Competitor in Energy Market Calls for Action Against Boston Edison.

BOSTON--(BUSINESS WIRE)--Nov. 5, 1998--New Energy Ventures East ("NEV"), the nation's largest retail supplier of electricity, has joined ranks with the Attorney General, national consumer groups, and Cablevision Systems Corporation to call on the Department of Telecommunications and Energy (DTE or Department) to scrutinize issues related to the relationship between Boston Edison and Residential Communications Network (RCN).

Barbara Kates-Garnick, Executive Vice President of New Energy Ventures East, said the case would be an important test for the DTE.

"Those of us looking forward to the development of a competitive market in Massachusetts are watching this proceeding to see how the Department deals with issues related to utility investments in non-energy related subsidiaries," Kates-Garnick said.

Boston Edison is currently under investigation by the Department for violating an earlier order that restricted its entry into new businesses. Specifically, the order, issued in 1993, limited the businesses which Edison could enter to energy-related ones, and capped these investments at $45 million. Subsequent to that order, Edison entered the telecommunications market through a joint venture with RCN and has contributed the use of its fiber optic network to the venture.

New Energy Venture East's filing stresses that strong enforcement action in this case is particularly necessary because this case is a first-of-its-kind. In particular, the filing explains that this case will help establish whether a new model of regulation - the reliance on vigilant enforcement of standards of conduct rather than restrictions on lines of business - will successfully facilitate fair competition and address abuses of a utility's monopoly. Moreover, NEV's filing highlights the importance of sending a clear message that the Department intends to adhere to its policy of promoting full and fair competition and will not tolerate a situation where electricity ratepayers subsidize investments in other parts of a utility's business, where the benefits are then applied to shareholders.

Citing evidence introduced by Cablevision, NEV noted that Boston Edison's fiber optic network - which was paid for by Boston Edison's electric customers and had been used for its internal purposes - was transferred to the joint venture at a fraction of its fair market value. By failing to fairly value this asset paid for by electric customers, Boston Edison not only violated the DTE's restriction on investing in new businesses, it also subsidized a competitive venture from a regulated service and failed to mitigate fully its "stranded costs" (i.e., uneconomic investments), as required under Massachusetts' electric restructuring law. Not only does Boston Edison's conduct negatively impact electric ratepayers and the development of competition in the telecommunications market, NEV explained, it also adversely affects the development in competition in the electric market.

Kates-Garnick is especially well positioned to comment on this proceeding, as she was a former DTE Commissioner who was on the DTE when it authorized Boston Edison's investment into certain ventures. "At the time the Department authorized Boston Edison's entry into new markets, there was an understanding that the safeguards imposed on Edison were key to the approval of its authority to invest in new ventures," Kates-Garnick said. "Given that enforcement is becoming an increasingly important part of the Department's role, it is now especially important that the Department be willing to enforce pro-competitive and pro-consumer safeguards once they have been breached. I am hopeful that the Department will take an important step for competition and Massachusetts' electric customers."

The hearings on Boston Edison's joint venture with RCN are set to commence in early December. A decision is expected in the first part of next year.