MID-ATLANTIC POWER SUPPLY ASSOCIATION
Proposed Subtitle 49 Electric and Gas Companies-
Affiliate Code of Conduct
Including MAPSA Revisions
October 22, 2003
Chapter .01 General.
Except as provided in § B of this regulation, this subtitle applies to all electric or gas utilities or a combination electric and gas utility.
This subtitle does not apply to a municipal electric or gas utility, a combination municipal electric and gas utility, or a gas utility that distributes only propane gas.
The purpose of this subtitle is to establish regulations, which promote competitive markets and ensure that, an electric or gas utility does not subsidize or provide any other advantage to its affiliate.
In this subtitle, the following terms have the meanings indicated.
(1) “Affiliate” has the meaning stated in Public Utility Companies Article, § 7-501, Annotated Code of Maryland.
(2) “Asset” means tangible property included in the rate base of a utility and intangible property.
(3) “Asymmetric pricing” means the transfer of an asset from a utility to an affiliate recorded at the greater of book cost or market value and the transfer of an asset from an affiliate to a utility recorded at the lesser of book cost or market value.
(4) “CAM” means cost allocation manual.
(5) Core Service.
(a)“Core service” means a service, which duplicates or replaces an essential service provided only by a utility prior to the introduction of customer choice programs.
(b) “Core service” includes the provision or the marketing of electricity or natural gas.
(6) "GENCO" means:
(a) A company that generates electricity or provides electricity at wholesale rates;
(b) An affiliate of an electric company that may submit a bid or applications to provide that electric company with generation in support of the provision of standard offer service by the electric company.
(7) “Non-Core Services” means any gas or electric service that is not a core service.
(8) Intangible Property.
(a) “Intangible property” means property that has no intrinsic value, but is the evidence of value.
(b) “Intangible property” includes intellectual property computer data,
company name or logo, or material containing a company name or logo.
(9) "Similarly situated" means the standard for determining whether a non- affiliate is entitled to the same benefit a utility offers, or grants upon request, to its core service affiliate or affiliated GENCO for any product or service. All non- affiliates serving or proposing to serve the same market at the utility’s affiliate are similarly situated to the utility’s affiliate.
(10) "SOS" means standard offer service as defined in Public Utility Companies Article, § 7-501, Annotated Code of Maryland, or a similar utility based service for the retail provision of natural gas.
(11) “Utility” means an “electric company” or “gas company” as defined in Public Utility Companies Article, § 1-101, Annotated Code of Maryland.
.04 Waiver of Regulations.
A regulation in this subtitle may be waived by the Commission for good cause shown.
Chapter .02 Utility Code of Conduct.
.01 Prohibited Utility Conduct with Affiliate.
Services Generally. A utility may not:
(1) Represent to a customer or potential customer that any advantage or superior service will accrue because of the utility and affiliate relationship;
(2) Give any preference to its affiliate or customers of its affiliate in providing regulated utility service;
(3) Condition or tie the provision of regulated utility services to any other product or service;
(4) Engage in joint promotions, marketing or advertising with an affiliate;
(5) Except with the informed consent of the customer and compliance with Commission consumer protection orders, disclose any customer specific information obtained in connection with the provision of regulated utility service;
(6) Offer discounts, rebates, fee waivers, or penalty waivers or other special provisions to affiliates or customers of affiliates, unless it makes the offer contemporaneously available to all similarly situated non-affiliated licensed electricity or gas supplier and/or their customers, and makes the offer in a manner designed to allow all an equal ability to utilize the offering. Any such offer, if made, shall also be contemporaneously posted on the utility's electronic bulletin board, website or other appropriate location.
(7) Market or promote its SOS, but may provide factual and unbiased information regarding the terms and conditions of SOS in response to a customer's request for such information.
B. Core Services. A utility may not:
(1) Except when specifically requested by a customer, engage in joint sales calls for the provision of core services with an affiliate;
(2) Operate from the same physical location used by an affiliate that offers core services to the public;
Share information with an affiliate that provides core services;
Provide sales leads to an affiliate that offers core services to the public; or
(5) Speak for or appear to speak on behalf of an affiliate that provides core services.
(6) Circumvent, or attempt to circumvent, these regulations through the use of an affiliate or affiliates as conduits between the utility and the core service affiliate(s).
C. A utility may not authorize, assist, or enable its affiliate to:
(1) Refer to a co-extensive service or the reliability of the utility, including reports and work papers of an independent auditor; or
(2) Engage in any activity prohibited under this chapter.
.02 Authorized Utility-Affiliate Activity.
Advertising Material. A utility may authorize its affiliate to use advertising material that identifies its relationship to the utility subject to the following conditions:
(1) The affiliate’s advertising material shall specifically enumerate the relationship;
(2) The affiliate’s advertising material shall state that the affiliate is “not the same company as the utility”; and
(3) If the affiliate provides core services and the advertising is for core services, the affiliate’s advertising shall clearly indicate that the Commission does not set rates for these services.
B. Use of Utility Name or Logo.
(1) Except as prohibited under Regulation .01A(4) of this chapter, a utility may permit its affiliate to use its name or logo.
(2) When a utility permits its affiliates to use the utility name or logo under §B of this regulation, the utility shall collect the dollar value of the benefit derived from the use of the name or logo from the affiliate.
(3) The value of the benefit derived from the use of the utility name and/or logo shall be determined by the Commission after notice to interested parties and hearing and shall, at minimum, be based on evidence of market price for the development and implementation of brand names and/or logos.
.03 Required Utility Conduct
If a customer requests information from the utility about competitive core services, to the extent the utility responds, the utility shall only provide a list, in alphabetical order, of all licensed electricity or gas suppliers of the core service on its system to the customer.
The utility may not highlight or promote its core service affiliate.
Service Requests. A utility shall process all similar requests for service by a licensed electricity or gas supplier in the order received, using the same procedures and within the same period of time as it processes requests for service from its affiliate.
Electricity and Gas Suppliers. A utility shall treat licensed electricity or gas suppliers and their customers in the same manner as the utility treats its core service affiliate or its core service affiliate’s customers.
(1) A utility shall contemporaneously disclose any information provided to its affiliate(s) to all non-affiliated licensed electricity or gas suppliers, or potential non-affiliated licensed electricity or gas suppliers on its system, in a manner designed to allow all an equal ability to utilize the information, with respect to: (i) the operation of its system;
(ii) the marketing or sale of energy to customers or potential customers; and
(iii) the delivery of energy to or on its system.
(2) Information disclosed under §D(1) of this regulation shall be posted on a general alert screen of a utility’s electronic bulletin board, website or other appropriate location.
E. Separation of Utilities and Affiliates—Generally.
(1) A utility shall be a separate, independent entity from its core services affiliate or affiliated GENCO.
(2) A utility and core service affiliate shall operate from physically separate locations to avoid the inadvertent sharing of information. Employees of the core service affiliate may not have access to the facilities of the utility beyond that allowed to employees of non-affiliated licensed electric or gas suppliers on the utility’s system. The utility shall keep an access log of any visit by a core service affiliate employee to utility’s facilities, which log shall, at minimum, be included in the utility’s compliance audits, and otherwise made available to the Commission upon request.
(5) The utility and the core service affiliate shall maintain separate books and records in accordance with generally accepted accounting principles and the requirements of applicable regulatory agencies. The records shall be sufficient to allow for an audit of transactions between the utility and the core service affiliate.
F. Standard Offer Service.
(1) A utility may not market or promote SOS. The Utility may only provide unbiased information regarding the terms and conditions of SOS in response to a customer’s request for such information.
(2) A utility shall ensure that any GENCO affiliate is a separate subsidiary from the utility. The utility and affiliated GENCO shall maintain separate books and records in accordance with generally accepted accounting principles and the requirements of applicable regulatory agencies. The records shall be sufficient to allow for an audit of transactions between the utility and affiliated GENCO.
(3) A utility and its affiliated GENCO shall operate from physically separate
locations to avoid the inadvertent sharing of information. Employees of the affiliated GENCO may not have access to the facilities of the utility that exceeds that permitted to employees of non-affiliated generators operating on the utility’s system. The utility shall keep an access log of any visit by an affiliated GENCO employee to utility’s facilities, which log shall, at minimum, be included in the utility’s compliance audits, and otherwise made available to the Commission upon request.
(4) A utility may not temporarily transfer or assign an employee to an affiliated GENCO unless the assignment or transfer is for a period of greater than one year. This does not apply if the employee does not have knowledge of either confidential information or day-to-day operations that would provide an affiliated GENCO with an advantage over non-affiliated generators. The utility shall keep a log of all transfers or assignment of employees between the utility and an affiliated GENCO. All transfers or assignment of employees between the utility and an affiliated GENCO shall be publicly posted on the utility’s electronic bulletin board for a period of 30 days.
(5) A utility and affiliated GENCO shall not share information services, such as electronic databases or electronic files stored on a Local Area Network, unless the utility can demonstrate the sufficient safeguards are in place to prevent employees from an affiliated GENCO from gaining access to utility information that could provide the core service affiliate with a competitive advantage over non-affiliated generation companies.
(6) Unless a waiver is obtained under COMAR 20.49.01.04, an electric company may not share information obtained from a non-affiliated company engaged in the generation or wholesale provision of electric power with its GENCO affiliate or with any other affiliate of the electric company.
(7) Any information provided by a utility to a GENCO or other affiliate for the purpose of supplying wholesale SOS shall also be provided to a non-affiliated GENCO or marketer in a commercially reasonable manner.
(8) Nothing in this regulation abrogates any additional or more stringent rules or codes of conduct, including a GENCO Code, that a utility has agreed to as part of
an electric restructuring settlement adopted in a Public Service Commission
(9) Except by means of the electric company’s public website, an electric company may not provide any information regarding its distribution or transmission system to its GENCO affiliate.
.04 Utility and Utility-Affiliate-Shared Personnel.
Permitted Personnel Sharing. Except as provided in § B of this regulation, a utility may share personnel with its affiliate.
(1) A utility may not share the following personnel with its affiliate:
Customer service; or
(2) A utility and its affiliate may share:
Accounting personnel only for the purpose of establishing corporate accounting policy or standards, producing consolidated financial or tax statements, or preparing consolidated accounting reports or records; or
Legal personnel only for the purpose of consolidated corporate support activity including:
Occupational Safety and Health Administration compliance;
Employment Retirement Income Security Act compliance;
Internal Revenue Service matters; or
Security Exchange Commission matters.
Shared Personnel Cost.
Except as provided in § C(2) of this regulation, the joint cost of shared personnel shall be allocated using the fully distributed cost methodology.
If the service of shared personnel could be reasonably marketed by a utility, the shared personnel cost to the affiliate shall be allocated on the basis of the imputed fair market value of the service performed.
Shared Personnel Plan.
(1) When a utility shares personnel with its affiliate, the utility shall file a personnel sharing plan with the Commission, including the names of shared personnel and their function.
(2) Prior to any personnel sharing between a utility and its affiliate, the plan required under § D(1) of this regulation must be approved by the Commission.
(3) A utility shall file with the Commission its first shared personnel plan sixty days after this regulation becomes final, and shall provide updated personnel sharing reports on a monthly basis.
E. Personnel Transfers and Records
(1) A utility may not temporarily transfer or assign an employee to a core service affiliate unless the assignment or transfer is for a period of greater than one year. This does not apply if the employee does not have knowledge of either confidential information or day-to-day operations that would provide a core service affiliate with an advantage over non-affiliated suppliers.
(2) The utility shall keep a log of all transfers or assignment of employees between the utility and a core service affiliate. All transfers or assignment of employees between the utility and a core services affiliate shall be publicly posted on the utility’s electronic bulletin board for a period of 30 (thirty) days.
.05 Utility and Utility-Affiliate-Shared Facilities.
A. A utility and core service affiliate shall operate from physically separate locations to avoid the inadvertent sharing of information. Employees of the core service affiliate may not have access to the facilities of the utility beyond that allowed to employees of non-affiliated licensed electric or gas suppliers on the utility’s system. The utility shall keep an access log of any visit by a core service affiliate employee to utility’s facilities, which log shall, at minimum, be included in the utility’s compliance audits, and otherwise made available to the Commission upon request.
B. A utility and core service affiliate shall not share information services, such as electronic databases or electronic files stored on a Local Area Network, unless the utility can demonstrate the sufficient safeguards are in place to prevent employees from a core service affiliate from gaining access to utility information that could provide the core service affiliate with a competitive advantage over non-affiliated suppliers.
.06 Utility Loans or Guarantees to an Affiliate.
Except as provided under §B of this regulation, a utility may make a loan or provide a debt guarantee to its affiliate.
If a loan or guarantee by a utility to its affiliate creates a reasonable likelihood that the utility’s cost of capital, credit worthiness, or ability to provide regulated services will be adversely affected, the utility may not lend money or guarantee the debt of its affiliate.
A utility loan to its affiliate shall be:
From retained earnings; and
An arms-length transaction.
D. The interest rate for any utility loan under this regulation shall be the fair market interest rate at time of execution of the loan.
E. The assets included in the rate base of the utility may not be pledged to secure financing for an affiliate
F. Loan or Guarantee – Annual Report.
A utility shall file an annual report of all loans or guarantees to an affiliate for the period ending December 31 of each year by March 31 of the following year.
(a) The report required under § E(1) of this regulation shall contain the following minimum information for each loan or guarantee as applicable:
The dollar amount of any loan or guarantee;
The terms of loan payment;
Any call provision on the loan;
The name of the corporate record keeper;
Any credit agency analysis;
Any insurance cost; and
The default terms.
(b) A utility may be directed to file additional information by the Commission on any or all of the reported loans or guarantees.
.07 Asset Transactions Involving an Affiliate.
A utility may enter into an asset transfer or receipt transaction with its affiliate.
When a utility enters into a transaction involving the transfer or receipt of an asset with an affiliate, the utility shall record the transaction in its financial records based on asymmetric pricing.
.08 Cost Allocation Manual.
Exemption. This regulation does not apply to the following:
A cooperative utility; or
A utility with gross annual revenues of less than $20,000,000
B. General. The utility shall not subsidize the business activities of any affiliate with revenues from a regulated service.
(1) Costs related to shared services or corporate support services (such as, but not limited to, corporate support services, information technology, property, shared equipment) shall be fully allocated based upon cost incurrence or benefits derived. Costs should be directly assigned where possible.
(2) The utility shall file a summary of all affiliate transaction with the Commission on an annual basis and maintain its books and records in order to allow the PSC to perform audits where necessary.
C. Cost Allocation Manual
(1) A utility shall file a CAM with the Commission.
(2) The CAM shall contain:
The utility corporate organization;
The location of each corporate entity;
The officers of the utility and each of its affiliates;
An index of operational and managerial employee units of the utility and its affiliate;
An index of shared services;
The methodology and procedure used to allocate the cost of shared services, shared assets, shared employees, and asset transactions;
A complete description of all transactions and services shared with each of its affiliates;
(h) A complete description of all cash management transactions involving an affiliate loan, financial security, debt guarantee, or change in capital structure; and a description of employee transfers involving an affiliate.
(3) A utility shall file its first CAM ninety days after this regulation becomes final.
Chapter .03 Enforcement.
.01 Compliance, Dispute Resolution and Penalties
A. The Utility shall develop and file with the Commission a Code of Conduct consistent with these Regulations. The utility has an ongoing obligation to update and file amendments to the Code of Conduct whenever necessary or requested by the Commission. This filing shall include a list of all affiliates of the utility.
B. Compliance Audits: No later than one year after the implementation of these Regulations, and at least every three years thereafter, the utility shall have an audit prepared by an independent auditor that delineates, in detail, the extent of the utility's compliance with these Regulations. The results of the audit shall be filed with the Commission within one month of the audit's completion.
C. A utility shall establish and file with the Commission a complaint procedure for addressing alleged violations of this section. The complaint procedure shall contain a mechanism through which all complaints are submitted in writing to a designated officer of the utility who shall work, in good faith, to resolve the complaint promptly on an informal basis. This informal process shall not preclude the pursuit of any other remedy by any aggrieved party before the Commission or other tribunal.
D. A violation or series of violations of this section that materially impairs, or is reasonably likely to impair, the ability of a non-affiliated entity to compete in a competitive market shall be deemed an abuse of market power. Remedies imposed by the Commission may include, but shall not be limited to:
(1) an injunction or civil penalties to remedy the violation; and
(2) the suspension or revocation of the competitive affiliate's right to participate in the market.
E. This subtitle shall not limit the Commission, court or other tribunal in its assessment of any other penalty or remedy available pursuant to any other statute, order or regulation.