The British Columbia Utilities Commission Project Number: 3698467

IN THE MATTER OF

Terasen Energy Marketing In. (“TEM”) Application for a License to Market Natural Gas Project No. 3698467

WRITTEN FINAL SUBMISSION OF: MXenergy (Canada) Limited

July 27, 2007 Final Argument Introduction MXenergy is a licensed natural gas marketer which is participating in the British

Columbia residential natural gas market, as well as 29 other markets in Canada

and North America. MXenergy’s participation in this large number of programs

and jurisdictions gives it a unique perspective with respect to the best competitive

practices, as well as those regulations, rules, tariffs or actions which are a

detriment to a customer’s competitive choices.

The initial scope of the hearing was set out in Order G-68-07, an order that was

issued in response to Terasen Energy Marketing’s (“TEM’s”) application for a

license to market natural gas, and which stated:

“In the hearing, the Commission will consider whether the existing TGI Code of

Conduct and Transfer Pricing Policy is satisfactory to address the situation that

would be created if TEM is granted a license to market natural gas.”

At this point in time, it appeared that the hearing would involve a review of the

TGI Code of Conduct and Transfer Pricing Policy (“COC and TPP”), and

accordingly, many of the interveners asked questions which addressed the COC

and TPP, addressing them in many cases to both TEM and Terasen Gas Inc

(“TGI”).

On July 4, 2007, the BCUC clarified the scope of the hearing in a letter to all

parties, the relevant portion of which is produced below:

“a review of the COC and TPP is outside the scope of the present proceeding, but does consider that the effects of the COC and TPP on the relationship between TEM and TGI are relevant to the proceeding. While TGI states that it is not and will not be providing services to TEM, the COC provisions related to matters such as access to customer information would still apply. The addition of Section 71.1 is a relatively recent change to the Utilities Commission Act, and the review of TEM’s application for a Gas Marketer Licence pursuant to this Section will likely need to consider whether the current COC and TPP adequately address the relationship between TEM and TGI to support the license application. TEM should be capable of addressing this matter, and so the Commission denies the request of CEG that TGI respond to Information Requests regarding the COC and TPP. “ From this clarification, it appears that the scope of the proceeding revolves

around three central questions:

1. What is the relationship between TEM and TGI?

2. Does the current COC and TPP adequately address the relationship

between TEM and TGI?

3. Should TEM be granted a license on the basis upon which it has applied?

As this proceeding is not intended on resulting in amendments to the COC and

TPP, we have focused our approach on pointing out the deficiencies in the

current versions, rather than on suggestions on how they might be changed.

The Relationship Between TEM and TGI Factual Background Upon reading the IR responses of TEM, there are a number of facts which

appear to emerge regarding the past, present and future ties between TGI and

TEM. These involve how resources were shared in the past, how they are being

shared currently, and how they might be shared in the future.

Confidentiality and Restrictive Covenants

First and foremost, TGI does not require that its employees enter into any

confidentiality agreements or other restrictive covenants upon moving from TGI

to TEM. This is surprising, in that many TGI employees have market sensitive

information at their hands. This can include such information as customer

address lists, knowledge of other marketers marketing materials, addresses for

future system expansion, knowledge of the receptivity of some customers to

choice options, knowledge of supply changes or options, or the details of

complaints that may have been made about particular marketers. This could also

include information that might relate to TGI's

supply portfolio, or hedging positions. TEM's response that there are no

confidentiality agreements required raises the concern that intercorporate

transfers could be structured to pass along business sensitive information to an

affiliate.

Management Concerns

In IR response BCUC 5.1, TEM indicated that its Board of Directors included the

current president and CEO of TGI as its Chairman. It is fundamentally

inappropriate to have someone in a senior position at TGI on the Board of TEM.

Sharing of Premises

In its Final Argument, TEM has indicated that it is, in effect, sharing premises

with TGI. The arrangement is not a direct arrangement, but it is the result of the

arrangement. TEM is leasing the premises from TI, who is in turn leasing the

premises from TGI. The implications of this are that through the interpolation of a

third party, TEM is notionally in compliance with the COC as it exists; and that

there is a possible cross-subsidy of TEM depending on what the financial

arrangements between the three parties are under the lease arrangements.

Sharing of Personnel

In IR response number MX 1, TEM indicated that they shared personnel with TGI

in the areas of customer care, regulatory affairs, senior management and others.

TEM subsequently indicated that they are not currently sharing any employees.

This raises a number of concerns. Firstly, while TEM has stated that it will not be

sharing personnel going forward, there is no regulatory obligation for it to not

change its mind, and further, no regulatory obligation to report any intended

sharing to the BCUC on an ongoing basis. The only reporting requirement

relating to sharing employees appears to be under the auspices of the TPP,

which presumably would be reported in rate proceedings by TGI long after the

fact in a subsequent rate proceeding.

Sharing of Name and Logos From the Information Request Responses, it is clear that TEM intends on using

what has been referred to as the “Terasen” name to conduct business under,

incorporating that into the name “Terasen Energy Marketing”. To date, for the

purposes of this application, TEM has used the name “Terasen” in conjunction

with a logo, which appear together at the top of letterhead containing

submissions from TEM. The name and logo together appear as shown below.

MXenergy IR no. 10, TEM indicated that it has non-exclusive rights acquired from

Terasen Inc. to use three licensed marks, which include the Terasen name, and two logos.

While TEM did not produce copies of the specific logos, a search of the Canadian

Trademarks Data Base indicates that Terasen Inc. has only three registered marks relating

to the Terasen name, which are TMA627,436; TMA627,593; and TMA621,837. The

specific logos which are contained within the registrations are depicted below.

From a simple search of the Terasen Gas Inc. website, it appears that TGI is using the following logo

in the following colour scheme, both with and without the accompanying phrase “Get Comfortable”.

MXenergy respectfully submits that the relevant question with regard to the use

of the Terasen name is not simply the use of the name, but it is the Terasen

“brand” that includes the use of the logos and colour schemes in conjunction with

the name. In order to address the question of the use of the brand, we submit

that it is necessary to look not simply at the ownership of the trademarks, but

also how the names and logos have been used, and what public impression

would reasonably arise from the use of the names and logos. We propose to do

this through a simple review of what customers might see through simple actions.

Terasen Inc.

There is no website listed under Teraseninc.com or teraseninc.ca . There are

numerous references to Terasen Inc. being the parent company of Terasen Gas

Inc. on the terasengas.com website, however, when a user clicks on the

“copyrights” link on the terasengas.com website, the following text appears.

Copyright All editorial content and graphics on this site are protected by Canadian copyright and international treaties

and may not be copied without the express permission of Terasen which reserves all rights. Re-use of any

of our editorial content and graphics online for any purpose is strictly prohibited. The materials from our site

are available for informational and noncommercial uses offline only, provided the content and/or graphics

are not modified in any way, all copyright and other notices on any copy are retained, and permission is

granted by Terasen.

Permission to use Terasen content is granted on a case-by-case basis. We welcome requests. DO NOT

copy or adapt the HTML that we create to generate our pages. It also is covered by our copyright.

Terasen trademarks

Any trademarks, logos, and/or service marks on this site are the property of Terasen and nothing in this site

can be construed as granting in any manner whatsoever any license or right to use any logos, trademarks or

service marks of Terasen without written permission. Any unauthorized use or misuse of these intellectual

properties is prohibited.

Terasen authorizes you to view, copy and print documents published by Terasen on this web site subject to

the following conditions: (1) such material may be used only for personal, non-commercial purposes; (2)

such material may not be modified, disassembled or otherwise altered in any way; and (3) you must retain

all copyright and other proprietary notices contained in the material and acknowledge Terasen as the

source.

Terasen reserves the right to revoke your authority to view, copy and print documents at any time without notice and for whatever reason and to require you to delete, destroy or otherwise remove any such material. Except as stated above, no part of this web site may be reproduced, stored in any retrieval system, or transmitted in any form or by any means, electronic, mechanical, printing, photocopying, recording or otherwise. MXenergy specifically notes that the copyright section makes reference to all

content on the terasengas.com website belonging to “Terasen”, and all

trademarks on the site belonging to “Terasen”. There is no elaboration within

these sections of which Terasen entity owns the copyrights or trademarks.

Additionally, at the bottom of each web page, Terasen Gas Inc. is referenced as

a “Fortis Company” with a link to the Fortis website.

While Terasen Inc. is a real company which is a parent of Terasen Gas Inc., and

which holds the registration of the trademarks, it does not put itself in the public

eye through frequent use of the marks on a website. Additionally, the reference

to the ownership of the trademarks on the Terasen Gas Inc. website is

ambiguous at best, and would lead a reasonable individual to be left with the

impression that the names and logos are the property of Terasen Gas Inc.

Terasen Gas Inc.

Terasen Gas Inc. currently makes significant use of the Terasen name and logo

on its website, as referenced in the previous section, yet does not do so without

any qualification as to the ownership of the name and logo. There are some

references within the customer bill inserts posted on the website in fine print in

varying formats which make reference to the names and logos, but these do not

appear to do so in the generic “Terasen” name, but rather refer to the name

being used under license as the “Terasen Gas name and logo”. Examples of

these are as follows:

“Terasen Gas is a subsidiary of Kinder Morgan Inc., and a licensed user of the Terasen Gas logo and “Get comfortable”.”1

“The Terasen Gas name and logo are trademarks of Terasen Inc.” The references on the customer bill itself are in minute text on the back of the bill

that is very difficult to see with the naked eye. The impression that one is left with

from the bill inserts is that the logo refers not to Terasen Inc., but to Terasen

Gas. However, a review of the Canada TradeMark Database does not show this

logo as relating to “Terasen Gas”, but does relating to “Terasen”. Accordingly,

any subsequent use of the logo by any other company, such as the applicant,

would lead to some customers thinking that the logo was a reference to Terasen

Gas.

In general, a reasonable customer is only going to be aware of the Terasen

name as relating to regulated natural gas distribution in the province of British

Columbia. While rights may be held within the parent company, the parent

company is not the entity putting the name and logo into households across the

province through monthly bills and a well-traveled website

TEM Perceptions on Boundaries of Code of Conduct It is clear from response MX IR 16 , that TEM perceives that there is no limitation

on contracting with third parties who may be performing services on behalf of

TGI. Under the COC as it is currently drafted, this appears to be a correct

interpretation.

What is problematic about this is that there is a growing trend for utilities to

subcontract various utility functions to third parties. On the surface, that would be

a logical process, as that affords an opportunity to tender services in a

competitive bid process to benefit ratepayers. Unfortunately, the regulatory

instruments in place rarely contemplate such arrangements, which can lead to

abuses of the dominant utility position. One such example was when Enbridge

Inc., the parent company of Enbridge Consumers Gas, entered into a transaction

with Centrica to sell certain retail rental equipment assets which had previously

been assets of Enbridge Consumers Gas. As a term of the sale, Enbridge Inc.

committed that Centrica would have exclusive access to the bill which was

rendered on behalf of Enbridge Consumers Gas by a third party for a period of

five years for the billing of appliance rentals and services. The regulatory

construct in Ontario was frustrated in efforts to address this by a number of

factors, including the narrow phrasing of the Affiliate Relations Code, the

question of the ownership of the utility bill, and the inconsistent reporting of

information through the ratemaking process. This was finally addressed in 2005-

001, which ordered EGD to either come to a plan for universal access to the

utility bill, or separate all non utility/charges from the bill within a date certain.

The current phrasing of the COC clearly allows for potential abuses of the

relationship between affiliates and third parties who might be performing utility

services on behalf of TGI. The definition of affiliate does not extend to third

parties, even though they may be performing utility functions on behalf of the

regulated utility. This is particularly highlighted in that TGI has outsourced its

customer billing and customer service functions to third parties who are not

considered affiliates under the current definitions under the COC. There is a

policy gap that leaves the door open to an affiliate contracting for enhanced

access to the customer bill, sharing the call centre used by TGI for customer

service handling using the same individuals, or contracting with service

contractors who participate in the installation of new subdivisions. All of these

processes would appear to fall outside the wording of the COC.

Deficiencies in the COC and TPP

Compliance structure

There are two principal issues with respect to the compliance reporting structure.

The first of these is that it resides within TGI. The second issue is that there is

conflicted reporting within the structure.

With regard to the first issue, again, it is an antiquated concept to have a utility

monitor its own compliance and report on it on an annual basis. While there is

the check of having an ultimate right of complaint to the BCUC, this is not

particularly helpful when the reporting time frame can leave a regulator with faits

accompli. There are many circumstances where a regulator might wish to adjust

a Code of Conduct to apply prospectively to proposed circumstances, rather than

have to deal with the fall out retrospectively. One specific instance where this can

happen is where a utility makes a decision to outsource a utility function to an

arm's length third party. It has been argued that when this happens, the company

then performing the utility function is beyond the scope of regulation, and can

contract in any manner it chooses to provide exclusive or preferential access to

the service to the detriment of other market participants. One example of this

occurring was when Enbridge Inc. removed the billing function from Enbridge

Gas Distribution, then contracted with a third party provider. This situation then

resulted in one service provider of non-commodity items ending up with exclusive

access to the bill for ancillary service billing for a period of time. This service

provider was also a marketer, and achieved a competitive advantage over other

marketers by being able to put its brands and logos on the bill through the

ancillary services business. While that may seem like an extreme example, it

would be possible without regulatory obstacle under the existing COC.

The second concern with the compliance reporting structure is that the reporting

is conflicted. The designation of reporting by third parties is, pursuant to section

7(c) of the COC, to the vice president of legal and regulatory affairs of what is

now TGI. This individual would then subsequently investigate and report findings

to senior management. What is troubling, is that senior management is also the

Chairman of the Board of Directors of TEM. The conflict is blatant, and while it

may not have been perceived of as problematic in 1997, it would be considered

to breach all current common corporate governance regimes. It is inappropriate

to

have someone in the position of CEO of a regulated company who is also the

Chairman of an unregulated affiliate which is supposed to be blind to the

operations of the regulated entity. The opportunities for miscreance are

significant, so much so that the very relationship is presumed to be inappropriate.

Definition of Utility Functions

Under the existing COC, there is no definition of utility function. The importance

of this omission is that it leaves the door open for TGI to contract with third

parties for the performance of utility functions, and the potential that the

contracting parties might be perceived as beyond the scope of regulation.

Currently, this is a significant concern for marketers, as TGI has outsourced its

billing and customer services to what is arguable a group of unaffiliated

companies.

Transfer Pricing Policy

The TEM application has brought into focus a primary deficiency of the transfer

pricing policy. Reporting of transfer pricing has not been included in the

application my TEM, and is not likely to be subject to regulatory scrutiny until the

next TGI rate filing. That gap in timing opens the door to the potential that cross-

subsidies, should there be any, would be in place for a significant period of time

before any scrutiny occurs, let alone any remediation.

In addition, the policy appears to address only single, not eventual transactions.

TEM has taken the position that contracting with TI for the use of TGI’s resources

does not constitute an affiliate transaction. While the TPP permits such actions, it

seriously undermines the integrity and purpose of the COC and TPP.

Jurisdiction of the BCUC. MXenergy believes that the BCUC has jurisdiction with respect to the

promulgation of a Code of Conduct, and also with respect to placing restrictions

on the name under which a marketer might operate. To that end, the following

excerpt is provided on a similar consideration of jurisdiction under EB 1999-0058

in Ontario.

The HVAC Complaint Jurisdiction of the Board to Create a Code of Conduct In action number EB 1999-0058 before the Ontario Energy Board, a complaint

was brought by the HVAC Coalition in respect of the Affiliate Relations Code

complaining of various breaches of the code, including, with particular relevance

to this application, the use of the utility name and the sharing of utility resources.

This case is illustrative of the problems that can arise when a utility affiliate

enters the marketplace, in that it contains a broad base of categories of

complaints, including the use of a similar name, similar marks and logos, the

sharing of a call centre, and customer confusion arising from both the confusing

names and

customer direction from the shared call centre.

In its response to the complaint, Enbridge Consumers Gas raised a number of

points with regard to the jurisdiction of the OEB in respect of the complaint. They

included the following:

“3.0.1 ECG raised four arguments with respect to the Board’s jurisdiction in the HVAC Complaint: • The Code is itself beyond the jurisdiction of the Board to the extent that it regulates the conduct of ECG with respect to competitive energy services, other than the sale of gas. • The Board can only regulate the actions of the utility and not the “interaction” between the utility and its affiliates. • The Board does not have the jurisdiction to hold a hearing to consider the HVAC Complaint. • There are no remedies which the Board can impose on a gas utility for a breach of the Code. The only possible remedy in the Act is a fine imposed as a result of a conviction for committing an offence under the Act” In deciding that it had the jurisdiction to make the Code, the OEB made the following comments:

“3.1.14 Section 2 of the Act states that the Board is to be “guided” by the listed objectives. It is clear that the Board must consider these objectives in carrying out its statutory duties; however, the objectives set out in section are not an exhaustive list of all of the goals that the Board may consider. The Board has a broad public policy mandate to regulate the conduct of monopoly utilities in the public interest. 3.1.15 A role of the Board in enhancing the competitive energy services marketplace is to ensure that the utility does not use its dominant position in the storage, transmission, and distribution of gas to frustrate the development of a competitive market in other non-regulated energy services.

3.1.16 The Board finds that it has jurisdiction to make the Code.” MXenergy submits that the OEB was in the similar position as the BCUC is now,

in that there is currently an emerging market for competitive energy services,

which currently consist of natural gas commodity providers operating behind the

Terasen Gas Inc. operating system, who are all dependent on a bill being

provided by Terasen Gas Inc. to display and collect their charges. This is similar

to Ontario in 1999.

Further, it is submitted that the appropriate context in which to view the breadth

of the BCUC's mandate to create a code of conduct between a regulated utility

and its affiliate should be interpreted on the same basis as the OEB determined,

being from a broad base of public policy in the public interest which extends

beyond the specific wording of the statute setting out authority.

The Use of the Terasen Name

In TEM’s application for a License, TEM makes reference to what it believes to

be an enabling decision of the BCUC, as set out below:

“In making this application for a gas marketer licence, TEM believes it is in compliance with the Commission’s direction provided in its Decision dated August 14,24306 on Terasen Gas’ Application on Residential Unbundling. In that decision, the Commission stated, “If TGI decides to participate in the unbundled residential market, it must do so through a non-regulated arm’s length entity subject to the Terasen Gas Code of Conduct and Transfer Pricing Policy or Provision of Utility Resources and Services.””

Upon review of that decision, MXenergy notes that the referenced paragraph was

the last in a series in which the BCUC had disallowed the continuation of the

SRO program which had previously been offered through TGI, on the basis that

the program would undermine competition, confuse customers, and would be

subsidized by other ratepayers. Of particular concern to the BCUC at the time

was the use of the TGI brand. For a more complete context, the full text of the

section partially quoted is reproduced below:

“Commission Determination The Commission Panel is of the view that successful launching of residential unbundling (customer choice for commodity supply) should be based upon a market with a “playing field” which is as level as possible and which at the outset gives no participant an undue advantage. The Commission Panel considers that TGI’s current brand impact is significant in comparison to the Gas Marketers who are attempting to develop brand and product awareness. The Commission Panel also considers that TGI’s SRO offering constitutes a form of unbundling, albeit internal, as it does provide the customer with a supply choice. At this point in the

development of residential gas commodity unbundling, Gas Marketers appear to be at a disadvantage when competing against the existing SRO which has been marketed under the TGI brand for the last two years. The Commission Panel concludes that it would detrimental to the development of a robust competitive market if the SRO were to be permitted to continue in its present form beyond 2007.

The Commission Panel considers that product awareness and educational value are decidedly different concepts. TGI argues that the continuation of the SRO will create educational value by using its strong brand awareness in the marketplace. However the Commission Panel considers that the result would be a strong differential advantage for the SRO offered by TGI that could inhibit marketers from entering this shorter term market segment and possibly even the Residential Unbundling program itself. If TGI is persuaded that ongoing education for commodity unbundling is of value, it can surely be undertaken independent of the existence of the SRO. The Commission Panel concludes that TGI has significant advantages over marketers besides its brand and if allowed to participate with the SRO will create an unlevel playing field. The shareholders of TGI are not at risk for the losses on this product, which is decidedly different from other participants in an unregulated competitive marketplace. It would be unreasonable to expect marketers to compete directly with the regulated host utility for unbundled gas supply services. The Commission Panel therefore concludes that the SRO must be terminated by December 31, 2007. If TGI decides to participate in the unbundled residential market, it must do so through a non-regulated arm’s length entity subject to the Terasen Gas Code of Conduct and Transfer Pricing Policy or Provision of Utility Resources and Services.”

The BCUC has acknowledged the significance of the Terasen brand in its

decision denying the continuation of the SRO, which has been referred to

previously here. One of the reasons that the Terasen name and its associated

brands are so prominent is that there is a repetitious use of the name and brands

in the context of regulated utility services in the province of British Columbia.

Each customer sees those brands frequently in the context of receiving a service

that is regulated and which gives customers the comfort of knowing that there is

a degree of oversight of the services being provided. The goodwill associated

with the name Terasen and its associated brands and logos has been exclusively

created through the operation of a regulated utility and has value far in excess of

whatever notional value might be assessed on the books of TI. Cost allocation

factors will not adequately capture the value of the goodwill, nor allocate from

whence that value came. It should be noted that the value of the goodwill was

created under regulation, and is in no way analogous to whatever value might be

created in competitive markets, and that therefore any comparison of the

prominence of the name with a non-regulated company such as Canadian Tire is

irrelevant and without base.

This brand has significant value, and it is important for the consumers of British

Columbia that that value not be undermined by a confusing and conflicting use.

The BCUC has previously recognized the value of the brand in denying the

continuance of the SRO, which is discussed in more detail later.

In addition, MXenergy respectfully submits that there are a number of new issues

facing the energy industry which require that names, brands and logos

associated with regulated Canadian utilities be kept neutral. The principle of

these is the move within Canada to create a culture of conservation, which

espouses demand management, reduction, and the adoption of whatever

measures will help reduce consumption. Utilities have been the focus of the

initiatives as facilitators for industry segments such as the heating and cooling

industries. For TGI to continue in that role, TGI requires brand neutrality in order

to attract and maintain the trust of potential industry conservation partners.

Concerns With Utility Name Use in Other Jurisdictions

Ontario – HVAC Coalition Complaint, EB 1999-0058

In this case, the complaint set out that both Enbridge Services Inc. and Enbridge

Consumers Gas were using the similar Enbridge name, as well as a similar swirl logo in a

fashion which would cause confusion between the two entities.

In their response to this portion of the complaint, one of the arguments which ECG raised

was that they did not have the ability to control who had access to the similar logos and

names, as they were owned by their parent company Enbridge Inc.

In the Board's decision, they stated that the legal ownership of the marks and logos was not determinative of whether or not there was a breach of the code. The Board went on to discuss what actions the utility could take and commented that Enbridge was not obligated to use (among other things) the logo particularly if such use would be in breach of the code. In addition, the Board made the following comment: “4.7.8 The Code requires the utility to “take all reasonable steps” to ensure that its

competitive affiliate does not use the utility’s name, logo or other distinguishing characteristics in a manner that would confuse consumers as to the distinction between the utility and the affiliate. The Board agrees with HVAC that ECG has not demonstrated to the Board’s satisfaction that is has taken all reasonable steps to deal with the Board’s ultimate concern, which is customer confusion.” The context of the HVAC Complaint is that it is illustrative of a situation where a board

in Canada determined that there is an obligation on the part of the regulated utility to

insure that the trade marks, names and logos used by it do not lead to confusion with

marks and logos used by an affiliate.

MXenergy submits that this should provide guidance to the BCUC from a number of

perspectives. Firstly, it is illustrative of a situation where the use of similar names and

logos has caused customer confusion. Secondly, the OEB determined that the regulated

entity has an obligation to

The Atlanta Gas Light Name Decision

In 1998, prior to the opening of the competitive natural gas market in Georgia, the

marketing affiliate of the Atlanta Gas Light Company (“AGLC”), which had been known

as The Energy Spring, Inc. provided notice to the Georgia Public Service Commission

that it intended on using the name Atlanta Gas Light Services, Inc. (“AGLS”) . As a

result of this, a number of marketers brought forward a complaint alleging that AGLC

had violated the Georgia Natural Gas Act by permitting its affiliate to use its name

corporate logos, designs and trademarks.

The GPSC made its determination prior to the market opening solely on the evidentiary

basis of the choice of name, logos, designs and trademarks as well as a number of

corporate communications. (Footnote to case record). The Commission made the

following comments with regard to the visibility of the name of the regulated monopoly:

“Although AGLC and AGLS maintain that the mere similarity of names is not a "representation" as intended by the statute, it is clear that AGLS intended to accrue for itself an advantage in the eyes of the consuming public by taking a recognizable portion of the name of its parent and sister companies. Natural gas customers and the public in general are familiar with the name and reputation of the Atlanta Gas Light Company, which has been the monopoly supplier of natural gas to a large portion of the state of Georgia for many, many years. By virtue of this monopoly status, the name "Atlanta Gas Light Company" has a high recognition factor among the consumers in Georgia. Use of "Atlanta Gas Light" by AGLS carries with it the association and recognition of the AGLC. “

In making its determination, the GPSC used a test that had been established by the state’s

Supreme Court in another case, which was “whether the resemblance [between trade

names] is so great as to deceive the ordinary customer acting with the caution usually

exercised in such transaction so that he may mistake one for the other.” Id. citing Prosser,

The Law of Torts, § 130 at pp. 957-58 (4th ed. 1971).”

MXenergy submits that it is appropriate and necessary for the BCUC to use a similar test

in this case with regard to TEM’s proposed use of the names and logos of TI that are

currently being used by TGI.

Conclusion

MXenergy has discussed above the three questions that are before the BCUC.

With regard to the first question, From the information provided, it is clear that the

relationship between TEM and TGI is ongoing, in that there are shared resources

and shared management. MXenergy submits that this is inappropriate and

conflicted, and should either not continue, or should prohibit the issuing of any

license.

With regard to the second question, MXenergy submits that the current COC and

TPP are significantly outdated, and completely insufficient to address the relation

between TEM and TGI. The premises of the COC are incorrect, in that there is

the suggestion that the sharing of management between a regulated and non-

regulated company is appropriate. Additionally, the process flow with respect to

complaints is conflicted, and the process flow with respect to the TPP does not

make the information available in a timely fashion to address potential impacts on

this application. For these reasons, MXenergy believes that the COC and TPP do

not adequately address the relationship between TEM and TGI.

With regard to the third question, the remaining contentious issue is the use of

the Terasen name, trademarks and logos. MXenergy believes that it is

fundamentally inappropriate and conflicted to use a brand developed under

regulation to support an unregulated business in the same jurisdiction. Terasen

Inc has made no commercial efforts to develop the brand outside of regulated

entities, and has therefore made no commercial enhancement to the goodwill

created under regulation. Any use of the brand by TEM would be confusing,

given not only the name similarities but also the intended use of the identical

trademarks that TGI is using. This has been considered in other jurisdictions, and

it is respectfully suggested that the BCUC take guidance from these decisions,

and also consider that the similarities of name, trademarks and logos can easily

confuse a reasonable person’s attempt to shop for a natural gas supplier.

Finally, with respect to the name and trademarks, MXenergy respectfully submits

that TEM’s proposed use would be in violation of the COC and TPP, as well as

the Gas Marketer Code of Conduct (specifically section 8); and would

undoubtedly lead to violations of section 21 of the Gas Marketer Code of

Conduct.

Request for Relief

It is noted that the BCUC has the options of: accepting a License application;

rejecting a License application, or accepting a License application but imposing

conditions on the applicant; In reviewing many of the Licenses which have been

granted to date, it is noted that the BCUC has imposed conditions on all

Licensees. These conditions have universally required that Licensees adhere to

the Code of Conduct; adhere to the Undertakings and Rules; maintain a letter of

credit in the amount of $250,000.00; maintain certain minimum financial metrics;

and statements that the license belongs to the BCUC and can be withdrawn at

any time. The BCUC’s power to impose conditions on License holders is a

discretionary power which is derived from section 71.1.6 (b) of the Utilities

Commission Act.

MXenergy is concerned with two principle aspects of TEM’s application, and has

elaborated on the substance and justification of those concerns previously in the

Argument. The first concern is the proposed use of the Terasen name and its

associated marks and logos. The second concern is the previous and continued

sharing or resources and personnel between TEM and TGI. MXenergy’s

concerns with the name, logo and mark use would be alleviated if the BCUC

were to make it a condition of the License that neither the Terasen name, nor its

associated marks and logos be used by TEM.

The concern with respect to the sharing of resources and personnel is somewhat

more complicated. MXenergy has submitted that the COC and TPP are

inadequate and antiquated, and do not provide sufficient scope of definitions to

address the current situation between TEM and its affiliates. MXenergy believes

that it would cause undue harm to the marketplace if TEM were permitted to

commence operations without there first being a full review of whether their past

and present sharing of resources are in compliance with the COC and TPP with

expanded definitions to close the loopholes that are currently being exploited.

However, if the BCUC were to impose interim conditions on the License pending

a formal review of the COC and TPP, and subsequent compliance review, there

may be a way to permit TEM to enter the marketplace in a timely fashion on the

same footing as all licensed participants. It is suggested that conditions which

prohibit any sharing of resources between TEM and TGI (apart from those

resources which are available to other Licensees), and which prohibit the

involvement of any TGI employee in the management or Board of TEM would

exacerbate many of the current concerns pending further review of the COC and

TPP.

All of which is respectfully submitted,

Robert Blake, Vice President Electricity Supply and Regulatory Affairs