DOE Outlines 'Truth-in-Labeling' Plan

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The Energy Department recently reiterated its plans for a mandatory "truth-in-labeling" policy requiring all energy companies that sell electricity in a deregulated environment to include a uniform, easy-to-understand label on their direct mail pieces or promotional materials.


The label, which would appear on materials aimed at consumers and businesses, may include price, basic contract terms and the source of power. If the energy company is using telemarketing, it may have to follow up with a direct mail piece containing the information.


Many states currently have labeling requirements, and most eventually will require them, Dan Adamson, special assistant to Energy Secretary Bill Richardson, said last week so "it's probably better for the industry, including the direct mail industry, that there be one uniform label. This will make it a lot easier and more efficient to everybody -- marketers and consumers."


The model the Energy Department is considering is similar to "the kind of labeling that is on the FDA food and nutritional labeling system," he said. The goal is to make choosing electricity as simple as possible for consumers. In addition, the label will be particularly important to "green" power marketers, who sell electricity that comes from renewable power sources such as solar power, since it will "help consumers be sure that when they buy green power, that is what they are paying for."


Adamson's organization has researched the subject and found that "a simple label really appeals to consumers and makes them much more receptive to choosing their electricity supplier." However, it may take a while for the proposal to be approved.


"If this provision becomes law, we would have a rule-making process where we would take comments from all of the interested parties and consider them before we issued any labeling requirements," he said.


Wayne, PA-based Exelon Energy, an unregulated subsidiary of PECO Energy, explains the terms in its contract and gives prices for its electricity products and services in its direct mail pieces -- although labeling isn't a state requirement in Pennsylvania. However, the company doesn't explain the sources of its energy, and communications manager Dee Bliss said telling customers about the exact type of gas or electricity it sells may be difficult.


"As a competitive supplier, we can go out and buy electricity on the open market from a variety of electricity generators and, as a result, get the best deal for our customers," Bliss said. "But if you are varying who you are purchasing from, it's going to be hard to switch [your direct mail pieces] back and forth every time you need to communicate this new information to a customer."


Regardless, she said mandatory guidelines are important "because if some consumers are looking for a green product, they will be allowed to see if their energy is coming from this type of source."


The "truth-in-labeling" provision was part of a comprehensive electricity legislative proposal the Energy Department and the Clinton administration submitted to Congress this summer. Adamson also mentioned the proposal in a speech he gave to the Energy Council in Houston earlier this month. Adamson said his department will resubmit the plans to Congress in the next session, which begins in January.


Besides the labeling provisions, the agency also plans to:


* Have a deregulation policy in effect by Jan. 1, 2003, that would encourage -- not mandate -- electricity competition plans in all 50 states.


* Be sure that market monopoly issues remain in federal hands.


* Call for a reform of the Public Utilities Holding Companies Act and Public Utility Regulatory Polices Act. Adamson said these acts should be more forward-looking in tone and require that changes apply only to new situations and not retroactively.


According to Adamson, the Energy Department is planning to pursue electricity deregulation aggressively in the 1999 congressional session.
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