A delegation of small business groups testified before a New Jersey legislative committee that unfair competition from utilities is threatening to force them out of business.

The Small Business for Fair Competition (SBFC) — which includes members of the PHCC, the New Jersey State League of Master Plumbers, the South Jersey Mechan-ical Contractors Association, the Associated Builders and Contractors, the Fuel Merchant Association of America and the National Federation of Independent Businesses — testified before the Assembly Policy and Regulatory Oversight Committee that the legislation designed to stimulate competition among companies generating and transmitting electric power to New Jersey consumers permits large utility companies to funnel ratepayer funds into newly created service affiliates in order to drive out competition from independent contractors.

Frank Brill, executive director of the New Jersey Plumbing-Heating-Cooling-Contractors Association, told the committee that the coalition’s demand for divorcement of utility parents and subsidiaries is being required by a number of other states undergoings deregulation. He also noted that the Federal Trade Commission had recently endorsed the concept of affiliate divorcement as well as strict codes of conduct to regulate the relationships between utility parents and their service affiliates.

Brill pointed to an example in New York where a utility regulation commission last year ordered Con Edison and other major utilities to separate their service operations into separate businesses.

“It’s working in New York and it will work here as well,” he said.

The committees were urged to remove language from the current deregulation bill that “grandfathers” cross-subsidized activities that utilities are already undertaking.

The SBFC also recommended the legislative committee strengthen provisions that would eliminate those legal protections that currently prevent contractors from suing utilities or their subsidiaries for unfair competition.

In Arizona, a coalition for unfair utility competition scored a big victory when legislation was passed that denied utilities from sharing information with its service affiliates.

Utilities in Arizona must now have an annual independent audit to ensure compliance with the process and procedures established by the new law, including:

  • The utility needs to adapt a code of conduct to prevent anticompetitive activities that may result from it providing both competitive and noncompetitive services to retail electric customers.
  • The utility needs to prevent employees from providing noncompetitive services by directing its customers to its service affiliates.
  • The utility must set up a procedure to provide its customers with complete and accurate disclosure of which services are competitive and which are noncompetitive.
  • The utility must allocate costs between noncompetitive and competitive activities to avoid cross-subsidization. The Arizona Subcontractors Com-mittee expects more plumbing bills to pass in the early part of 1999.