Colorado Merger Settlement Provides Long-term Low-Income Funding and Protections (April 2000)

(Compiled by the LIHEAP Clearinghouse based on information provided by Fisher Sheehan and Colton and the Colorado Energy Assistance Foundation)

The state of Colorado has not yet restructured its electric industry. In fact, so far it has been the only state to just say no.

Last fall, after a 15-month study, 17 members of the 29-member Colorado Electric Advisory Panel, issued a report concluding that restructuring "is not in the best interest of all Colorado electricity consumers and not in the best interest of the State as a whole."   The panel's majority report predicted restructuring could bring higher electricity prices to Colorado along with a loss of jobs and consumer protections.

At the same time, low-income energy advocates were observing that "virtual restructuring" was already underway in Colorado. The state's largest utility, Public Service Company of Colorado (PSCo), as well as other smaller companies, were anticipating the advent of restructuring and were preparing themselves for it through mergers and other activities. But these activities sometimes adversely impacted low-income households, according to Jeff Ackerman of Energy Outreach Colorado (EOC).

As a result, EOC and others intervened in PSCo merger proceedings and through a merger settlement gained long-term funding commitments for low-income programs. Additionally, they negotiated a landmark agreement that PSCo would make payments to EOC if it does not meet certain quality of service performance indicators -- a significant step toward protecting the low income in the rapidly changing utility industry, Ackerman said.

On February 16, 2000, the Colorado Public Utilities Commission approved a settlement agreement between low-income consumer advocates and PSCo, an investor-owned gas and electric utility covering 70 percent of Colorado. PSCo, and its parent company, New Century Energies, had requested approval to merge with Northern States Power (NSP) of Minnesota. PSCo had merged with Texas-based Southwestern Public Service Company to form New Century Energies in 1996.

Energy Outreach Colorado , a fuel fund, was created in 1989 through an executive order of the governor, in order to raise funds to supplement the state's LIHEAP. It is a public /private partnership of government agencies, low-income advocacy groups, the business community, and utilities. EOC intervened in the merger proceedings, along with Catholic Charities of Denver (CC) and a low-income customer.

The settlement agreement provides for the following:

• PSCO will make a contribution of $4.75 million in shareholder funds to EOC over the next ten years to be used for energy assistance targeted at PSCo's low-income customers.

• PSCo will continue funding a low-income energy efficiency program at a rate of $2.6 million per year through the year 2006. This agreement continues PSCo's Energy $aving Partners Program, a partnership between the state of Colorado weatherization program and (PSCo) since 1993. The 1996 merger settlement had continued the program at about $2.6 million annually through 2001. The level of the annual contribution will be indexed after the year 2000 to the Denver-Boulder Price Index. Funds can be used for any purpose allowed by the U.S. Department of Energy's Weatherization Assistance Program.
  

• The utility will provide 20 computers to Catholic Charities and/or other agencies designated by EOC over a two-year period. In addition, PSCO will fund telephone lines and Internet access for each computer during the same time period, and provide training so agencies can use PSCO-supplied equipment to access the PSCO home page to help negotiate payment terms for low-income consumers.

• An agreement by PSCo to pay EOC an amount equal to eight percent of any bill credits PSCO might be required to pay for failing to maintain designated service quality standards, the use of which funds will be limited to energy assistance for low-income PSCO customers.

• Finally, PSCO agreed to continue to make annual reports on low-income payment troubles through the year 2009, even though its obligation to make such reports was to expire at the end of 2001. These reports include information on termination of service, payment agreements, and households in arrears, PUC complaints, energy efficiency and rate affordability program impacts, and related matters.

EOC hired Roger Colton, of Fisher Sheehan and Colton, to make the case that low-income customers could be harmed by the merger through proposed reductions in customer services. Colton also argued that as relatively low volume consumers, the low-income would receive relatively little from a proposed rate freeze.

Colton's testimony also pioneered the establishment of performance quality indicators for low-income customer services, particularly pertaining to payment arrangements, arrearages and disconnections. If the utility does not meet these performance quality indicators, it must make payments to EOC.

Referencing the experiences of mergers in the health care, banking and telecommunications industries, where fees have increased and service quality and availability have decreased after mergers, Colton and the intervenors stressed that less effective customer services, especially for the low income, were a likely outcome after the merger.

In fact, EOC and other low-income advocates had noted that this was already occurring. In a minority report of the advisory panel, Karen Brown, the panel's low-income representative and executive director of EOC, wrote:

Change is already happening. Energy providers are focusing more on the bottom line and thus reducing services offered to low-income customers. Credit and collection policies have tightened significantly for the poor, in effect causing rate increases. The time that utility staff spends on the phone resolving customer payment issues is now measured; the trend is toward incentives to keep calls short. Utility funding and support of low-income energy assistance programs is declining. For some utilities, customer service people are no longer located in the state of Colorado, leading to some confusion and lack of knowledge of local conditions, local assistance, even knowledge of the fact that the company services a particular city in Colorado.

Many of the concerns expressed above are fears about what will happen in a deregulated market place. Yet, these concerns are realities today. Consumers, especially the low-income, are feeling the burdens without the benefits. It is as if restructuring is happening - "virtual restructuring" - without protective mitigating measures and the ability to choose a supply provider. The utilities are already protecting themselves and increasing their options; the consumers deserve the same - protections and options.

Because there is a belief that Colorado is operating in a world of "virtual deregulation" without protection, the low-income representative supports moving the existing supply market to retail choice with legislation that provides the appropriate protective measures for low-income families. Such legislation would also need to address the other 16 issues outlined in the electric study panel legislation.

Page Last Updated: October 23, 2007