NIACCA Gains Small Victory In Utility Battle

December 19, 2001
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It has been a long-standing campaign in Illinois against joint advertising and marketing by gas utilities and their affiliated companies, but Chris Colditz, president of Northern Illinois Air Conditioning Contractors of America, reports that a battle has been won.

When the state of Illinois instituted deregulation of gas utilities, there were no specific rules regarding these operations. It was determined that if and when they were needed, the Illinois Commerce Commission (ICC) would make them.

However, the utilities, led by Nicor Gas, but also including Peoples Energy, Illinois Power, and others, have opposed any attempts to impose rules restricting transactions between natural gas utilities and their affiliates.

In 1993, the utilities began to compete in the hvac service business. This was fought by local contractor coalitions, but they were unsuccessful in getting any rules to stop the practice.

In 1999, NIACCA joined the fray. According to Colditz, the ICC began rule processing regarding gas affiliates in late 2000. The commission has an administrative law judge who oversees its proceedings; the staff gathers evidence, prepares a draft rule, and then rounds of comment and rebuttal are initiated.

Colditz said she was able to convince the ICC staff to take a close look at joint advertising and they found clear evidence of cross-subsidization and commingling of assets. The staff then wrote a tighter rule banning the practice.

RULE REVERSED

Donald Woods, the administrative law judge, did not agree with the rule and wrote that he saw nothing wrong with joint marketing. The ICC commissioners then voted with Woods against their own staff. This new rule was then submitted to the state legislature’s Joint Committee on Administrative Rules (JCAR), which is the next step in the rulemaking process.

The meeting of JCAR legislators was scheduled for September 11, and nine of the members had committed to an objection to the proposed rule. Because of the terrorist attacks that day, the meeting was cancelled. Colditz noted, “We thought the reason for the cancellation would be worthy of a postponement.” Instead, the ICC enacted its new rule a week later, on September 18, without having JCAR address it.

NIACCA, through its legal staff, approached the members of JCAR with a letter to the ICC commissioners. The letter was signed by nine of the legislators and requested that the commissioners reconsider the rule, which the letter said, “inadequately protects existing businesses, such as those in the heating, ventilating, and air conditioning (hvac) industry, from having to compete with utility affiliates that may receive unfair competitive advantages from their association with the monopoly gas utility.”

The ICC commissioners agreed again to review the rule, but upheld their original decision.

At the October meeting of JCAR, this issue was not on the agenda. However, a concern was voiced by one member, resulting in the chairman requesting that the ICC appear before the JCAR members in November. The chairman requested that an explanation be given at that time as to how the ICC commissioners voted against their staff’s recommendations.

SPECIAL MEETING

JCAR then decided to have a special meeting to discuss the Gas Affiliate Rules. It was scheduled for November 14, but only five members of the committee showed up.

Vicki Thomas, executive director of JCAR, told the ICC that any “substantive change” made in the rules should have been brought up and explained to the JCAR members. She asked Woods why he didn’t include the ban on joint advertising and marketing in the Gas Affiliate Rules. Woods responded that he did not believe the ICC had the authority and that there was not overwhelming evidence that a ban was justified.

Representatives of Nicor Gas stated that independent contractors are given the same equal opportunity to advertise in the company’s billing inserts. Colditz, though, showed examples of how Nicor uses newsletters and much larger and more colorful ads than what it will allow a contractor to purchase. And the affiliate services can be ordered through a tear-off coupon with the return payment envelope. Peoples Energy was also shown to jointly advertise its gas and hvac services.

Then, Janice Dale, bureau chief, public utilities, of the state’s Attorney General’s office, noted that she was concerned that consumers were becoming confused over the blurred distinction between the utility and its affiliate when they engage in joint marketing.

Because of this meeting, the JCAR legislators present determined that the issue of joint advertising has not been adequately addressed. At the next meeting of the full committee, it will have the option of directing ICC to look at this again or decide to adopt legislation on the matter. Colditz believes that JCAR will at least give some indication of which way it wants to go.

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