SUMMER 2000

WE'RE BACK ON TRACK!!!!!!!!!!!!!!!!!!!!!!!

On June 3, 2000, Governor John Engler signed enrolled Senate Bill No. 937 into law, 2000 PA 141. This Act, which provides the restructuring of the electric utility industry is entitled the Customer Choice and Electricity Reliability Act (the "Act"). Section 10a(4) of the Act required the Michigan Public Service Commission ("Commission" or "MPSC") to establish a Code of Conduct that shall apply to all electric utility's.

"...Within 180 days , the commission shall establish a code of conduct, to prevent cross-subsidization, information sharing, and preferential treatment, between a utility's regulated and unregulated services."

The Michigan Alliance for Fair Competition ("MAFC" or "the Alliance") by and through its attorneys, Clark Hill P.L.C. is filing a motion to reopen Case No. U-12134 before the Michigan Public Service Commission, in the matter of the approval of a code of conduct for Consumers Energy Company and Detroit Edison Company.

It is the intent of the Alliance for the Commission to:

a. Re-notice this proceeding as one to "establish a code of conduct" that shall include measures to prevent cross-subsidization, information sharing, and preferential treatment, between a utility's regulated and unregulated services.

b. Allow new parties to intervene.

c. Allow for new or supplemental testimony, rebuttal testimony, discovery, and cross
examination based upon the scope of the proceedings, as defined in the Act.

d. Preserve the existing evidentiary record as part of the proceeding.

DEREGULATION-
What does it mean?

The gas and electric utilities are in the process of transition from a predominantly monopolistic, regulated environment to one characterized by increased competition and decreased regulation.

The diversification of utilities into areas outside their traditional regulated role as producers and suppliers of energy, and their expansion into work "beyond the meter," has occasioned significant and continuing harm to small, private sector firms engaged in the energy service fields. Utilities (typically through unregulated affiliates or subsidiaries) first focused on residential markets and now routinely sell appliances; provide plumbing, heating and cooling equipment and service contracts; engage in insulation work and sales of storm windows and doors; provide outdoor lighting and interior lighting fixtures. Utility affiliates are looking to the commercial, institutional, and industrial markets as well, performing more complex services traditionally provided by engineering, electrical and mechanical contractor firms.

The difficulties encountered by small businesses from unfair utility competition are documented by the Small Business Administration (SBA).2

"...utility supply and installation programs cannot be effectively regulated to eliminate improper subsidies and other competition problems. Such unregulated activity by the utility does not provide significant public benefits which outweigh the hazard to competition and the cost of regulatory oversight."

"UNFAIR" COMPETITION
The primary obstacle to free, fair and open competition in existing and emerging markets is the ability of the utility to leverage its entry into, and penetration of, traditional private sector markets (typically through its non-utility subsidiaries or affiliates) by means unavailable to business entities that do not enjoy a monopoly status.

CROSS-SUBSIDIZATION
Of all the abuses which can accompany deregulation, the potential for cross-subsidization is the most substantial and significant. Cross-subsidization can occur where the utility's cost of entering and dominating an unregulated market is financed by reliance on the utility's rate base. In such situations, utility subsidiaries or affiliates can offer products and services at below cost thereby driving out established private sector competitors, especially small business competitors.

(The above information has been provided to the MAFC by Anthony M. Ponticelli, Esq.)

FRONTLINES REPORT

UPDATE FROM THE FRONTLINES OF THE CRUSADE - GOOD NEWS:
The Commission overturned its original opinion and order of April 24, 2000 and allowed the testimony of the Alliance's witnesses into the record. Tuesday, May 25, 2000 Lynn Briggs, Cliff McCourt, and Dan Squires, as Intervenors, faced cross-examination by the big guns of the Utility's. Our stories are honest and true and have found a place on the record. This is the time to see first hand what is going on in local politics. As a business person and a consumer it is important to be involved !!! We will keep you updated on the upcoming events.

ALL ARE WELCOME AT MEETINGS

The Michigan Alliance for Fair Competition is an Alliance made up of ordinary people just like you. We need your support to make a difference on your behalf, so come out and see what we are doing for you!! We have interesting guest speakers, lobbyists with the inside track on whats' happening in Lansing and causes that need defending. The faithful few who come every month, take time from their businesses and personal lives because they know how important the issues are to all of us.

Please join us at our next meeting