Why 'Sharing' is Bad

      Here is what then Attorney General Granholm had to say about utilities mixing the operations of its affiliates such as Consumers Appliance Repair Plan with its energy operations:

“The Attorney General agrees that structural separation is vital to any code of conduct and “believes that the most effective way to address the problem of fairness in the interaction between the regulated utility, its affiliates and competitors, [sic] is through structural separation.” Attorney General’s brief, p. 5. She says that behavioral rules are not enough to ensure fairness, particularly in light of the difficulties of enforcement.”[1]  

The Code of Conduct addressed this concern.  Here is how SB612 (H-1) disregards the Governor’s concern and modifies the Code:

(11) Except as otherwise provided in this section, the code of conduct with respect to an appliance service program shall not require a utility to form a separate affiliate or division to operate an appliance service program, impose further restrictions on the sharing of employees, vehicles, equipment, office space, and other facilities, or require the utility to provide other providers of appliance repair service with access to utility employees, vehicles, equipment, office space, or other facilities.

Both SB612 and SB612 (H-1) ensure that utility customers will pick up the cost from cross-subsidies by Consumers to its ASP program.  PSC staff disagrees with the House and Senate and sides with the Governor about ‘Sharing’ between utilities and affiliates:

“The lack of adequate separation between the regulated and competitive businesses increases the opportunity for discriminatory behavior, cross-subsidization and cost-shifting, and inappropriate sharing of information.  The less distinct the separation between the entities offering regulated and competitive services or products, the greater incentive for and opportunity to abuse its monopoly power.  Staff believes that the separation of regulated and competitive activities through the use of legally separate entities is a hallmark of an effective code of conduct.  To allow a structure such as that proposed by Consumers opens the door for anticompetitive behavior.”[2] (emphasis added)