Order 15751 - Aurora Natural Gas v. Prov. Gas Co.

 

STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS

DIVISION OF PUBLIC UTILITIES AND CARRIERS

ORDER ON THE REQUEST OF PROVIDENCE GAS COMPANY

FOR RECONSIDERATION AND REHEARING

On September 28, 1998, Providence Gas Company ("ProvGas" or "PGC") filed a Request for Reconsideration and Rehearing ("the Request") in the above-referenced proceeding. The PGC request seeks reconsideration and reversal of the finding that the ProvGas Non-Operational Policy for FT-1 service was unduly discriminatory, as well as reconsideration of the amount of ordered refunds to FT-2 marketers. In addition, the PGC request seeks reconsideration and reversal of numerous Division findings with respect to violations of the Public Utility Commission's Regulations for Utility Interaction with Gas Marketers. Aurora Natural Gas, L.L.C. ("Aurora") submitted its Answer to the ProvGas Request for Reconsideration on October 19, 1998, and PGC submitted a reply to the Answer of Aurora on October 23, 1998. Having weighed the arguments presented in those submissions the Division herein renders its decision regarding the ProvGas Request for Reconsideration and Rehearing.

1. PGC'S ARGUMENT THAT ITS NON-OPERATIONAL SERVICE OFFERING FOR FT-1 CUSTOMERS DID NOT CONSTITUTE AN UNDULY DISCRIMINATORY PRACTICE.

The ProvGas Request offers two basic arguments for reconsideration of this issue. First, PGC suggests that there was no undue rate discrimination between similarly situated customers since, contrary to the Division's findings, FT-1 Non-Operational customers and FT-2 customers were not similarly situated. Second, PGC argues that its offering of Non-Operational FT-1 service was permitted by tariff. [1 The Division notes that the rationales for PGC's decision to offer Non-Operational FT-1 service were investigated in considerable depth, through both discovery requests and questions during the several hearings. Yet, despite the considerable development of record with respect to that matter, the rationale that PGC could use the tariff "flexibility" suggested in the ProvGas Request for Reconsideration and Rehearing never surfaced.]  Having reviewed the arguments presented in PGC's September 28, 1998 filing, the Division finds no new or compelling reason to reconsider its initial determination that PGC's offering of non-operational FT-1 service resulted in a form of rate discrimination. The Division's assessment of the question of rate discrimination was well-developed in the Decision of the Administrator, and the Division hereby reaffirms that determination. However, as discussed later in this Order, the Division will reconsider the amount of the refunds directed to be paid to the FT-2 marketers.

In reaffirming its initial determination the Division rejects PGC's argument that fundamental resource and cost of service differences exist between FT-1 Non-Operational service and FT-2 service. The Division also rejects PGC's assertion that the FT-2 rate, as approved by the Commission in Docket 2552, differs from the FT-1 rate only to reflect the allocation and use of storage and peaking resources. Rather, the FT-1 and FT-2 rates that the PUC approved also differ in terms of their metering requirements and in terms of responsibility for daily balancing of gas deliveries and use. As was discussed in the Decision of the Administrator, requirements for daily balancing were effectively eliminated for Non-Operational FT-1 service since in the absence of in-place and operational telemetering equipment to provide daily meter reads, the procedures adopted by ProvGas effectively assumed that daily use equaled daily deliveries for FT-1 non-operational customers. Thus, the difference in metering requirements (i.e., daily versus monthly) for FT-1 and FT-2 service has a substantive link to the resource allocation issue that PGC arguments in its Request do not address.

The Division also rejects PGC's arguments that the tariff provides the Company with the "flexibility" to ignore the key distinction between its FT-1 and FT-2 service (i.e., that requirements for daily versus monthly meter reading) and substitute estimates of daily use for actual daily meter readings for extended periods of time. [2 The Division recognizes that operational problems may occur with metering or telemetering equipment, once in place and operational, which result in the unavailability of daily metering data for portions of a period. However, the Division believes that the customer and PGC share a responsibility to ensure that every effort is made to minimize disruptions of daily metering data availability. Under PGC's Non-Operational policy for FT-1 service, large numbers of customers were permitted to initiate FT-1 service without ever having in-place and operational telemetering equipment. They were also permitted to continue to take service without in-place and operational telemetering equipment for multiple months. Furthermore, according to ProvGas witnesses, the periods of time that customers continued on non-operational FT-1 service were often extended by the failure of individual customers to meet their obligations under the tariff to achieve timely installation of telephone lines for use with PGC installed telemetering equipment. These practices and policies are clearly inconsistent with the importance attributed to daily metering requirements by the Tariff.]  PGC's argument for the reliance on estimates of daily gas use for non-operational FT-1 service improperly ignores the importance of the explicit tariff requirement that, "Transportation service [for FT-1 customers] shall not commence until the telemetering equipment [required for that service] is in place and operational." If estimates of daily gas use could be so readily substituted for actual daily meter reads without jeopardizing the integrity of the FT-1 service, requirements for daily meter reads and telemetering would not have been included in the tariff provisions for FT-1 service.

Thus, the Division finds no basis for reconsideration of its initial determination that rate discrimination existed.

2. REFUNDS TO FT-2 MARKETERS

With respect to the matter of restitution and refunds for marketers of FT-2 service, the Division has considered PGC arguments regarding requirements for proof of damages, but finds those arguments, premised primarily on the "Penn Railroad" case which, as explained below, is not found to be applicable to the matter at hand.

Although PGC argues strongly that the Division cannot order restitution to a party who has paid the filed rate of a public utility, PGC fails to acknowledge that the doctrine upon which it relies stems from federal court interpretation of a federal act, the Interstate Commerce Act ("ICA"), which specifically provided that any carrier doing any act prohibited by statute should be "liable to the person ... injured thereby for the full amount of damages sustained in consequence of any such violation ..." 24 Stat. At L. 382, chap. 104, U.S. Comp. Stat. 1901, p. 3159. It was this specific provision that caused the United States Supreme Court to issue its landmark opinion in Pennsylvania Railroad V. International Coal Mining Company, 230 U.S. 184, 33 Sup. Ct. 893 (1913). In that opinion the Court held that the right to recover damages sustained by a shipper who has paid the "lawful published freight rates" for shipments of coal, while lower rates resulting from rebates were being allowed for other shippers of contract coal at the same time, is limited to the pecuniary loss suffered by the shipper who suffered discrimination. The result was driven by the express provisions of the federal statute (i.e., the ICA). However, the Court specifically recognized that had the statute not required the shipper to prove damages, but instead allowed (or instructed) a court to treat the lower rate as evidence of what was the reasonable rate, the result would naturally have been different. On this specific point the Court cited a state-specific statutory scheme in Colorado "which did not, as the commerce act, compel the carrier to adhere to published rates, but required the railroad to make the same concessions and drawbacks to all shippers alike ..." See Union P.R. Co. v. Goodridge, 149 U.S. 681, 37 L.Ed. 896.

Similar to Colorado, Rhode Island has a rather sophisticated legislative scheme that sanctions intrastate economic regulation by two sister agencies (the PUC and the DPUC) which maintain concurrent jurisdiction over the rates, charges, conduct, and policies of public utilities as defined by statute. Further, Section 39-3-13.1 authorizes the Division, "when deemed by it necessary to provide remedial relief from unjust, unreasonable, or discriminatory acts ... to order the public utility to make restitution." Moreover, the PUC's Regulations for Utility Interaction with Gas Marketers (the Regulations), which were duly promulgated in accordance with the State Administrative Procedures Act, authorize the PUC and the Division to hear complaints concerning alleged affiliate abuse and to make all appropriate orders. The Regulations have the force and effect of law.

More importantly, the Regulations place sole responsibility to make appropriate orders following an investigation with the Division or PUC. This stands in distinct contrast to the proposition cited by PGC in Penn Railroad, where the injured party pursued a cause of action against the shipper in a court of law, as opposed to remedial orders resulting from an agency investigation or proceeding. As demonstrated by Penn Railroad and by our own Supreme Court in Main Realty Co. v. Blackstone Valley Gas & Electric Co., 193 A. 879 (R.I. 1937), a court's jurisdiction to order remedies is far more limited than that of an agency such as the Division. In order for a plaintiff to prevail in a tort action in a court of law, he must prove damages (i.e., pecuniary loss). [3 It should be noted that Aurora, instead of pursuing its claims at the administrative level, could have filed a separate tort action in Superior Court alleging discrimination. That is what occurred in Main Realty. Had Aurora done so, then the standard for recovery would have been "all damages which ordinarily and in the natural course of things have resulted from commission of the wrongful acts, if clearly shown and not merely speculative."]  The Court does not have the expertise to rely upon any differences between the filed rate and a lower/favored rate. In contrast, the Division not only has the expertise to evaluate the extent of damage resulting from a discrepancy in rate treatment between similarly situated customers, but it is required to do so by law and regulation.

Finally, the Division will rehear issues relating to the amount of restitution and the amount of refunds that ProvGas is directed to pay to marketers of FT-2 services. In particular, the Division will provide ProvGas an opportunity to demonstrate its claim that the ordered refunds would place FT-2 marketers in a better position than marketers who served FT-1 customers in non-operational status. The Division will also accept any further evidence that Aurora may wish to submit regarding the adequacy of the ordered restitution.

3. VIOLATIONS OF THE REGULATIONS

PGC's Request presents argument seeking reconsideration of each of the seven categories of violations (23 total violations) of the Regulations that the Division found in its Decision. The Division has reviewed the arguments that PGC offers regarding those findings and has concluded that certain matters originally found to be in violation of the Regulations, upon further reconsideration, may not be prohibited by the Regulations. These items relate to Section IV.D. ADVERTISING and are discussed further below. Regarding the other items cited for violations, the Division stands on its original Decision. For the most part, the arguments offered in the PGC Request repeat arguments that PGC presented in briefing. Those arguments were thoroughly weighed by the Division in the rendering of its Decision. Although the Request suggests that certain issues were "not subject to full consideration," the Division finds no indication of the nature or type of additional information that ProvGas would seek to present if its Request for Rehearing of issues associated with the found violations were granted. Thus, the Division assesses that little would be gained by revisiting those other issues at this time and concludes that no reconsideration of those findings is necessary or appropriate.

With respect to specific matters raised in the PGC Request regarding the found violations, the Division concludes the following:

A. JOINT MARKETING

In the original Decision in this Docket, the Division found that there were two violations for use of PGC experience to market PES services for a fine of $2,000 and one violation for the inclusion of utility services in PEC corporate branding activities, for an additional $1,000 fine. In its reconsideration of this matter, the Division is not agreeing with the Company's comments in its Request that it is unambiguous that the promotional materials cited for violations (DIV. Ex. 4 and DIV. Ex.6) are appropriate under the Commission's policies embodied in the Regulations. In the original Decision, the Division concluded that in promoting the use of the affiliated energy marketing company's services, that references to "our 150 year heritage" and "over 150 years of experience" can only be a reference to the gas utility, as that is the only entity with that amount of longevity despite the ad copy's reference to the parent holding company. We believe the implication intended by the ad copy is that the many years of experience of the utility business translates to a higher quality of service from the affiliated gas marketer. We further construe that the intended message of the advertisements is that by selecting the marketing affiliate as the energy provider, the customer is making a choice to "stay with" the company that the customer has come to know through the prior experience of taking traditional utility service. The Division was of the opinion that this type of message provided an unfair advantage to the affiliate of the local utility and violated the Commission's Regulations prohibiting joint promotions. Upon reconsideration, which included reviewing the record of the proceeding in Docket No. 2379 which established the Regulations for Gas Marketers, the Division now concludes that it is unclear whether in fact the Commission's Regulations do prohibit the type of advertising the Division cited in its original Decision. The Division believes this issue warrants further clarification from the Public Utilities Commission so both the marketing affiliates and the Division have a clear understanding of the intent of the Advertising section of the Regulations. The Division therefore rescinds the three aforementioned violations and intends to seek further guidance from the Commission on this matter.

B. SHARED LOGO

In its original Decision, the Division found two violations of the Advertising Regulations pertaining to the use of company logos. Specifically, the PUC's Regulations state, "A utility and a marketing affiliate may not share trademarks or logos." In the two ads cited for violations, Division Exhibit Nos. 4 and 6, the Providence Energy Corporation logo was prominently displayed. The PEC logo is the same as the gas utility logo, except for the reference to "Providence Energy Corporation" rather than "Providence Gas Company". This is a matter very similar to the issue discussed above on corporate branding and use of the utility's experience to promote the gas marketing affiliate. The Division originally found use of the logo in ads for the marketing affiliate to be violative, even though it was the parent company's logo. This is due to the fact that the parent company and the gas utility shared the same logo. The practice cited for violation can be viewed as a step away from literal interpretation of the Commission's Regulations. Upon further consideration, the Division believes this issue too warrants further clarification from the Public Utilities Commission so Providence Gas and other jurisdictional utilities with affiliated energy marketers have a clear understanding of the limits placed on them by the Regulations on Advertising. The Division therefore rescinds the two aforementioned violations pertaining to shared logos and intends to seek further guidance from the Commission on this matter.

C. OTHER ISSUES

In its Request, Providence Gas makes a number of other arguments relative to the other violations of the Commission's Regulations. With respect to the matters raised in the PGC Request regarding the violations, the Division concludes the following:

a) Mr. Yurkevicz's direct involvement with marketing and management of Providence Energy Services makes him a representative of that gas marketer, and thus, disclosure of market sensitive information to Mr. Yurkevicz is the same as disclosure to a gas marketer.

b) Mr. Yurkevicz's activities cannot be justified by reference to the Master Service Framework Agreement (MFSA). The MSFA applies only to "utility operating personnel," a classification which does not encompass Mr. Yurkevicz, who was an employee of PEC, not ProvGas. As stated in the Division's Decision, the scope of the MSFA does not address the "brand consistency functions" that Mr. Yurkevicz purportedly performed. Moreover, the MSFA, Section II.B. explicitly states that service provided to Providence Energy Services by Providence Gas Company "shall in all cases be further limited to exclude ... service likely to result in the sharing or exposure of market-sensitive information ..." If it was the intent of PGC/PEC for the activities of Mr. Yurkevicz to conform with the provisions of the MSFA, even though he was not a PGC operating employee, that intent was not reflected in the exposure of market-sensitive information to Mr. Yurkevicz.

c) Gas use is weather-sensitive and detailed weather data is relevant to the provision of transportation services. If, as PGC represents, the weather data that is used by transportation marketers is "general and common knowledge" then there should be no need for a special arrangement between PGC and PES to share the costs of such data. Furthermore, if it is beneficial to PGC to provide weather data to PES, it should be equally beneficial for PGC to market similar weather data services under similar terms and conditions to other gas marketers.

d) With respect to PGC arguments regarding the hiring of Mr. Stephens, the Division notes that PEC, and not ProvGas, is the parent of PES. The violation that the Division found results from Mr. DeMetro's significant role in ProvGas  [4 The Division takes note of the fact that at the 9/17/96 PUC hearing on the proposed gas marketer regulations, Mr. DeMetro actively participated on behalf of the gas utility.], not his role in PEC. [5 At the time of the hiring of Mr. Stephens, Mr. DeMetro was an officer and director of both PGC and PEC, as well as a director of PES.]  A violation of the regulations would have been avoided by using a PEC employee or Director who was not also an employee of ProvGas to perform the hiring of Mr. Stephens.

e) Contrary to the suggestions of PGC, the Division's finding with respect to PGC's violation of Section V.B.3. of the Regulations was not focused solely on the Company's application of Section 2.02.0 of the Transportation Terms and Conditions. Rather, the PGC activities that the Division finds to be in violation of Section V.B.3. of the Regulations are related to PGC's uneven treatment of similarly situated FT-2 customers and FT-1 non-operational customers. The arguments presented on this matter in PGC's Request therefore misconstrue the basis for the Division's finding.

4. STAY OF THE DECISION

The PGC Request also asks for a stay of the effectiveness of the Decision pending action on its Request. Based on the foregoing, the Division directs that all aspects of the Decision No. 15683, as amended by this Order on the Request For Rehearing and Reconsideration, other than the payment of refunds to FT-2 marketers, be immediately effective. The Division further directs that the payment of refunds to FT-2 marketers be further stayed until the amount of such payments is reconsidered and the Division issues a decision on rehearing.

For the foregoing reasons it is Ordered (15751):

1. The Providence Gas Company's Request for Reconsideration and Rehearing is granted for the limited purpose of reconsidering the amount of restitution originally Ordered to be made to Aurora and the other FT-2 marketers.

2. The fines for violations of the Public Utilities Commission's Regulations For Utility Interaction With Gas Marketers have been amended to rescind the five aforementioned violations of the regulations on Advertising. The Division puts the parties on notice that it intends to seek guidance on this issue from the Commission. The Division will not rehear aspects of the Docket pertaining to the other cited violations.

3. The Division hereby advises the parties that they will be contacted forthwith for the purpose of establishing a procedural schedule and other matters relevant to the Rehearing.

DATED AND EFFECTIVE AT PROVIDENCE, RHODE ISLAND THIS 15th DAY DECEMBER 1998.