Consumer Affairs, Consumer Education, and Public Information
Economists traditionally considered utilities to be "natural" monopolies. As a result, governments regulated utilities' business conduct and granted various utility companies exclusive authority to provide electric, telephone, water, and gas services in limited areas. In some cases, local governments chose to operate their own utilities.
By definition, the monopoly model does not allow normal market forces--competition--to keep consumer prices low. As a result, government regulation or provision of these services have been substituted for competition. Governments set prices, rates of return, and service quality standards. In theory, regulation guarantees fair prices and acceptable service for the consumer, while allowing utilities a reasonable profit.
Rapid changes in technology and the deregulation of other industries (such as long-distance telephone service), however, have cast doubt on the continued need for monopoly in electricity and telecommunications. As a result, many states are considering various forms of deregulation in the electric and local telephone markets. Obviously, such steps will lead to major changes in the missions of utility regulatory agencies. In the view of the National Association of Regulatory Utility Commissioners (NARUC), their agencies' major role inevitably will shift from traditional regulation to continuing core regulatory functions while increasing outreach and education.[ 1 ]
Oversight activities will focus on customer service and protection. Deregulation will bring new companies into the utility industries, and in some cases allow customers to choose their service providers for the first time ever. Utility agencies must attempt to minimize disruptions and lapses in quality, to remedy violations, and to provide consumers with the information they will need to realize the benefits of competition.
PUC's Customer Services Office is staffed with seven positions including a manager of Customer Services; one additional position is vacant at this writing. The manager reports to the newly created position of director of Consumer Affairs (also currently vacant).[ 2 ] The office's fiscal 1997 operating budget is about $345,000.[ 3 ] Customer Services' major functions include response to consumer complaints and requests for public information, and the registration of pay-phone operators and caller ID per-line blocking requests. In fiscal 1995, Customer Services handled 25,701 general inquiry and complaint calls and 8,414 written complaints and inquiries that resulted in $151,942 in customer credits and refunds.[ 4 ]
The Public Information Office is staffed with five and one-half positions including the Public Information officer; one full time position and one half time position are vacant at this writing. The Public Information officer reports directly to PUC's executive director. The office's fiscal 1997 operating budget is $174,128.[ 5 ] Public Information's major functions include media/press relations; production of a weekly PUC Update, an annual report, and other publications; response to general information inquiries; a daily clipping service; preparation of press releases and agendas for open meetings; maintenance of information on the agency's internet site, and preparation of information for the Legislature. In fiscal 1995, the Public Information Office handled 1,031 in-person requests for information, answered an average of 30 phone calls per day, and distributed 30 press releases to state and national media.[ 6 ]
TPR compared PUC's operations to peer agencies in other states that are facing similar restructuring and deregulation pressures. Eight state agencies responded to all or part of a TPR survey--Connecticut, Pennsylvania, Illinois, New Jersey, Maine, Michigan, Wisconsin, and New York. While some of these states regulate utilities other than electric and telecommunications, they provide a reasonable comparison. In addition, other states such as Florida and Ohio were contacted for specific consumer information. TPR also examined the consumer affairs function of the Texas Department of Insurance (TDI), another large regulatory agency involved in a complex industry, and one that has many of the same consumer functions as PUC (such as response to consumer complaints and inquiries and consumer education).
TPR's recommendations in this chapter call for changes in PUC's approach to consumer affairs and public information. The first proposal would refine and expand PUC's consumer education role, while the second would reorganize the agency's consumer activities along functional lines. The third proposal would strengthen and simplify PUC's consumer complaint process. Finally, TPR outlines ways to use the agency's computer capabilities more effectively. These recommendations, taken together, would require additional funding of $958,000 over the 1998-1999 budget period.
PUC should develop a comprehensive Consumer Education Plan to help Texans make informed decisions in a deregulated utility market.
Deregulation promises to lower prices through competition. To reap the full benefits of deregulated markets, however, consumers must be able to make informed choices about their options. The variety of service options and prices available in a deregulated environment is likely to result in confusion, and consumer education will be critical to ensuring that deregulation lives up to its promise.
PUC recognizes the importance of consumer education in the transition to competition. In a document prepared for its August 1996 legislative appropriation request, PUC noted that:
...customers [must] have an understanding of their rights....This would be best accomplished through a more aggressive approach to customer education by the Commission and better dissemination of information regarding Commission activities.[ 7 ]
PUC uses a variety of methods to inform consumers, including an Internet site, press releases, a newly created toll-free number, the PUC Update publication, interaction with the media, brochures, regularly scheduled PUC meetings, and periodic field meetings open to the public. In addition, the agency plans to create a speakers bureau.[ 8 ] PUC's Public Information Office is involved in most of these areas; the Customer Services Office manages the toll-free number and works with Public Information to support the Internet site.
These efforts are useful, but they are limited and do not reflect an integrated, systematic strategy. PUC lacks a comprehensive plan of action to inform consumers about the approaching competitive marketplace.
Efforts in other states
TPR has identified several state utility commissions that are somewhat ahead of Texas in planning and implementing consumer education programs in response to deregulation.
Wisconsin's Public Service Commission is developing a consumer education program to promote public awareness on changes in the telecommunications marketplace. As a first step, the agency has created an industry forum to gather input from representatives of industry and the general public.[ 9 ]
In May 1996, the New York Public Service Commission began implementing a statewide "Informed Energy Choices Program."[ 10 ] Key components of this campaign include public forums, speeches, development of both English and Spanish language educational materials, targeted mailings to consumer groups, and distribution of the agency toll-free number. The campaign also features Internet access to consumer information and an electronic consumer comment form.
In Florida, 1995 telecommunications legislation required the Florida Public Service Commission "to adopt a consumer information program to educate consumers about the provisions of the law."[ 11 ] The program includes regional customer meetings, publications, media outreach, and the inclusion of consumer education information in utility bills.
Although PUC issues press releases and utility advisories, it does not have a program designed specifically to provide important consumer-related information to utility customers and consumer organizations. The Federal Communications Commission (FCC), for example, operates a Consumer News Fact Sheet program that identifies trends in consumer-related issues and publishes "Consumer Alerts" on particular issues. FCC distributes this information to consumers through an extensive mailing list of consumer advocacy organizations.[ 12 ] The Michigan Public Service Commission has a similar Consumer Alert program in place. Michigan analyzes consumer complaints and inquiries on a monthly basis, using these results to prepare alerts and informational brochures and distribute them to consumers.[ 13 ]
PUC's rule 23.41(b) requires utilities and carriers to give their customers a package of information entitled "your rights as a customer." The package explains customers' right to file complaints with PUC, their right to information concerning rates and services, and procedures for resolving billing disputes. However, PUC has not yet made efforts to determine what consumer information utilities should be required to provide during the move to deregulation. Such information could include standard billing formats and consumer information to be included in billing statements (such as PUC's toll-free number). In addition, PUC has not yet developed strategies to educate specific constituencies such as senior citizens, Spanish-speaking citizens, or those living below the poverty level.
PUC's plans for consumer education should include the dissemination of information on cost comparison standards, to allow consumers to easily compare costs and services among competing carriers via "apples-to-apples" comparisons of the various companies' costs. The Texas Department of Insurance (TDI) uses its publications to circulate cost information that allows consumers to compare, for example, the range of costs for car insurance among competing companies.
TPR also learned that PUC has chosen not to advertise its new toll-free number for consumer complaints, because the agency lacks the staff to handle the expected workload.[ 14 ] Other state utility agencies, such as those in Pennsylvania, Maine, Ohio, and Florida, prominently display toll-free numbers on written materials and the Internet.
A TPR survey of utility agencies in other states found that all six agencies responding to the question assign more staff members to consumer inquiries than PUC's Customer Services Office, as is shown in Exhibit 4. New York's utility commission, for instance, dedicates 11 staff members to consumer inquiries; Pennsylvania's uses six.[ 15 ] In Florida, six to eight employees answer a toll-free number for general inquiries and assist in processing consumer complaints.[ 16 ] Ohio has seven staff members who answer customer inquiries on a toll-free number.[ 17 ] New Jersey uses five, while Illinois assigns four employees to this function.[ 18 ] Moreover, the Texas Department of Insurance's Information Assistance Section includes 19 employees who work full time on response to general consumer inquiries.[ 19 ]
Finally, PUC does not use radio/TV public service announcements (PSAs), due to their production cost.[ 20 ] The agency's focus, instead, is primarily on the print media. By contrast, the Florida and Pennsylvania utility agencies, as well as TDI, use PSAs.[ 21 ] PUC's funding level may be one reason that PUC chooses not to use radio and TV. Note that, for instance, PUC's combined 1997 operating budget for consumer affairs and public information was less than $519,000, while TDI's budget for similar functions is $3.6 million.[ 22 ]
Another way to keep the public informed is to make complaint information available to the public via the Internet and agency publications. PUC employees have noted that this would be desirable, but the agency does not yet do so.
Several state utility agencies provide company complaint information to the general public. For example, Florida publishes monthly and annual lists of complaints by company and by type of complaint. Indiana places complaint information on the Internet. Pennsylvania issues an annual report on utilities' response to complaints. Connecticut publishes an annual Utility Scorecard ranked by complaints.[ 23 ]
Consumer education staffing
PUC has no staff members dedicated only to consumer education. Instead, employees in Public Information and Consumer Protection and Enforcement perform this function on a part-time basis. PUC allocated 1,270 staff hours to this function in fiscal 1997, an amount equivalent to slightly more than half of one full-time position.[ 24 ] Moreover, PUC does not plan to increase its resources in this area, despite the fact that the agency acknowledges the need for education during the transition to deregulation.[ 25 ]
New York's utility agency, by contrast, has 15 employees devoted to consumer education/outreach; Florida and New Jersey each have five.[ 26 ] In Texas, TDI has 12 staff members dedicated entirely to consumer education and outreach, as is detailed in Exhibit 4.[ 27 ]
A. State law and applicable substantive rules should be amended to stress and strengthen PUC's consumer education mission. Funding for this activity should be increased to support an expanded education and outreach function, and should include appropriate resources for the consumer toll-free number.
Specific authority and direction in law should give PUC a clear mandate to develop, implement, and sustain a consumer education program. Increased funding would ensure that the agency has the resources to carry out this new mandate.
B. PUC should develop a comprehensive plan to educate consumers on the upcoming deregulated market.
This plan should be completed by April 1997. The plan should examine various communications strategies and clearly explain how the agency will guide Texas consumers through the change to competition. PUC could choose to hire a professional marketing and communications consulting firm if it needs such technical assistance. An analysis of staffing and other resources needed to implement the plan should be included as an amendment to PUC's 1998-1999 budget request.
PUC employees charged with this mission should solicit the input of consumer groups, other state agencies such as TDI, other state utility agencies, and representatives from regulated utilities. Communications plans developed by the New York, Florida, and Wisconsin utility agencies, FCC, TDI, and other agencies could serve as models for a communications strategy.
The consumer education plan should provide a comprehensive outline showing how PUC intends to implement and manage its consumer education and outreach function. At minimum, the plan should:
- specify the communications tools and methods to be used (such as consumer alerts, PSAs, the Internet, brochures, billboards, speaker's bureau, or editorial columns);
- establish a clear timeline with specific action steps and assignments for implementation;
- include benchmarking with comparable agencies to examine their communications and marketing plans and resource allocation;
- identify staffing requirements and project anticipated workload;
- identify target constituencies with specific needs and strategies for communicating information (such as seniors and Spanish speakers);
- detail the education/outreach role that regulated utilities should play, including information requirements;
- describe a mechanism for providing the public with complaint information;
- recommend legislative or substantive rules changes needed, if any, to implement the plan; and
- specify a cost for implementing the plan during the transition to competition and for sustaining an education program after the initial transition;
C. PUC rules should be amended to require utilities to communicate certain consumer education information to their customers, and to authorize PUC to collect, standardize, and disseminate information on utilities.
Information requirements for utilities could include, for example, a stipulation that utilities must include PUC's toll-free number on each billing statement. PUC should be specifically authorized to collect information on utility costs and services, to serve as a clearinghouse of standardized comparative information for consumers.
Additional staffing and communications tools such as producing PSAs would entail additional costs. Exact staffing requirements would depend upon the final consumer education plan; TPR's study of other utility agencies and other Texas regulatory agencies indicates PUC would need at least three full-time staff members dedicated to consumer education to move closer to the average of other state PUCs surveyed (See Exhibit 5). Assuming new employees are paid at the average Customer Services salary (and comparable TDI salary) of $34,000 per position, these employees would require additional annual funding of about $127,500 (including benefits).
Again, PUC's staffing requirements for the consumer inquiry hotline would depend upon its consumer education plan. Based on other agencies' staffing patterns and the increased number of consumer inquiries likely to follow regulatory changes, it seems reasonable to assume that at least four additional staff members would be required. Assuming a salary of $22,000, which is what TDI pays phone inquiry staff, total annual costs for these employees, including benefits, would be about $110,000.
TDI, a comparable Texas regulatory agency, budgeted $275,000 in fiscal 1997 print material including consumer brochures and consumer bulletins.[ 28 ] In addition, TDI spends $4,000 to $8,000 a year to produce television PSAs.[ 29 ] Given PUC's urgent need to communicate consumer information during the transition period, the agency should budget to prepare at least four PSAs initially (perhaps two for electricity and two for telecommunications), and probably should produce a similar number of PSAs in future years.
In all, TPR estimates that PUC would require an estimated $261,500 per year ($237,500 for staff and $24,000 for television PSAs) to implement an adequate consumer education plan. Actual costs for PSAs and other communication tools should be specified in the consumer education plan.
Total costs to implement the plan should be incorporated as an amendment to the agency's 1998-1999 legislative budget request.
[ 1 ] The National Regulatory Research Institute, Missions, Strategies, and Implementation Steps for State Public Utility Commissions in the Year 2000: Proceeding of the NARUC/NRRI Commissioners Summit (Columbus, Ohio, May 1995), p.4-5.
[ 2 ] Public Utility Commission of Texas, "Organization Chart," Austin, Texas, November 1, 1996.
[ 3 ] Public Utility Commission of Texas, "1997 Operating Budget," Austin, Texas, September 16, 1996. (Computer printout.)
[ 4 ] Public Utility Commission of Texas, 1995 Annual Report (Austin, Texas, June, 1996), p. 15.
[ 5 ] Public Utility Commission of Texas, "1997 Operating Budget."
[ 6 ] Public Utility Commission of Texas, 1995 Annual Report, p. 15.
[ 7 ] Public Utility Commission of Texas, Moving Towards the Future: the Role of Customer Protection and Enforcement (Austin, Texas, August 1996), p. 1.
[ 8 ] Interview with Leslie Kjellstrand, public information officer, Public Utility Commission of Texas, Austin, Texas, October 17, 1996; and interview with Pat Wood, chairman, Public Utility Commission of Texas, Austin, Texas, October 15, 1996.
[ 9 ] Wisconsin Public Service Commission, "Wisconsin PSC Establishes Consumer Education Forum, Public Input Sought," Madison, Wisconsin, August 16, 1996. (Press release.)
[ 10 ] New York Public Service Commission, "Commission Promotes Informed Energy Choices Consumer Education Plan," Albany, New York, October 23, 1996. (Press Release.)
[ 11 ] Florida Public Service Commission, 1995 Annual Report (Tallahassee, Florida), p. 72.
[ 12 ] Federal Communications Commission, Common Carrier Bureau, Enforcement Division, "Consumer News Fact Sheets," Washington, D.C., November 25, 1996 (http://www.fcc.gov/Bureaus/Common_Carrier/Factsheets/ consumer_news/). (Internet document.)
[ 13 ] TPR survey of eight state utility commissions, November 1996.
[ 14 ] Interview with Christina Morris, manager, Customer Services Division, Public Utility Commission, Austin, Texas, October 16, 1996.
[ 15 ] Interview with Mitch Miller, Consumer Affairs Division, Pennsylvania Public Utility Commission, Harrisburg, Pennsylvania, November 22, 1996.
[ 16 ] Interview with Vic Durbin, coordinator, Complaints Bureau, Florida Public Service Commission, Tallahassee, Florida, November 25, 1996.
[ 17 ] Interview with Lisa Colisomo, Consumer Affairs director, Ohio Public Utility Commission, Columbus, Ohio, November 25, 1996.
[ 18 ] Interview with Kent Papson, Consumer Affairs director, New Jersey Board of Public Utilities, Trenton, New Jersey, November 21, 1996.
[ 19 ] Interviews with and staffing chart provided by Audrey Selden, associate commissioner for Consumer Protection, Texas Department of Insurance, Austin, Texas, November 6 and 19, 1996.
[ 20 ] Interviews with Leslie Kjellstrand, public information officer, Public Utility Commission of Texas, Austin, Texas, October 17 and 23, 1996.
[ 21 ] Interviews with. Audrey Selden ; interview with Vic Durbin; and interview with Mitch Miller.
[ 22 ] Interviews with Audrey Selden.
[ 23 ] Florida Public Service Commission, 1995 Annual Report, pp. 73-90; TPR survey of eight state utility commissions; and Indiana Utility Regulatory Commission, "Consumer Affairs Division, Consumer Complaints by Type of Utility," Indianapolis, Indiana, November 20, 1996 (http://www.state.in.us/iurc/html/com.rep.html) (Internet document).
[ 24 ] Public Utility Commission of Texas, "Schedule A: Projected Workload for Fiscal Years 1997-1999" (support schedules for legislative appropriations request for fiscal 1998-1999), Austin, Texas, August 1996.
[ 25 ] Public Utility Commission of Texas, "Schedule A: Projected Workload for Fiscal Years 1997-1999".
[ 26 ] Interview with Raj Appeppelai, consumer services division staff, New York Public Services Commission, Albany, New York, December 14, 1996; interview with Vic Durbin; and interview with Ed Santana, assistant director, Customer Relations Division, New Jersey Board of Public Utilities, Trenton, New Jersey, November 21, 1996.
[ 27 ] Interviews with Audrey Selden;
[ 28 ] Interview with Mary Pat Hughes, program administrator, Division of Consumer Protection, Texas Department of Insurance, Austin, Texas, December 11, 1996.
[ 29 ] Interviews with Jim Davis, public information officer, and Mark Hannah, staff member, Public Information Office, Texas Department of Insurance, Austin, Texas, December 11, 1996.
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