Rep. Kucinich Requests Federal Trade Commission Investigation of FirstEnergy

Washington, Oct 7 - Congressman Dennis Kucinich (D-OH) today sent a letter requesting the Federal Trade Commission (FTC) to conduct an investigation of the potentially unfair and anti-competitive forced sale of light bulbs by FirstEnergy to their customers in Northern Ohio. Kucinich also requested the FTC examine the issue of FirstEnergy’s plan to charge a fee for the energy that was not used by the consumer because they installed the light bulbs.

The full text of the letter follows:

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October 7, 2009

Mr. Jon Leibowitz
Chairman
Federal Trade Commission
600 Pennsylvania Avenue NW
Washington, DC 20580

Re: The need for an FTC investigation of FirstEnergy’s unfair and anti- competitive forced sale of 3.75 million light bulbs at excessive prices

Dear Chairman Leibowitz:

I am writing to ask the Federal Trade Commission to conduct an investigation into the unfair and anti-competitive forced sale of 3.75 million light bulbs that was announced by FirstEnergy yesterday and that will compel all FirstEnergy’s captive customers in Northern Ohio not only to overpay for the light bulbs they receive, but also to pay First- Energy for the electricity that those customers will not be using. Since FirstEnergy’s program constitutes an abuse of its monopoly position and also constitutes unfair or deceptive acts or practices that are injurious to consumers, it falls within the purview of both the Bureau of Competition and the Bureau of Consumer Protection.

FirstEnergy is the electric utility that has a monopoly in the sale and distribution of electric power in Northern Ohio through its subsidiaries, Cleveland Electric Illuminating Company, Toledo Edison and Ohio Edison. FirstEnergy is engaged in interstate commerce, both through its ownership of utilities in multiple states and through its transmission and sale of electric power throughout those states.

Yesterday, FirstEnergy publicly announced that it will be delivering two compact fluorescent light bulbs (CFLs) to every residence it serves. FirstEnergy also announced that it will be adding $7.20 per year to the electric bills of its consumers to charge those consumers for: 1) the cost of the two CFLs, 2) the cost of distributing the two CFLs, and 3) the electricity that the consumers will not be using as a result of the energy efficiency of those CFLs.

FirstEnergy purports to justify this unfair and anti-competitive program as its effort to comply with a state energy law that requires utilities to cut their customers’ energy use by 22 percent by 2025. However, other utilities chose to accomplish the same result by means that were not anti-competitive, that were not unfair to consumers and that did not result in a forced sale of overpriced products. Those utilities arranged with retailers to provide coupons or discounts that consumers could use to purchase the CFLs of their choice at the best price they could find.

That kind of competitive, marketplace solution was apparently unacceptable to First- Energy. Instead, FirstEnergy is misusing its monopoly power to force consumers to pay for 3.75 million CFLs that FirstEnergy is selling to them. Those consumers, who have no choice in their purchase of electricity, and must buy it from FirstEnergy, now have no choice and must buy two CFLs from FirstEnergy also. FirstEnergy has totally eliminated all marketplace competition in the sale of those 3.75 million CFLs. In addition, First- Energy is attempting to leverage its monopoly power further, by providing its customers with information that will make it easier for them to order additional CFLs from First- Energy itself, rather than the competitive marketplace. This conduct is anti-competitive. It will reduce competition in the sale of CFLs. And it has no reasonable business justification. Compared to the alternative used by the other utilities in Ohio, it serves only to leverage FirstEnergy’s monopoly power and extend it into the sale of CFLs.

FirstEnergy’s program also is unfair, deceptive and injurious to consumers. FirstEnergy is forcing its consumers to pay far more for these two CFLs than those consumers would pay to purchase them in the marketplace. FirstEnergy is forcing its consumers to buy these two CFLs even if those consumers have already replaced all their incandescent bulbs with CFLs. FirstEnergy is forcing consumers to buy these two CFLs even if they are not appropriate for the lights in their homes. FirstEnergy is forcing its customers to buy these CFLs even if they are not going to use them. And, incredibly, FirstEnergy is actually charging those customers for the cost of the electricity they will not be using as a result of the greater efficiency of these CFLs over the light bulbs those customers are currently using.

The “state action” immunity is not available to insulate FirstEnergy from the consequences of it anti-competitive and unfair conduct. In order for that immunity to apply, the restraint on trade or competition must be clearly articulated or affirmatively expressed as state policy. California Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc., 445 U.S. 97, 105 (1980). The only policy that the State of Ohio has articulated and expressed is the policy of reducing energy use. That policy is being accomplished by other utilities through a coupon or discount program that is not anti-competitive. It is FirstEnergy, and FirstEnergy alone that has chosen a program that is designed to extend its electricity monopoly into the sale of retail products.

FirstEnergy’s program actually works against the policy that the State of Ohio has articulated and expressed. The utilities that have provided their customers with coupons, or that have negotiated discounts from retailers, are empowering their customers to buy CFLs for their entire home and to purchase CFLs that are appropriate for their home and their lighting fixtures. FirstEnergy is distributing only two CFLs per household, with no knowledge of whether those light bulbs are appropriate, or even needed, for the homes to which they are being delivered. And consumers who use coupons or discounts to buy new CFLs will see an immediate reduction in their electric bills, which should inspire them to buy more CFLs or to install more energy saving features in their homes. First- Energy customers who use their two CFLs will not see any reduction for three years. Instead, their electric bills will go up.

Clearly, the coupon/discount alternative is more consistent with the policy articulated and expressed by the State of Ohio. It also allows consumers to buy the light bulbs they need, at lower prices, in the competitive marketplace. The only interest that is served by the FirstEnergy program is the interest of FirstEnergy’s profits.

For these reasons, I am requesting that the Federal Trade Commission conduct an investigation into FirstEnergy’s unfair and anti-competitive forced sale of light bulbs to consumers. I am also requesting that the Federal Trade Commission issue a cease and desist order to FirstEnergy to prevent the execution of its anti-competitive program.

Sincerely,

Dennis J. Kucinich
Member of Congress

Source: Congressman Dennis Kucinich