Consumer Groups Say Regulators Soft on Boston Edison; Call For $60 Million Refund For Edison Customers.

BOSTON--(BUSINESS WIRE)--Oct. 8, 1998--Two consumer organizations joined ranks with the state Attorney General and Cablevision of Boston today asking the Department of Telecommunications & Energy to sanction Boston Edison, and order it to give its customers a $60 million refund.

The Massachusetts Public Interest Research Group (MASSPIRG) and the Consumer Federation of America (CFA), a national consumer protection organization, filed a joint brief asking for permission to participate in the ongoing DTE investigation into whether Boston Edison's investment in Residential Communications Network (RCN) violated a 1993 DTE order placing limits on Edison's investments in unregulated, competitive business ventures.

"The DTE should take decisive action," the consumer groups stated in their filing. "Only by imposing meaningful sanctions, in addition to refunding consumers the over $60 million that appears to have been impermissibly taken from the rate base, will the DTE ensure that regulated utilities will know that the cost of getting caught is more than simply having to replace the cookie taken from the cookie jar."

"We will be watching the DTE closely on this important case," Rob Sargent, Director of Energy Programs for MASSPIRG, explained. "If they do not take a tough stand here, it will confirm our worst fears that they do not take seriously their obligation to protect consumers. Moreover, a failure to act here would not only violate their responsibility to protect the public interest, but also their mandate to enforce their prior orders and to use one of the few tools that they have under the state deregulation law."

Mark Cooper, Research Director at the COnsumer Federation of America, explained that this proceeding will be watched as a nationwide precedent. "Electric utilities across the United States are looking for ways to take advantage of the opportunities presented by electric restructuring. That's all well and good, but if they can get away with tucking away valuable assets paid for by ratepayers in unregulated affiliates while claiming that they should be reimbursed for all bad investments, they will put the interests of their shareholders over the interests of their customers."

"Just last summer, CFA released a report that highlighted the problem of cost shifting and uneconomic investments in cases like this," Cooper explained. "Only if regulators vigilantly guard against such conduct, can consumers hope to really benefit from electric restructuring."

In 1993, the DTE gave Boston Edison approval to invest $45 million in the Boston Edison Technology Group (BETG), an unregulated subsidiary, for three specific purposes: (1) demand-side management; (2) electric vehicles; and (3) electric generation services. Through BETG, Edison has since invested well over $45 million in a joint venture with RCN, including the transfer of a fiber optic system at less than market value.

MASSPIRG and the CFA cited recent testimony, filed by expert witnesses on behalf of Cablevision Systems Corp., estimating that the value of the fiber optic network is worth at least $60 million more than Edison has credited to ratepayers. As a results, the ratepayers are being overcharged and Edison is not mitigating its "stranded costs," or bad investments, to the fullest extent possible, as prescribed by law.

"This proceeding is critical to Massachusetts consumers," Sargent explained. "Until now, Boston Edison has had it both ways; getting full recovery of their bad investments, but not fairly valuing its good investments that were paid for by its electric customers. This proceeding is about whether DTE will allow Boston Edison to get away with this consumer ripoff."

"Apparently, despite its rhetoric about competition, Boston Edison saw electric restructuring as an opportunity to take advantage of the regulatory structure, not to ensure that consumers could enjoy the best of what competition had to offer," the brief stated.

In the brief, MASSPIRG and CFA argue that the case revolves around three key issues, namely whether:

-- regulators will ensure that assets paid for by electric customers are fully and fairly valued by companies that use these assets for competitive, non-regulated ventures;

-- the entry of regulated utilities into new markets will lead to cross-subsidies and threaten free and full competition;

-- regulated utilities will be sanctioned appropriately for violating important regulatory restrictions.

"It's now put up or shut up time for the DTE," Sargent said.