Utilities Make Effective ‘Last Ditch’ Assault on Code of Conduct

Consumers Energy initiated an all-out assault on the Code of Conduct that for now has come up short. The House and Senate leadership, working with the Michigan Alliance for Fair Competition, was able to thwart Consumers Energy’s effort to ram through legislation that would have ‘gutted’ the Code of Conduct.

Had Senate Bill 612 (SB612) which had passed the Senate 34 – 4 gone further, contractors would have suffered two major setbacks. First, while SB612 gave a mandate to the Public Service Commission (MPSC) to make certain that cross-subsidization does not occur, at the same time it allowed incremental accounting — a cross-subsidizing accounting method! (That’s like making a law to make speeding illegal and then making an exception for cars!)

Second, it would have granted utilities up to 30% market share of the HVAC industry before it would have to do business on a level playing field with HVAC contractors!

Further, this clause was so vague there was nothing in it to prevent the utility from possibly having 90% of the HVAC market in cities, 0% in rural markets, and yet still be under the 30% limit in total!

Any way you look at it, SB612 would have been disastrous to contractors.

Why Utilities Hate the Code of Conduct

The Code of Conduct was enacted as part of the Customer Choice and Electricity Reliability Act of 2000, to ensure that public utilities in Michigan are unable to subsidize unregulated services with ratepayer dollars. The MPSC was required to develop a Code of Conduct that prevented electric utilities from cross-subsidizing their non-regulated operations.

The Michigan Alliance for Fair Competition was a party to this rule making process and was key in providing the MPSC with information and testimony about the areas that needed to be addressed in the Code of Conduct.

As a result, the final rules that the MPSC developed included items that the Michigan Alliance for Fair Competition has sought after for years such as prohibiting the use of bill stuffers and similar joint marketing efforts. Also, utilities were directed to use accounting methods that assigned costs properly and to functionally separate operations so that improper ‘cost mixing’ could not occur.

Consumers Energy’s Scheme to ‘Take Out’ the Code of Conduct

The initial response of the utilities has been to ignore the Code of Conduct or give it partial attention.   They have even challenged the legal grounds for the Code of Conduct to the Michigan Court of Appeals, which has still not ruled on their appeal.

In March, Consumers Energy told the MPSC they needed more time to either close their Appliance Service Plan (ASP) down or ‘functionally’ separate it from their energy operations as the Code of Conduct requires. The MPSC granted their request and gave them a temporary waiver until December 31 of this year.

Consumers Energy did not do either of these things. Instead they sent two letters to their entire ASP customer base which threatened to end the program unless the law could be changed.

This led to a massive amount of mail by customers of the ASP – especially senior citizens – who were frightened by the prospect of losing their ASP coverage.

The amount of mail was overwhelming. One Senator acknowledged receiving over 500 letters primarily from concerned senior citizens supporting SB612.

The volume of letters, in combination with the mid-winter compliance date, produced a sense of urgency regarding SB612. This helped push the matter for Consumers Energy as Senators needed to respond to this vocal constituency.

In contrast to tremendous support (however contrived!) for SB612 received by Senators, there was very little opposition communicated to Senators regarding it. The same Senator who received over 500 letters in support of SB612 received only 18 letters against it (that’s us!).

 There were quite a few Senators who were sympathetic to the case presented by the MAFC, but without hearing from their constituents - contractors, employees, etc. - who opposed SB612, they didn’t have enough reasons to not support it. As a result, SB612 was passed in the Senate and moved to the House.

Concerned that important issues were not being considered thoroughly enough, a substitute measure was drafted by the House and Senate leadership working with

MAFC to put the issue on hold.

Had the legislative leadership not acted when they did to take the steam out of this legislation by pushing the deadline until next July, the momentum that utilities had would have surely carried this legislation through.

What’s Next?

House Energy and Technology Chairman Ken Bradstreet indicated his intent to hold a hearing January 21. With the immediate pressure of having to act on Consumers Energy’s Appliance Service Plan gone, the issues should be explored more thoroughly.

Still, you can bet that Consumers Energy and Detroit Edison will be spending a fortune lobbying for their agenda.

The worst part about the lobbying is that so much ‘bad information’ about the issue is communicated. Without hearing from contractors, legislators are left with an incredibly distorted picture of the issue.

How to Protect Fair Competition

While there has been progress toward ending unfair utility competition, the events of SB612 show that there is no room for complacency. We need contractors to become actively involved to see our goals become reality.

For this reason, the MAFC is holding a series of meetings around Michigan in early 2004. You need to be there! These meetings collectively are a political summit to begin an offensive to counter the efforts of the utilities.

The most potent tool against utilities is contractors - you - telling legislators how unfair competition harms your business. The purpose of the Protect Fair Competition Summit is to give you the information and tools you need to effectively communicate and to organize the effort.

The importance of having as many contractors participate as possible cannot be overstated. We need multiple contacts with every single legislator. Our message is a powerful one that legislators cannot easily dismiss, no matter how many lobbyists utilities hire.

What Can You Do?

First, help make the meetings a success. Make plans to attend the closest meeting and bring other contractors. Pass this information on to other contractors who may not have gotten this. We need to have as many people as possible understand the issues and be able to communicate it to legislators.

Next, renew your membership in the Michigan Alliance for Fair Competition. A tremendous amount of expense has been incurred on your behalf recently and funds are depleted.

Besides the lobbying expenses regarding SB612, there are also tremendous legal expenses from defending the Code of Conduct and its enforcement. (The rules of the MPSC require attorneys to represent intervening parties in the cases before the commission.)

In order for the MAFC to be able to conduct a successful campaign on both legal and political fronts a lot of money will be necessary. To ensure that the funds are there please also make an extra contribution to our legal fund besides paying your dues.

Additional financial help can come from Michigan wholesale suppliers. You can help the cause by asking your suppliers to join the MAFC and make a donation.