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AEP Retail Energy Offers to Use Disclaimer in Texas, But Main Problem Remains

November 11, 2011

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Copyright 2010-11 Energy Choice Matters

In direct testimony concerning its REP certificate amendment, AEP Texas Commercial & Industrial Retail Limited Partnership has offered to use a disclaimer in advertisements, on its website, and on business cards concerning its relationship to the AEP Texas distribution companies, but this would not resolve what Matters sees as the central issue in the case (39509).

As previously reported (9/12), AEP Texas Commercial & Industrial Retail Limited Partnership is seeking to expand its REP certificate to include service to customers under 1 MW, and to serve such mass market customers under the names AEP Texas Commercial & Industrial Retail Limited Partnership and AEP Retail Energy. AEP Texas Commercial & Industrial Retail Limited Partnership has withdrawn its request to use current trade name AEP Plus for mass market sales.

Although the case has generally centered on the use of the "AEP" name by a mass market REP (encompassing both the trade name AEP Retail Energy and certificated name AEP Texas Commercial & Industrial Retail Limited Partnership), Matters believes the more salient issue, with respect to the alleged customer confusion which has prompted hearings on the amendment, is the use of the combination of the terms "AEP" and "Texas" as "AEP Texas" in the certificated name AEP Texas Commercial & Industrial Retail Limited Partnership, and not simply the use of the term "AEP" alone as would occur under the trade name AEP Retail Energy.

Although it appears AEP Texas Commercial & Industrial Retail Limited Partnership would use the AEP Retail Energy trade name in marketing to and serving mass market customers, it must, by Substantive Rule, include its actual certificated name AEP Texas Commercial & Industrial Retail Limited Partnership in certain materials, including the Electricity Facts Label and Terms of Service.

In other words, even if marketed to by AEP Retail Energy, customers of the REP will see the REP also identified as AEP Texas Commercial & Industrial Retail Limited Partnership.

As AEP Retail Energy itself repeats at several points in testimony, the distribution companies, "AEP [Texas] Central and AEP [Texas] North are referred to together as 'AEP Texas.'"

Indeed, even the disclosure statement proposed by AEP Retail Energy would refer to the utilities as "AEP Texas."

Specifically, AEP Texas Commercial & Industrial Retail Limited Partnership offered to use the following disclosure statement on advertisements, on its website, and on business cards:

"AEP Retail Energy is not the same company as AEP Texas Central Company or AEP Texas North Company, which are sometimes referred to together as AEP Texas, and AEP Retail Energy is not regulated by the Public Utility Commission of Texas, and you do not have to buy AEP Retail Energy's products to continue to receive quality regulated services from AEP Texas Central Company, AEP Texas North Company, or AEP Texas."

Although the disclaimer clearly says AEP Retail Energy is not the same company as the utilities sometimes referred to together as AEP Texas, what are customers to conclude when they later see the REP's certificated name as, "AEP Texas Commercial & Industrial Retail Limited Partnership." Notably, as the disclaimer will be on advertisements, the website, and business cards, it does not appear a disclaimer would appear on certain materials, such as the Electricity Facts Label, where the certificated name AEP Texas Commercial & Industrial Retail Limited Partnership must appear.

AEP Texas Commercial & Industrial Retail Limited Partnership does not address the use of its certificated name in testimony, focusing solely on the use of the AEP Retail Energy trade name, and arguing that, especially in light of the proposed disclaimer, such use is not deceptive or misleading. No doubt much of this focus is because, in part, the case's preliminary order shares the same focus, though some intervenors did raise the certificated name issue apart from the trade name issue in prior briefs (though they did not zero-in on it as the heart of the matter).

With respect to AEP Retail Energy, AEP Texas Commercial & Industrial Retail Limited Partnership presented results of a survey conducted by the Guild Group.

On behalf of AEP Texas Commercial & Industrial Retail Limited Partnership, Will Guild, CEO of the Guild Group, said that the survey showed that use of the AEP Retail Energy name would not lead to customer confusion.

"In fact, it appears that most people interpret the name AEP Retail Energy as being a REP, even though they have no prior experience with, nor have they been exposed to any advertising for, AEP Retail Energy," Guild said.

Although Guild said that the survey showed that, "[t]here exists today a lack of complete understanding about the details of how the deregulated Texas electric market works," and that, "[t]his lack of understanding concerns the roles that various providers play in terms of being either a TDU or a REP," Guild testified that, "[r]espondents overwhelmingly identify AEP Retail Energy as a REP, not a TDU, even though they have no other knowledge about AEP Retail Energy."

Of the survey respondents in the AEP Texas utility service areas who claimed some familiarity with one of several companies addressed in the survey question, some 52% said that AEP Retail Energy is a retail electric provider, but some 32% said that AEP Retail Energy fulfilled a Transmission & Distribution role in the market.

Nonetheless, Guild noted that more than half correctly identified the role of AEP Retail Energy, which occurred without any real knowledge of the company since it does not currently operate in Texas. "Under those conditions in which AEP Retail Energy actually entered the market place, we would expect it to advertise its services, which would further drive perceptions of the firm as a REP," Guild's report concludes.

Guild also said that, "Ninety percent of the people surveyed indicated that they would expect no better reliability if they selected AEP Retail Energy as their REP."

The survey included 223 phone surveys and 225 internet panels, with two-thirds of respondents residing in the AEP Texas utility service areas.

Additionally, as it had done in briefs, AEP Texas Commercial & Industrial Retail Limited Partnership noted the prior use of the name TXU by a REP, TXU Energy, and TDU, TXU Electric Delivery. While Matters believes that this is analogous with respect to AEP Retail Energy, Matters believe that the use of "AEP Texas" in the certificated REP name, which is the entirety of the TDU's commonly used trade name, makes the situation unique and not on point to the TXU experience. Although certainly TXU Electric Delivery was colloquially known in most quarters as simply TXU, Matters believes (it has been four years so we could be mistaken) that in TXU Electric Delivery's own materials it was always clear to identify itself as TXU Electric Delivery.

In contrast, AEP Texas Central and AEP Texas North identify themselves primarily, on their website and in news releases, as simply and only "AEP Texas" (see recent example). Therefore, Matters thinks this would be analogous to if TXU Energy ever applied to use the certificated name "TXU Electric Delivery Retail Energy" to market competitive electric service, which obviously did not occur.

Moreover, Guild's survey shows that 19% of respondents in the AEP Texas utility service areas said that "AEP Texas" owned and maintained the poles and wires, while only 1% said AEP Texas North and 3% said AEP Texas Central. Additionally, of those customers expressing familiarity with various companies, Guild's survey found that two-thirds of such respondents identified "AEP Texas" as a TDU company.

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