EVERYONE'S GOT AN OPINION ABOUT MARKETING affiliates. In the natural gas industry, a fierce debate has emerged, as rules are proposed to govern the relationship between utility and affiliate.
Affiliate transactions are already among the most regulated activities in the gas industry. According to the 1995-96 Compilation of Utility Regulatory Policy produced by the National Association of Regulatory Utility Commissioners, every state, except Nebraska, has jurisdiction over affiliate transactions involving a private- or investor-owned gas utility. Moreover, every state prescribes special accounting and reporting requirements for utility transactions with affiliates. Some states, such as Virginia and Pennsylvania, require specific state approval of transactions between a utility and its affiliates. In addition to this state regulation, certain affiliate transactions are subject to regulation by the Federal Energy Regulatory Commission. Registered holding companies also must deal with the Securities and Exchange Commission.
Retail competition has sparked a new regulatory wave. In the last 18 months, 17 states have adopted or are considering adopting new standards to govern transactions between a utility and its marketing affiliate. And it appears that this new wave has not yet crested - indications are that other states will join this effort over the next several months.
Companies that compete against the marketing affiliates of utilities are among the leading advocates of these codes of conduct. It is therefore not surprising that many of the provisions that are being proposed for such codes have more to do with protecting these companies from undesired competitors than with promoting the development of true retail competition in the gas industry.