competition - HMS Legal

PUC Launches Investigation of Pennsylvania’s Retail Electricity Market

Todd Stewart on April 28, 2011

In a 4 to 1 vote, the Pennsylvania Public Utility Commission “officially launch[ed] the investigation of the competitiveness of the retail electric market with the goal of making recommendations for improvements to ensure a properly functioning and workably competitive retail electric market.”

On the Joint Motion of Chairman Powelson and Vice Chairman Coleman, the Commission launched a two-phase investigation that will first assess the current status of the retail market and explore what changes need to be made to allow customers to see the benefits of competition. This first phase will include an en banc hearing currently scheduled for June 8, 2011. The second phase of the investigation will be an examination of how best to resolve the issues raised and implement prudent changes. The second phase also will include an en banc hearing to be scheduled later.

As an initial step, the Commission has asked interested parties to address a list of eleven questions by June 3, 2011. The inquiries include:

• The present status of competition by class and service territory for alternative suppliers;

• Whether the present market design in Pennsylvania presents barriers to a fully workable competitive retail market and do those barriers vary by customer class to the extent they exist;

• What economic and managerial costs are associated with fulfilling the default service role by EDCs;

• Whether there are unintended consequences associated with EDCs providing default service; and,

• Whether the parties believe that default service should continue its present form or be fulfilled by another entity.

These and the other questions make it clear that the Commission is considering all issues and options to be “on the table,” including whether the Commission should advocate requiring electric distribution companies to exit the merchant function. Such a move would require legislative action, but it would appear at least that the Commission is prepared to seek legislative authority if there are facts to support such a policy shift. It is likely that the entire process could take at least nine months to a year.

PUC Stalls Met-Ed/Penelec Customer Education Plan

Todd Stewart on April 4, 2011

The Pennsylvania Public Utility Commission unexpectedly voted to delay implementation of the electricity shopping Customer Education Program for Metropolitan Edison Company and Pennsylvania Electric Company. The Commission was addressing an audit of the plans, which cost about $900,000 each, when it suspended implementation pending further comment from participants. The Commission appears to be concerned that, due to lack of electric generation supplier participation in those territories, customer education about competitive alternatives may be premature.

The March 31 Commission vote was prompted by Commissioner Cawley’s motion, which noted that there are only two or three electric generation suppliers serving each of the Met-Ed and Penelec service territories, and questioned whether it is appropriate to “roll-out” retail choice education until the market further matures. The Education Programs at issue were agreed-to as part of the settlement of the Companies’ latest default service cases. The settlement requires Met-Ed and Penelec to notify residential and small commercial customers of participating EGS offers by mail.

The Commission has asked stakeholders to address a number of questions, including:

(1) whether the Customer Education Program should be delayed until a certain number of EGSs have entered the market, and, if so, what the threshold number should be;

(2) whether the Education Program should move forward for either residential or small commercial customers separately or for both at the same time; and

(3) whether there are EGSs that intend to enter these service territories in the near future and whether a delayed and more concentrated campaign might be more effective at a later date.

The Commission suspended the implementation of the Education Program until it has received these answers and has an opportunity to review them.

Pennsylvania Passes 1,000,000 Customer Mark in Competitive Electricity Market

Todd Stewart on April 1, 2011

It’s official – Pennsylvania has passed the 1 million customer mark in electricity shopping. According to the latest weekly update on the Pa. Power Switch website (www.PaPowerSwitch.com), the total number of customers switching to an electric generation supplier as of March 23, 2011, was 1,001,062.

Leading the way with the highest percentage of customers shopping is
tiny Pike County Power & Light, with 73% of its customers shopping. Among the larger companies, PPL is out in front at 37.5%, which equates to 526,000 customers – 449,403 of whom are residential customers. In a not too distant second place among larger companies is Duquesne, with 24.5% of its customers shopping. This equates to 126,000 residential customers. PECO has 16%, or 199,800 residential customers shopping, but given that its customers have been shopping for only a few months, that number is likely to grow substantially. In all, for the majority of the Commonwealth, the numbers are quite impressive and evidence the strong support of the competitive electricity industry by the Pennsylvania Public Utility Commission and Pennsylvania’s electric distribution companies. These figures also are strong evidence for the notion that when it comes to competition in the electric and gas business, if you build a competitive market, the marketers will come.

The same momentum is not present in the natural gas markets, where switching has languished at about 200,000 total customers statewide. The PUC has undertaken a number of regulatory initiatives that should help improve these numbers when the changes finally come on line.

PUC “Opts Out” of Municipal Aggregation

Todd Stewart on March 21, 2011

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.

Retail Energy Market Sales Practices To Be Subject Of PUC Rulemaking

Todd Stewart on February 11, 2011

In a move that reflects growing concern over door-to-door marketing of retail energy the Pennsylvania PUC is seeking the input of industry stakeholders with an eye to adopting regulations that will curb perceived abuses.

At its February 10, 20011 Public Meeting, the PUC issued a Proposed Rulemaking Order at Docket L-2010-2208332 to establish regulations that will impose restrictions on the manner in which retail energy marketers, particularly those who rely on door-to-door sales, interact with the public. The proposed regulations are not expected to deviate significantly from the Interim Guidelines that were issued on November 5, 2010. Interim Guidelines on Marketing and Sales Practices for Electric Generation Suppliers and Natural Gas Suppliers; Docket No. M-2010-2185981 (Interim Guidelines). The Interim Guidelines addressed such subjects as: requiring marketing representatives to identify themselves and the company on whose behalf they are soliciting at the outset of every contact; prohibiting conduct such as misrepresenting the terms of a proposal; and requiring that door-to-door representatives not dress in a manner that suggests they work for a utility or another marketer. Under the Interim Guidelines, the Commission also required that sales representatives wear photo identification issued by the marketer and present customers with business cards clearly identifying on whose behalf they are marketing. Sales representatives also were required to provide customers with written copies of any offers, terms and conditions, etc., discussed with customers orally during any sales contact and would require the marketing representatives break off any such contact immediately upon customer request. One other important feature of the Interim Guidelines is the requirement that door-to-door sales representatives leave a customer’s home before the required third party verification process takes place.

Vice-Chairman Tyrone Christy filed a Statement in which he reiterated the position he took regarding the issuance of the Interim Guidelines, stating that the other Commissioners were incorrect in presuming that door-to-door sales are permissible for energy markets and suggesting that they should be outlawed altogether

The requesting comments is expected to be issued shortly.

PUC Approves New Rules Aimed at Improving Retail Natural Gas Competition

hmslaw1 on January 13, 2011

Today, in split vote, the PUC approved new regulations intended to level the playing field for natural gas competition.

PROPOSED RULEMAKING-PROMOTION OF COMPETITIVE RETAIL MARKETS, L-2008-2069114. While the final rulemaking order may not be publicly available for a few days, it appears that the new rules will require Natural Gas Distribution Companies to remove certain costs of providing default service from the base rate distribution charge, which all customers pay, and instead collect those charges as part of the gas cost rate, which is paid only by customers who remain on default service.

Based upon comments and earlier iterations of the rulemaking process, it appears likely that the Commission also will address Natural Gas Supplier requests to eliminate or shorten the recovery of prior period gas costs from customers who switch to a competitive provider from default service. These payments are collected through a mechanism referred to as a “migration rider” and are now recoverable for a full year after a customer switches. The new rules are expected to shorten the time period over which those costs may be recovered.

One other important change proposed by the new rules will be a further refinement of the Price to Compare. The PTC, as it is known, is intended to assist customers in evaluating competitive offers by presenting the “rate” that the customer pays, in theory, to their local gas utility for the commodity portion of service. The goal has always been for the PTC to provide a meaningful comparison point for competitive offers. Up till now, however, the PTC has not reflected a similar basket of costs as those faced by competitive suppliers, some of which change significantly over time. The new rules will require that additional costs that customers now pay as part of default service be explicitly included in the price to compare. Significant among those currently unrecognized costs that will in the future be included in the PTC is what is known as the e factor, which varies quarterly and is intended to recover or refund differences in actual prior period gas costs from projected prior period gas costs. It is the projected costs that form the basis of the rates customers actually pay. Including the e factor in the PTC is intended to make the PTC a better comparison point by making it more representative of the costs that a customer avoids by taking service from a competitive supplier.

The Final Rulemaking Order should be available within two weeks.

PUC Launches Investigation of Pennsylvania’s Retail Electricity Market

PUC Stalls Met-Ed/Penelec Customer Education Plan

Pennsylvania Passes 1,000,000 Customer Mark in Competitive Electricity Market

PUC “Opts Out” of Municipal Aggregation

Retail Energy Market Sales Practices To Be Subject Of PUC Rulemaking

PUC Approves New Rules Aimed at Improving Retail Natural Gas Competition

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