FTC Files Comment with Public Utility Commission of Texas

The staff of the Federal Trade Commission yesterday filed a comment with the Public Utility Commission of Texas (PUCT) about the relationships between regulated electric utilities and their affiliated entities operating in unregulated markets.

The FTC has a longstanding interest in regulatory reform and competition in energy markets, including proposals to increase competition in the natural gas and electric power industries.

The FTC’s comment covered four areas about which the state agency was seeking comments:

1. Provisions requiring separation of the utility from its affiliates;
2. Limits on the types of transactions between utilities and their affiliates;
3. Inclusion of a disclaimer when an affiliate uses its parent utility’s logo; and
4. Competitive bidding.

The comment noted that the separation of a utility from its affiliates may present fundamental trade-offs between preventing discriminatory behavior by the utility and preserving economies of vertical integration. It stated that creating "market-like" institutions to govern the types of transactions between utilities and their affiliates may be a viable initial approach to preventing discrimination. The FTC also said that when unregulated affiliates are allowed to use a regulated parent utility’s name or logo, the parent utility may have incentives to overinvest in building its reputation (as a provider of high quality services, for example) in ways that are difficult for regulators to detect and prevent. In addition, the comment noted that preserving confidentiality of bidding information, such as the PUCT proposes to collect, may help prevent collusive behavior among firms selling to the parent regulated utility.

The Commission vote to approve the staff comment was 4-0.

NOTE: The comment represents the views of staff members of the FTC’s Bureau of Economics and not necessarily the views of the Commission or any individual Commissioner.

Copies of the full text of the comment are available from the FTC’s web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202- 382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.