active in which states, although I don't have any of those web addresses handy.

gaithersburg MD: How much will a meter cost that records electric usage & day-time, if I wanted to move frequently between suppliers. Are such meters available to residential customers.

Martha Hamilton: There certainly are meters which record time-of-day use, but the metering is done by the company supplying the energy in order to know how much to charge. And, as for moving frequently between suppliers, I suspect most suppliers will require contracts that make that hard to do. It's an interesting question whether some suppliers will try to attract customers by charging lower prices for off-peak usage.

Waldorf, MD: What do think about companies that are now giving people a chance to give their utility services-gas-electric- to their friends and family and gain a percentage of their bill each and every month, residually. Deregulation has given me a opportunity to start my home base business.

Martha Hamilton: There are and will be companies who try to aggregate customers into large groups that will have some leverage in shopping for energy. But these companies will have to be registered with state regulators and meet some hurdles in terms of demonstrating financial soundness.

Martha Hamilton: We're almost out of time and questions. Let me put in one final word about what kind of questions consumers should ask in choosing a supplier of natural gas or electricity. Ask about the key terms of the agreement, including how long the commitment is. Ask whether you are buying anything other than electricity or natural gas if you say yest to their offer. Ask what happens if you want to change providers. For instance, some suppliers charge customers a termination fee under certain circumstance. You also should know whether the charge for gas or electricity is fixed or goes up or down. For instance, some charges are a percentage discount off the utility's price. Find out where to call if you have a question about your bill. And make sure that the provider is registered with the state regulatory agency.
Thanks for being with us today.

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