FTC Staff Files Comment with Louisiana Officials about Rules Governing Regulated Utilities/Unregulated Affiliates

The staff of the Federal Trade Commission on October 30, 1998, filed a comment with the Louisiana Public Service Commission (LPSC) about potential LPSC rules governing relationships between regulated electric utilities and their affiliated entities operating in unregulated markets to "prevent unfair competition and cross-subsidization between affiliated businesses."

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

In its comment the staff discussed the trade-offs between preventing discriminatory behavior by the parent utility and preserving economies of vertical integration with its affiliates that are central to the development of affiliate rules. The comment also addressed the potential costs and benefits of behavioral unbundling versus structural separation of distribution companies from their affiliates. While the staff comment concluded that permitting utilities to own affiliates that must be operated separately may be a reasonable initial approach, the comment suggests that the LPSC may wish to reevaluate the trade-offs and alternatives after an interim period. In addition, the comment discussed potential consumer deception and cross-subsidization issues associated with a regulated firm allowing its logo to be used by its unregulated affiliates.

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.

(FTC File No. V980028)