Title: The Common Law "Duty To Serve" and Protection of Consumers in an Age of Competitive Retail Public Utility Restructuring
Abstract: Jim Rossi* Wires from 10-month-old Montray Cadet's chest lead to a machine that signals if his heart stops. The sick baby often is fed through a tube in his stomach. A hole in his trachea helps him breathe. Montray needs machines to survive, yet last month the power company turned off the electricity to the baby's Orlando apartment because his parents hadn't paid the bill for three months.l I. INTRODUCTION People like young Montray Cadet and his family will increasingly face the possibility of shut-off and limited access to utility services, such as telecommunications, natural gas, and electricity, as these industries-traditionally subject to obligations to serve customers-are deregulated. Already, the natural gas industry's introduction of retail competition in states like New York has been alleged to adversely affect the quality of and access to gas, essential to many New Yorkers for heating, and has led to the filing of a lawsuit against the state by consumer advocates.2 Can vigorous retail competition of the type utility deregulation envisions coexist with extraordinary obligations to serve customers? If so, at what costs? Who will bear these costs? These questions are central to an emerging law and economic analysis known as the jurisprudence of network industries,3 which is of paramount importance as regulators and courts implement competition in traditional utility industries. Yet, to date there has been little analysis of how customer service obligations in utility law will be affected at the dawn of the new competitive era brought about by deregulation. For hundreds of years, utilities have assumed obligations to extend service to customers within their service territories and to continue providing service once service has commenced.4 At common law and under statutes and regulations passed in the twentieth century by state and federal regulators, utilities are obligated-largely as conditions of their monopoly franchises-to provide service to all customers within their service territories, sometimes even when the cost of providing service to a customer is in excess of the anticipated revenue from that customer.5 Although ordinary private businesses may unilaterally refuse to deal with particular customers and set the terms and conditions under which they contract pursuant to antitrust laws,fi utilities are held to significantly more rigorous dealing requirements and service terms and conditions.7 Yet today, utilities' service obligations-which I will collectively refer to as the duty to serve-face their largest challenge ever. Competition has dawned on the electricity, natural gas and telecommunications industries. These industries were previously dominated by the staid public utility, a large vertically-integrated firm that provides service to all customers within its geographicallydefined service area. With the growth of competition, regulators and courts face new issues regarding the protection of consumers, particularly residential customers who historically have purchased their service at retail from the incumbent utility serving their community. Not surprisingly, one regulatory development that is especially threatening to small customers is the growth of retail competition-the introduction of a choice of supplier for all consumers of utility service. Some states will soon implement retail competition and others are considering it as a serious policy proposal for telephonic, natural gas, and electricity services, although none of these historically regulated utility industries has completely implemented retail competition. For example, the Telecommunications Act of 1996 endorsed several policies designed to promote retail competition in local telephony.8 In the natural gas industry, deregulated by the Federal Energy Regulatory Commission (FERC) in 1992,9 local gas distribution companies are already beginning to offer many customers retail choices in many states. …
Publication Year: 1998
Publication Date: 1998-10-01
Language: en
Type: article
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Cited By Count: 17
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