1. Affiliate Rules/Code of Conduct
Presented by
Kent Foster
December 14, 1999
HTM-L-04
EGSI BSP Filing
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2. What you need to know:
Competition requires Entergy to have new affiliate rules and code of conduct in some jurisdictions
We will separate our business into business functions, including a competitive affiliate on the retail side to compete for the business of our current customers as well as others
The new affiliate rules/code of conduct will restrict the way we interact with each other and our new competitive affiliates
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3. Affiliate Rules/Code of Conduct
Purpose
Texas
Arkansas
FERC
Recap
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4. Purpose of Affiliate Rules/Code of Conduct
An affiliate code of conduct is primarily intended to govern interactions between regulated operations and competitive operations, in order to:
Prevent cross subsidization between regulated and competitive activities
Avoid potential market power abuses and prevent anti-competitive conduct
Foster competitive markets
The statute and rules accomplish this through nondiscrimination standards, record-keeping requirements and complaint resolution procedures
Procedures are also set for monetary penalties and other remedies for violations
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5. Texas Affiliate Rules
Texas legislation (Senate Bill 7) contains specific requirements related to codes of conduct between regulated utilities and their affiliates.
PUCT has adopted new rules which will require companies to adopt an internal code of conduct
On January 10, 2000, Entergy will file a business separation plan with the PUCT containing an internal code of conduct and a detailed plan for compliance
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EGSI BSP Filing
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6. Arkansas Affiliate Rules
Arkansas legislation (Act 1556) contains specific requirements related to codes of conduct between regulated utilities and their affiliates.
APSC is in process of developing implementation rules
Final rules are not expected until first quarter 2000
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7. Arkansas & Texas Affiliate Rules
Examples of what the rules touch on:
Information safeguards
Preferential Treatment Prohibited
Joint Advertising or Promotional Activities Restricted
Transactions between utilities and affiliates
Separation of utility and competitive affiliates
Record-keeping requirements
Enforcement Required
Rules in both jurisdictions relating to the transfer of employees
Information Safeguards
Proprietary customer information cannot be shared by the utility with competitive affiliates or any other entity, except under very limited circumstances
Aggregated non-proprietary customer information can be shared with a competitive affiliate only if the information is made available to non-affiliates
Market analysis reports (e.g. market forecast, planning or strategic reports) cannot be shared by a utility with its competitive affiliate
Preferential Treatment Prohibited
Utility may not offer different treatment to competitive affiliates and its customers than is offered to other companies and its customers
Utility may not provide any kind of business opportunity to, nor solicit business on behalf of, its competitive affiliates
Utility may not give customers any information about its competitive affiliate other than its name and address
A utility may not allow preferential access by its competitive affiliates to information about its T&D systems
Joint Advertising or Promotional Activities Restricted
Corporate name or logo cannot be used by a competitive affiliate unless a disclaimer is used
Utility and its competitive affiliate may not engage in joint advertising or promotional activities (e.g. joint sales calls, joint proposals) in a manner that favors the competitive affiliate
At customers unsolicited request, utility may participate in customer meetings to discuss operational subjects related to T&D services, but only to same extent utility does same for unaffiliated suppliers, and must leave when sales discussions start
Transactions Between Utility and Affiliates
Utility cannot subsidize business activities of an affiliate
Costs of shared services shall be fully allocated
Utility must obtain services from competitive affiliates only on an arm’s length basis, with certain limited exceptions
Tying arrangements prohibited
Utility service shall be made available to competitive affiliates and other similar entities contemporaneously and in same manner
Separation of Utility and Competitive Affiliates
Utilities and their competitive affiliates are not to share employees, facilities or other resources, except under limited circumstances
They may share common officers, directors, property, equipment, computer systems, info systems and corporate support services, if safeguards are in place to prevent transfer of confidential info, unfair advantage, customer confusion, and cross subsidization
Corporate support services that may be shared include HR, procurement, IT, regulatory services, administrative services, real estate services, legal, accounting, environmental services, research and development unrelated to marketing and/or business development for the competitive affiliate regarding its services and products, internal audit, community relations, corporate communications, financial services, financial planning and management support, corporate services, corporate security, lobbying and corporate planning.
Separation of Utility and Competitive Affiliates (cont’d)
Office space shall be physically separated
Employees engaged in T&D system operations with knowledge of confidential information may not be temporarily transferred to a competitive affiliate for less than one year, except in limited circumstances
Employees engaged in T&D system operations with knowledge of confidential information who transfer to a competitive affiliate must sign a statement verifying that confidential information will not be used or transferred unfairly, and verifying that penalties may otherwise result
The utility must track the migration of all T&D system employees and report the same to the Commission annually
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8. FERC Standards of Conduct
Entergy has been operating under these standards since 1996
Employees in Transmission function must operate independently of Wholesale Merchant function employees, including employees of affiliates
Employees in Transmission function may not disclose information about the transmission system to Wholesale Merchant function employees, including employees of affiliates
Wholesale Merchant function employees may only have access to transmission information available to all customers
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9. FERC Standards of Conduct
Wholesale Merchant function employees are prohibited from engaging in transmission system operations or from having access to the System Operations Center different from other customers
Information about the transmission system may be provided to all customers, including the Wholesale Merchant function employees, simultaneously by posting the data on the Internet-based Open Access Same-time Information System (OASIS)
Transfers of employees between functions must be posted on the OASIS for a period of 90 days
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10. FERC EPMC Standards
Employees of EPMC shall function independently of the operating companies (OPCOs)
EPMC and the operating companies shall not grant each other any undue preferences
EPMC shall purchase transmission and ancillary services from OPCOs at the terms and conditions of the OATT filed at FERC
Power sales between EPMC and OPCOs require FERC approval
Non-public information disclosed by OPCOs to EPMC shall be publicly disclosed
Pricing of non-power goods and services restrictions
Power brokering requirements
EPMC books and records shall be separate
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11. Recap - What this means to you:
Entergy will release a new code of conduct manual in the very near future
Entergy will identify employees who are affected by the new code
Affected employees will go through training
You will need to become familiar with the rules, inform your direct reports and assist in enforcing these important codes
Employees will have to acknowledge they are educated on the new rules
Failure to comply with these rules may have serious personnel and regulatory consequences
Entergy will continue enforcement and training of FERC Stds and Internal Code of Conduct
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