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PUC “Opts Out” of Municipal Aggregation

The PUC has ruled unanimously that opt-out municipal aggregation programs violate the Commission’s regulations regarding the standards for changing a customer’s electricity generation supplier.

Opt-out municipal aggregation would permit a municipality and an electric generation supplier (“EGS”) to agree that the EGS would provide service to all customers within the boundaries of the municipality unless those customers affirmatively choose to not participate.  Without looking to whether municipalities are granted the authority to make such agreements or pass the ordinances necessary to implement them, the Commission ruled that EGSs and the electric distribution companies (“EDC”) that actually implement the switch transaction remain subject to Commission oversight and cannot enter into such agreements absent Commission approval.

The Commission has approved opt-out aggregation in the past, but only in the most extreme circumstances and emergency situations; in none of those cases did the Commission adopt a policy or general rule endorsing such arrangements.  To the contrary, the Commission has stated that it has a general dislike of such programs and found that its regulations point to an opposite result:  “Commission regulations express a strong preference for individual choice in regard to electric generation supply.”  Chairman Powelson expressed concern that an EDC would attempt municipal aggregation prior to receiving Commission approval, and had this to say about the future of municipal aggregation in Pennsylvania:

I note that the Commission has historically been generally supportive of the concept . . . however, my views are maturing.  At a minimum, I am becoming less convinced that municipal aggregation is a benefit to a well-functioning and fully competitive retail electricity market and increasingly concerned that such programs may actually hinder competition. . . . [W]idespread enactment of municipal aggregation will prevent suppliers from making offers, thereby stifling innovation and competition and deterring the development of a robust retail market.

Chairman Powelson closed his remarks by recommending the legislature table all efforts to implement municipal aggregation while the Commission investigates statewide retail electricity markets.

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