Canadians Want Increased Consumer Protection For Internet Services

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MEDIA RELEASE
A new study released today by the Public Interest Advocacy Centre (PIAC) highlights problems with consumer protection for customers of internet services. According to Michael Janigan, PIAC Executive Director and General Counsel, “Canadian internet customers are not being well served by the current hands-off approach to regulation of the Internet”. Janigan also noted “Our survey found that almost two thirds of consumers think that the government should develop and enforce consumer protection rules. In particular, sixty-two percent of customers thought it was very important for the government to develop rules with respect to quality of service.”
PIAC’s study, conducted with the financial assistance of Industry Canada, reviewed the current mechanisms for self regulation and the handling of customer complaints and found them wanting. Currently consumer problems such as spam, service outages and delays, and billing complaints are handled by individual internet service providers (ISPs) in ways which are frequently not transparent or standardized. ISP practices may create an imbalance in service arrangements to the customer’s disadvantage. The PIAC report also warns that the high level of concentration in the high speed Internet market, dominated by two suppliers cable and local telephone companies, bodes ill for future internet consumer welfare.
The report recommends action first by the ISPs themselves to more effectively deal with consumer problems by implementing more effective self regulation through a number of models currently available. Failing such initiative, the report finds public support for appropriate regulatory intervention.
For more information please contact:
Michael Janigan
Executive Director/General Counsel
Public Interest Advocacy Centre (PIAC)
(613) 562-4002 ext. 26
mjanigan@piac.ca
You may download this publication free of charge from our web-site or if you prefer a hard copy please contact our office at (613) 562-4002 or at piac@piac.ca we will send you a copy for a charge of $10.00 plus postage which will cover our publication costs.

Modem Hijacking: The CRTC Must Act

MODEM HIJACKING: THE CRTC MUST ACT
Contact: John Lawford, PIAC
(613) 562-4002×25
jlawford@piac.ca
MONTREAL and Ottawa, July 7, 2004: Three major consumer groups today filed an application demanding the Canadian Radio-television and Telecommunications Commission (CRTC) take action to stem the tide of “modem hijackings”, an internet scam costing consumers thousands of dollars in overseas long-distance charges and billable 900/976 calls.
Option consommateurs, l’Union des consommateurs and the Public Interest Advocacy Centre (PIAC) are raising the alarm. The problem of “dialler” programs has reached epidemic proportions in Canada this spring and regulators can no longer bury their heads in the sand.
The consumer groups are demanding that the CRTC, the phone companies and Internet experts sit down at the table and find a real solution to this costly problem as soon as possible.
“Diallers” are computer programs that surreptitiously self-install when consumers visit certain websites or receive certain e-mail attachments. Once installed, these programs “hijack” the modem by redirecting the user’s Internet dial-up connection via grossly expensive overseas calls or through 900 or 976 numbers.
Thus in recent months, several thousand Canadian consumers have, to their surprise and horror, received phone bills for calls to such far-flung destinations as Sao Tome, Nauru, Guyana or Guinea-Bissau. Calls they have not knowingly made – and some bills for more than $2000!
PUBLIC INTEREST ADVOCACY CENTRE
LE CENTRE POUR LA DEFENSE DE L’INTERET PUBLIC
ONE Nicholas Street, Suite 1204, Ottawa, Ontario, Canada K1N 7B7
Tel: (613) 562-4002. Fax: (613) 562-0007. e-mail: piac@piac.ca. http://www.piac.ca
In today’s press conference, the consumer groups will underline that solutions such as blocking or filtering outgoing calls already exist and that the phone companies have an obligation to assist customers now in avoiding these charges.
The consumer groups will also demand that the phone companies agree to cancel overseas telephone charges for these “wrong numbers”, as they do already with unrecognised 900 or 976 calls.
“Quite apart from the question of ultimate legal responsibility, it remains a fact that neither the consumer, nor the phone company, feel responsible for these charges,” noted Jannick Desforges of Option consommateurs. “Considering that the phone companies may no longer cut off local phone service simply due to unpaid long-distance charges, we find ourselves in an absurd situation where the phone companies must sue their customers in court for these charges or sell them to a debt-collection agency. Is that any way to treat your customers?”
“This problem has been known for at least two years” adds Charles Tanguay of l’Union des consommateurs. “The phone companies are guilty of neglecting to address a scam they know about. Who are these people in Sao Tome or Nauru that Bell and the other phone companies are collecting phone charges for?”
The consumer groups will remind victims that the CRTC has already ruled that they are entitled to have 900 and 976 call charges removed when these numbers appear on a phone bill for the first time. They will demand that the same policy be extended to long-distance charges resulting from modem hijacking.
The consumer groups will also remind customers that, due to another recent CRTC decision, the phone companies can no longer cut off local phone service, nor threaten to do so, as long as customers continue to pay the local service charges portion of their phone bill.
Finally, both PIAC and l’Union des consommateurs have posted public information pages on how to avoid modem hijacking and how to remove this nefarious software:
L’Union des consommateurs modem hijacking information page: http://www.consommateur.qc.ca/union (in French)
For more information: Charles Tanguay, Communications Officer
Union des consommateurs (514) 521-6820
Jannick Desforges, Counsel
Option Consommateurs (514) 598-7288
John Lawford, Barrister & Solicitor, Research Analyst
Public Interest Advocacy Centre (613) 562-4002×25
See our webpage on how to avoid modem hijacking[pdf file: 0.13mb]

PIAC and Telephone Companies Work to Ensure Consumers are Aware of Toll Rates

PIAC AND TELEPHONE COMPANIES WORK TO ENSURE CONSUMERS ARE AWARE OF BASIC TOLL RATES FOR LONG-DISTANCE

Contact: John Lawford, PIAC
(613) 562-4002×25
jlawford@piac.ca
The Public Interest Advocacy Centre (“PIAC”) and Aliant Telecom Inc., Bell Canada, MTS Allstream Inc., Saskatchewan Telecommunications and TELUS Communications Inc. (the “phone companies”) have agreed to work towards increased visibility of basic toll rates for consumers who make infrequent long-distance telephone calls.
Consumers pay basic toll rates for long-distance calls when they are not subscribed to a phone company long-distance plan. Basic toll rates are “pay-as-you-go” rates that vary depending upon the distance called and the time of day. There is no monthly fee to use basic toll services and they are regulated by the CRTC. For some low-volume long-distance consumers, basic toll rates may be more advantageous than phone company long-distance plans.
In Telecom Decision 97-19, Forbearance – Regulation of Toll Services Provided by Incumbent Telephone Companies (18 December 1997), the Canadian Radio-television and Telecommunications Commission (“CRTC”) conditionally forbore from the regulation of long-distance services. Among the conditions were ceilings on basic toll rates and a requirement that basic toll rates be made “publicly available”.
PUBLIC INTEREST ADVOCACY CENTRE
LE CENTRE POUR LA DEFENSE DE L’INTERET PUBLIC
ONE Nicholas Street, Suite 1204, Ottawa, Ontario, Canada K1N 7B7
Tel: (613) 562-4002. Fax: (613) 562-0007. e-mail: piac@piac.ca. http://www.piac.ca
In 2002, PIAC brought an application to the CRTC to seek direction on how and where basic toll rates should be disclosed to consumers. On June 25, 2004, PIAC and the phone companies settled the CRTC proceeding and PIAC has withdrawn its application.
PIAC and the phone companies agreed that consumers will be best informed about basic toll rates by:

Publishing all basic toll rate schedules on phone company public websites;
Making sure that basic toll rates are clearly presented alongside long-distance plans on websites and in phone company mailings;
Publishing basic toll rate information in the introductory white pages of the phone directory;
Ensuring that phone company customer service representatives provide basic toll rate information to consumers who request it, free of charge.

PIAC and the phone companies also have committed to continue to consult on the basic toll rate information that will be provided to consumers in the future.

CRTC Tells Canada’s Telephone Companies To Stop Disconnecting Paying Customers

The Public Interest Advocacy Centre (PIAC) today welcomed a decision by the Canadian Radio-Television Telecommunications Commission ordering incumbent local telephone companies to halt the practice of disconnecting customers from their local telephone service when the customers do not pay their total bill for all telephone services received. In the past, for example, a customer of Bell Canada obtaining both long distance and local service from Bell Canada could have been disconnected from local service if the total telephone bill for both local and long distance service was not paid. Now, customers can maintain their local telephone service, even if their toll (long distance) service is discontinued, if they pay enough to cover the cost of the local service. In a decision released yesterday by the CRTC (CRTC 2004-31), the Commission ruled that local telephone companies, which include such companies as Bell Canada, Telus, Aliant, MTS, NWTel and SaskTel, cannot disconnect or threaten to disconnect for non payment when the customer has made sufficient partial payment to cover the outstanding arrears from the local telephone charge portion of the bill.
PIAC brought the matter before the Commission and filed written argument on behalf of several Canadian consumer and anti-poverty groups. Michael Janigan, Executive Director and General Counsel of PIAC noted:
Sometimes a family member or friend runs up charges for long distance or other non-essential telephone services that threaten the ability of the family to keep its local telephone service. This decision does not wipe out that debt but simply prevents such an occurrence from potentially cutting off families from telephone service.
Janigan added that it makes no sense, now that telephone services have been unbundled, to allow disconnection of one service for failure to pay on another.
The CRTC decision comes two years after PIAC raised the initial complaint with the Commission in a CRTC committee in April 2002.
For further information contact
Michael Janigan (613)-562-4002 ext. 26
Executive Director/General Counsel (613)-562-0007 fax
mjanigan@piac.ca

Text of Press Conference

PRESS CONFERENCE
Date: Monday, 8 December 2003
Place: Option consommateurs – 2120, rue Sherbrooke Est, bureau 604,
Montreal, Quebec
Time: 10:30 a.m.
Subject: Airline Advertising – Don’t Believe Everything You Read
Every day, in newspapers across the country, airlines advertise flights at attractive and competitive prices. And every day, when consumers actually buy these tickets, they are surprised to discover the hidden fees that raise the price up to 79%!
During this press conference, Option consommateurs, in conjunction with the Public Interest Advocacy Centre, will explain why this state of affairs is illegal, make recommendations to airlines and the government and invite ordinary consumers to complain. The Air Travel Complaints Commissioner, Ms. Liette Lacroix Kenniff, will also be present.
For more information: Option consommateurs: Louise Rozon, Stéphanie Poulin and Marie-Hélène Beaulieu, (514) 598-7288
TEXT OF PRESS CONFERENCE
Monday 8 December 2003 at 10:30 a.m.
Airline Advertising – Don’t Believe Everything You Read
When you see a service advertised at a given price, you expect to pay that price. But not for flights. Surprised?
Every day, in newspapers across the country, airlines advertise flights at highly competitive prices. In the past several weeks, we have seen ads announcing, for example, flights from Montréal to Vancouver for $174 (Westjet), to Toronto for $89 (Jetsgo), and to Halifax for $64 (Canjet).
These rates are attractive – but far from the truth.
In the first place, the advertised price is for a one-way ticket – which you rarely need, especially for longer trips.
Secondly, the advertised price is for the ticket only. You’ll have to add the fees – that airlines in their ads call “surcharges”. These include Nav Canada fees, airport improvement charges, fuel fees, insurance and air security charges.
Finally, you also have to add taxes (G.S.T. or H.S.T. and possibly sales tax depending on the province).
The ads say “taxes and surcharges extra”. But this is in the (very) fine print tucked away at the bottom of the ad. And the total of these fees and taxes is never stated. Often, however, their cost is very high indeed.
For example, on a Montreal to Vancouver ticket advertised by Westjet at $174, you must add $61.54 in extra charges, which equals 35.5% of the ticket price; on a Jetsgo Montreal-Toronto flight advertised at $89, add $48.55 of charges, which is 54% of the ticket price, and on the Montreal-Halifax ticket advertised by Canjet, add $50.54, which is 79% of the ticket price. Quebec sales tax extra.
When you buy a ticket to a U.S. destination, things are even worse. You must add fees demanded by the Americans. While researching this issue, we found an ad announcing tickets at $99 for West Palm Beach (from Montreal). Once the extra charges were added, the West Palm Beach ticket didn’t cost $99, but instead $196.64 (G.S.T. extra), an increase of 98.5%. Another ad offered tickets for Orlando at $99. Since the extra charges were $103.10, the final cost of the ticket was $202.10 (G.S.T. extra), in other words an increase of 104%.
Stéphanie Poulin, a lawyer with Option consommateurs, will now show you several examples of the ads and explain the added charges.
[Examples to be shown at press conference.]
Faced with such an intolerable situation, many consumers have been complaining. Ms. Liette Lacroix Kenniff, Air Travel Complaints Commissioner, will now explain her role, and talk about the complaints she has received, and the recommendations she has made.
There is no specific law governing airline travel advertising. However, the federal Competition Act applies to all advertising. In Option consommateurs and PIAC’s opinion, under s. 74.01 of the Competition Act, the ads we have reproduced are misleading advertising. Simply put, the advertised price does not reflect what the consumer pays. The added charges are indeed mentioned, but only in miniscule print, and the total of the fees is never revealed. Very often, in fact, this “fine print” at the bottom of the ads is virtually illegible – you only have to take a glance at any of the ads in papers at the newsstand to be convinced.

OUR RECOMMENDATIONS

Option consommateurs and the Public Interest Advocacy Centre demand that airlines’ advertising clearly indicate the entire price the consumer must pay, including all fees and charges. Taxes may be stated as payable in addition to this total if it is clear to consumers which taxes are applicable and the tax rate.
Option consommateurs and the Public Interest Advocacy Centre recommend that the Minister of Transport place strict controls on airline advertising and ensure that these rules are enforced.
Option consommateurs and the Public Interest Advocacy Centre invite consumers who feel they have been misled by these ads to complain to the airline that sold them the tickets, to the Air Travel Complaints Commissioner, as well as to the Competition Bureau.
To assist consumers in filing a complaint, Option consommateurs and the Public Interest Advocacy Centre have provided form letters on their respective websites at www.option-consommateurs.org and www.piac.ca. Option consommateurs and the Public Interest Advocacy Centre will ensure they are delivered to the appropriate parties.
The Public Interest Advocacy Centre (PIAC) is a non-profit corporation that provides legal services and research to vulnerable consumers and the organizations that represent them. PIAC’s main areas of advocacy are in the areas of telecommunications, broadcasting, financial services, energy, e-commerce and privacy.
Transport 2000© Canada is a non-profit organization whose primary purpose is research, public education and consumer advocacy. It promotes environmentally-sound transportation solutions and gets actively involved in a wide range of issues such as: public transportation, safety, accessibility, energy efficiency, protection of the environment, intermodal cooperation and government regulation.

PIAC and Option consommateurs call for end to misleading airline advertising.

EMBARGOED to Monday 8 December 2003 at 10:30 a.m.
MEDIA RELEASE
MISLEADING AIRLINE ADVERTISING
Contact: John Lawford, PIAC
(613) 562-4002×25
jlawford@piac.ca
OTTAWA, December 8, 2003: The Public Interest Advocacy Centre, supported by Transport 2000 Canada, today joined in a call by Option consommateurs for better consumer protection in relation to airline advertising. Option consommateurs is holding a press conference on the issue at their Montreal headquarters today at 10:30 a.m. The text of this press conference, translated from the French by PIAC, will be provided after the press conference. PIAC is available to answer any questions from the press regarding the press conference or this media release.
PRESS CONFERENCE
Date: Monday, 8 December 2003
Time: 10:30 a.m.
Subject: Airline Advertising – Don’t Believe Everything You Read
Every day, in newspapers across the country, airlines advertise flights at attractive and competitive prices. And every day, when consumers actually buy these tickets, they are surprised to discover the hidden fees that raise the price by up to 79%!
During this press conference, Option consommateurs, in conjunction with the Public Interest Advocacy Centre, will explain why this state of affairs is illegal, make recommendations to airlines and the government and invite ordinary consumers to complain. The Air Travel Complaints Commissioner, Ms. Liette Lacroix Kenniff, will also be present.
For more information: Option consommateurs: Louise Rozon, Stéphanie Poulin and Marie-Hélène Beaulieu, (514) 598-7288 Public Interest Advocacy Centre: John Lawford (613) 562-4002×25 Transport 2000 Canada: John Pearce (902) 469-3474, Ottawa office: 594-3290

PIAC Releases Report on Identity Theft

Contact: John Lawford, PIAC
(613) 562-4002×25
jlawford@piac.ca
The Public Interest Advocacy Centre today released its report “Identity Theft: The Need for Better Consumer Protection”.
PIAC’s report is Canada’s first clear look at a growing menace to consumers: the theft of their personal identity. Identity theft is Canada’s fastest growing crime and a personal nightmare for thousands of Canadians. Many cases of ID theft cannot be prevented – even by the most careful consumers – due to causes outlined in the report, including:

pre-approved credit offers and credit card “cheques”;
easy credit;
electronic access to personal information;
sloppy government and business information practices;
lack of consumer control of their credit bureau files;
abuse of Social Insurance Numbers, drivers’ licence numbers, etc.;
weak ID theft laws and uncoordinated law enforcement;
inadequate protection by privacy laws.The report also rejects the notion that a National ID Card, with or withoutbiometric support, would have any appreciable effect upon these crimes.The report calls on consumers, business, government and law enforcement to work together on measures designed to prevent, detect and recover from ID theft such as: criminalizing simple possession of multiple identity documents; better disclosure by financial institutions to consumers of risks inherent in electronic banking; limiting victim financial losses; and assisting and protecting victims while they struggle to rehabilitate their personal credit.The report “Identity Theft: The Need for Better Consumer Protection” fills a serious information gap in our present understanding of this overlooked threat to Canadian consumers. PIAC hopes the report will be widely consulted by governments, businesses, credit issuers and consumers. The complete report is available, free of charge, on PIAC’s website at: http:www.piac.ca/IDTHEFT.pdfThe Public Interest Advocacy Centre (PIAC) is a non-profit corporation that provides legal services and research to vulnerable consumers and the organizations that represent them. PIAC’s main areas of advocacy are in the areas of telecommunications, broadcasting, financial services, energy, e-commerce and privacy.
h3. LE CENTRE POUR LA DÉFENSE DE L’INTÉRÊT PUBLIC (PIAC) PUBLIE UN RAPPORT SUR LE VOL D’IDENTITÉ
Personne-ressource : John Lawford, PIAC
(613) 562-4002 poste 25
jlawford@piac.ca
OTTAWA, le 5 novembre 2003 : Le Centre pour la défense de l’intérêt public publie aujourd’hui son rapport sur le vol d’identité intitulé « Identity Theft: The Need for Better Consumer Protection ».
Le rapport du Centre pour la défense de l’intérêt public est le premier document canadien qui étudie de manière claire cette menace croissante qui affecte les consommateurs : le vol d’identité. Le vol d’identité est le crime qui se répand le plus rapidement au Canada et représente un cauchemar pour des milliers de Canadiens. Bon nombre de vols d’identité ne peuvent être évités – même par les consommateurs les plus avertis – étant donné les raisons mentionnées dans le rapport, dont :

Les offres de crédit pré-approuvé et les chèques de « dépannage »;
Le crédit facile;
L’accès électronique aux renseignements personnels;
Les pratiques laxistes appliquées par le gouvernement et les entreprises en matière d’informations;
L’impossibilité pour les consommateurs d’exercer un contrôle sur les fichiers des agences d’évaluation du crédit;
L’abus des numéros d’assurance sociale, des permis de conduire, etc.;
Les règlements complaisants en matière de vol d’identité et la mise en application incohérente de la loi;
La protection insuffisante qu’offre le droit sur la protection des renseignements personnels.Le rapport rejette également l’idée qu’une carte d’identité nationale, qu’elle soit accompagnée de mesures biométriques ou non, pourrait avoir des résultats conséquents sur ces crimes.Le rapport encourage les consommateurs, les professionnels, le gouvernement et les forces de police à travailler ensemble sur l’élaboration de mesures conçues pour empêcher et détecter le vol d’identité et en obtenir des dommages-intérêts. Les mesures suivantes y sont détaillées : criminaliser la simple possession de pièces d’identité multiples; inciter les établissements financiers à mieux communiquer avec leurs clients quant aux risques associés aux transactions bancaires électroniques; limiter les pertes financières pour les victimes ; assister et protéger les victimes lors de la réhabilitation de leur crédit personnel.Le rapport « Identity Theft: The Need for Better Consumer Protection » répond à de nombreuses questions et complète nos connaissances actuelles sur ce crime souvent ignoré qui menace les consommateurs canadiens. Le Centre pour la défense de l’intérêt public espère que ce rapport sera largement consulté par les gouvernements, les professionnels, les responsables des prêts et les consommateurs. Le rapport est mis à la disposition du public, dans son intégralité et sans frais, sur le site Web du Centre pour la défense de l’intérêt public : http://www.piac.ca/IDTHEFT.pdf. Le rapport est rédigé en anglais.
Le Centre pour la défense de l’intérêt public est une société à but non lucratif qui offre des services juridiques et de recherche aux consommateurs vulnérables ainsi qu’aux organismes qui les représentent. Ce travail concerne principalement des questions liées aux télécommunications, à la radiodiffusion, aux services financiers, à l’énergie, au commerce électronique et au respect de la vie privée.

CRTC Proceeding on Telecom Consumer Bill of Rights

Consumer Groups applaud CRTC initiative to develop Consumer Bill of Rights

The CRTC today initiated a public process to develop a bill of rights for retail telecommunications customers, noting that much of this information is currently either hard to find or difficult to understand.
The “Consumer Bill of Rights” would be a list of clear and concise statements of existing telecommunications consumer rights, written in plain language. The Commission is requesting public input on which rights to include, how to communicate the Bill of Rights to consumers, and how to amend the Bill of Rights in the future.
“We’ve been calling for a Canadian Telecom Consumer Bill of Rights for some time now”, said Philippa Lawson, Counsel for the Public Interest Advocacy Centre, who represents a number of consumer groups in matters before the CRTC. “We are finding that telephone companies often take advantage of consumers’ lack of awareness of their rights, whether about security deposits, right to refunds, the availability of local-only service, or other issues. When consumers aren’t aware of their rights, they tend not to pursue them.”
Other jurisdictions, such as England and some American States, have developed telecom consumer rights documents, intended to educate and empower consumers in the increasingly competitive marketplace. It’s time that Canada does likewise, says Ms. Lawson.
The Bill of Rights will apply only to local telecommunications services offered on a retail basis by Aliant Telecom, Bell Canada, MTS, SaskTel, Telebec, and TELUS. “We hope that this will set a precedent for other phone companies to follow, whether in the local, long distance, or wireless markets”, said Ms. Lawson.
CONTACT:
Philippa Lawson, PIAC tel: 613-562-4002 x.24
Link to CRTC Public Notice
Link to CRTC website with other submissions

Ontario Electricity Restructuring

Ontario Electricity Restructuring- A Funny Thing happened On the Way to Utopia.

For the past eight years, PIAC has been involved as a participant and critic of the process of electricity restructuring in Ontario. Our participation included representation of a coalition of small volume residential consumers, the Vulnerable Energy Consumers Coalition (VECC) in proceedings before the Ontario Energy Board, as well as submissions to various parliamentary committees and deliberative bodies and research and advocacy concerning the impacts of proposed reforms.
From the start, the Ontario process seemed to be driven more by assumptions and opinion than by reality and common sense. There was considerable policy pressure for a new way of doing things. In 1995, the new provincial Progressive Conservative government was confronted by the task of dealing with a vertically integrated electricity monopoly, which had accumulated considerable debt arising from questionable nuclear plant development. This was in addition to patterns of excessive maintenance and operating costs possibly arising from years of ineffective operational scrutiny. Ontario Hydro was not subject to the control of the Ontario Energy Board (OEB), the independent regulatory authority, and was pretty much at liberty to disregard the OEB whenever it made findings on different aspects of Ontario Hydro’s generation and transmission policies and rates referred to it by the Minister.
The MacDonald Commission, appointed by the new government in 1995 to study competition in Ontario’s electricity system, released its report in May 1996. The report gave the government confidence it could fundamentally change the system of monopoly generation and transmission such that electricity could be supplied more efficiently to all customers in a competitive framework, and it could recover Hydro’s stranded debts for generation assets no longer useful (write-offs in 1997 totaled over 7 billion and most expected that sum would double, if not triple). The Commission’s base case assumptions about a competitive electricity market assured the government that it could lower wholesale electricity prices, eliminate the stranded debt and get revenue equivalent to tax from the new entities. This would be done through a strategy that unbundled Ontario Hydro’s functional components and introduced competition into the generation market through open access and partial privatization.
The next year, the government released a white paper that confirmed the government’s intention to open up Ontario’s electricity market to subject Ontario Hydro to the “discipline of the marketplace”. The White Paper of 1997 proposed the dismantling of Ontario Hydro into generation and transmission companies. It also set out that the monopoly elements of the electricity system in transmission and distribution would be regulated by the OEB with an opportunity for local distribution companies to earn a market-based rate of return. Creating a competitive supply market would encourage private investment in generation. An Independent Market Operator (IMO) would attend to the safety and security matters of electricity exchange and to dispatch power.
The Energy Competition Act, enacted late in 1998, put in place the necessary statutory reforms to administer the new regime. A Market Design Committee, reporting in 1999, gave detailed recommendations setting out requirements for market participants, appropriate accounting and governance procedures for the IMO as well as potential market power mitigation. The OEB, in turn, developed processes and procedures to regulate, for the first time, the transmission and distribution monopoly elements for the new entity. The OEB also devised rules for the licensing of participating retail marketers and the system policies associated with the maintenance of the default supply of electricity. Distribution and transmission rates were set in accordance with standard regulatory practice. Finally, Ontario Power Generation (OPG), the new generation company of the old Ontario Hydro, was made subject to a market power minimization agreement that mandated the devolution of 65% of its generation assets to private sources over a ten-year period. OPG would also have to rebate to customers revenue from prices in excess of 3.8cents per kilowatt-hour.
When the market for electricity trading finally opened (after several delays) in May 2002, the government believed that the design of the market would cause the price offered by the generational components of the system (OPG and private power) to be responsive to the demands of customers. The demands of end-users would, in turn, be shaped by the resourcefulness of the retailers in offering choice in terms of both product and commodity price. High demand would spur entry into the generation sector by private investors. Higher prices, brought about by such periods of high demand, would provoke price responsiveness by end-users and cause a lessening of demand and a reduction in price.
That was the theory. It wasn’t really a plan of deregulation, since its operation required much more regulation than before. The privatization of generation assets was intended to prevent OPG from using its market dominance to eliminate competition. Local municipal distribution companies and the distribution arm of Hydro ONE were now given an opportunity to earn three or four times what they previously earned under the old regime. Significant costs were incurred to establish and to operate the new regime. New charges, such as that to pay off Hydro debt, appeared on customer bills. The extension of competition to retailing meant a proliferation of questionable and outright fraudulent marketing practices that misrepresented both prices and processes to irritated residential consumers. Sleepy follow-up by the government and regulators made problems worse.
But the coup de grace for the plan was the emergence of evidence that there were shortages of supply. The IMO’s Market Surveillance Report of October 2002 concluded:
“There is a serious shortage of generation capacity to meet Ontario’s growing demand for electricity. If steps are not taken to address this situation, Ontario could face even more serious reliability problems next summer, leading to the possibility of supply interruptions and continued upward pressure on prices during periods of peak demand.”
By the time of its November 11 announcement, the government was facing a triple whammy:

The commodity price of electricity had already trended over 20% higher than expected from the date of the market opening. Scarcity of supply in the absence of lessening demand was possible with a likely result of further escalating prices. Generation competition was not on the immediate horizon. The further devolution of OPG assets might merely create more market dominant players rather than more competition. Electricity is not a commodity that can be stored, so all suppliers in a scarcity market are, potentially, high price-setters.
Higher electricity bills with new itemized charges were enraging consumers. Provincial government MPPs were, in turn, incensed that the blame for increases in the municipal distribution charge was falling on them.
Ten years of rate freezes with no new generation being developed was coming home to roost. OPG’s bedraggled nuclear program could not bring refurbished generation on line in accordance with its previous projections, creating the likelihood of the “perfect storm” for government political fortunes.

The public reaction to these events was, in no small measure, ignited by the government’s own overly-rosy predictions of the benefits of competition, which were likely due in part to the government’s reliance on the views of private industry proponents who had something to gain from restructuring. As well, there seemed to be a built-in mindset that somehow the infusion of entrepreneurial ambition into the operation of the electricity system would bring certain benefits for everyone. The sad sack nuclear program of Ontario Hydro certainly gave credence to the view that a dramatic change was needed. The fact that the price of electricity was almost 40% higher in the states that border on Ontario was no check on the dreams of competition theorists and would-be utility saviours.
The current government’s solution is a little like putting a finger in a hole in the dike. Obviously, if demand does not abate and/or new supply is not developed, the taxpayer is going to be heavily subsidizing electricity ratepayers. The government must act swiftly to develop new supply and to closely monitor the electricity spot market to prevent California-style generator profiteering, now that there is a disconnect between supply and demand. Long-overdue requirements for a certain percentage of renewable energy in any distribution customer’s package would greatly assist alternative energy producers. Cost- effective savings mechanisms for consumers are needed. These include the wider application of interval meters to reward customers for adjusting their electricity use so as to reduce peak demand. While it is remarkable that the elaborate electricity restructuring plan should be jettisoned so quickly, it is not the time to re-fight old battles. Ontario’s electricity customers want understandable measures and results, however they are to be delivered.

Telco “Discount” toll plans no discount for many consumers

Telco “discount” toll plans no discount for many consumers

Ottawa – Subscribers of Bell Canada’s First Rate long distance plans are in for another surprise: the so-called monthly “Network Charge” that Bell began to charge last year will increase from $1.25 to $2.95 – a whopping 136% – on December 14th.
“This is one more example of the phone company gouging consumers through fees that are not part of advertised rates”, said Philippa Lawson, Senior Counsel at the Public Interest Advocacy Centre. Rates under so-called “discount” toll plans offered by phone companies are no longer regulated, so companies can charge what they like. Bell customers who choose to pay regular toll rates (i.e., those that apply if you are not on a plan), however, are exempt from the charge.
Last fall, Bell introduced a $1.25 “Network Charge” on all of its “discount” toll plans. In the spring, the Company started applying a minimum monthly charge of $4.95 on its popular First Rate plan, a move caught the ire of many of its customers, especially those who did not make enough use of long distance to warrant the minimum $6.20 bill.
According to Bell’s own data, 25% of its customers make less than 7½ minutes of toll calling per month, and 50% make less than 43 minutes per month. Hence, a significant proportion of Bell customers will actually be worse off under its heavy promoted “discount” plans – plans that used to be free of any monthly charges.
Now, Bell is increasing the unregulated “Network Charge” by another $1.70, meaning that even more of its customers will be better off on regular toll rates. Yet, the company continues to promote its “discount” toll plans as the best deal for consumers, says Ms. Lawson. “Our research shows that the Company is directing customers to discount toll plans even when the customer would be better off under basic rates”, she said.
Many people signed up to the First Rate plan when it was totally free of charge, and only noticed the changes after they received a higher-than-normal bill. “Bell is changing the deal midstream, without the customers’ agreement”, said Lawson. “This is fundamentally unjust; they are effectively terminating the original deal and replacing it with a new one that is to the detriment of many customers,” she said. “Such changes should not be allowed without clear, informed customer consent. A bill insert does not constitute consent, in my view.”
With a minimum monthly charge of $7.90 for Bell’s First Rate plan, Lawson estimates that most Bell subscribers may now be better off under regular toll rates, given their relatively low usage of toll service.
Her advice for consumers: “Watch out! Phone companies are slipping in charges wherever they can, without having to change their advertised rates. The heavily promoted discount plans may be less economic than they first appear.”
CONTACT: Philippa Lawson, 613-562-4002 x.24
Nathalie St. Pierre, Consumers Union (Quebec) 514-521-6820