Utility - HMS Legal

A New “Consumer Protection” Bill Where the Solution is Worse than the Problem

Todd Stewart on June 14, 2024

On June 7, 2024, Senator Stefano, Chairman of the Senate Consumer Protection and Professional Licensure Committee, introduced SB 1250. The overt purpose of the bill appears to be to require the Public Utility Commission (“PUC”) to convene stakeholder groups for the various fixed utility groups that it regulates and to use the feedback from these groups to determine whether policy statements, regulations or statutes under the PUC’s jurisdiction should be “created, remain in effect, be amended or be repealed to reduce ratepayer impact and permit the public utility to operate in a more effective, efficient or economical manner.” The PUC must issue a report and a plan on how it will implement the changes that it views as necessary. There is no provision for the General Assembly to do anything with the report except receive it.

The problem with the legislation is the lack of required diversity of the “stakeholders”. While the bill identifies the usual participants in PUC cases, utilities, Commission staff, the Consumer and Small Business Advocates and industrial groups, there is no process for other groups to request recognition or for participation to be permitted, except “as deemed necessary by the commission.” If the PUC is going to address new issues in new ways, it makes sense that the Commission should hear from diverse and different stakeholders who may have different views than the standard groups. That is not to say that the usual participants should not participate, but rather to advocate for the ability of new voices to be heard.

The consequence of not broadening and diversifying the participants is that it creates an echo chamber of sorts, where the only ideas are those the participants have already heard, from interests and people they already know. We can do better. If the goal truly is to identify ways to make public utility service better, it seems best to hear from many interests, not a few. The bill should require new/other groups a path to participation and not diminish their participation in the discussions and the eventual report. For example, the PUC is presently seeking legislation that would seriously impede the future of renewable energy in Pennsylvania. However, the policy that the PUC is promoting in the General Assembly was not the subject of a broad based stakeholder group. Rather, it was the product of a select few.

Is the PUC Preparing to Address Utility Rates in Light of the Recent Tax Cut?

Todd Stewart on January 10, 2018

Most US taxpayers are by now conscious of the passage of President Trump’s signature tax legislation which dramatically reduces the corporate tax rate from 35% to 21%. What many folks may not know is that the rates they pay to their local utility include recovery for the income tax expense of those utilities. This raises the question that some states, notably Kentucky and Oklahoma, have already begun to address: “How do regulators make sure that utility rates promptly reflect the substantial reduction in tax liability?” In Oklahoma, the Attorney General has called upon the Oklahoma Corporation Commission to address the tax savings issue which he estimates to total $100 million statewide. The Kentucky Public Service Commission already has ordered utilities to track their savings due to the tax change and to timely pass these savings on to customers. Montana and Michigan are taking similar actions.

It appears that the Pennsylvania Public Utility Commission (“PUC”) is preparing to address the issue as well. On January 5, 2018, the PUC opened Docket Number M-2018-2641242, with a case description of “THE TAX CUTS AND JOBS ACT: TAX REFORM BILL SIGNED INTO LAW ON DECEMBER 22, 2017”. The matter has been assigned to the Bureau of Technical Utility Services (“TUS”). So far there is no indication of the priority of this effort or what direction the PUC might take. It is clear, however, that the legal landscape in Pennsylvania, as it relates to utility ratemaking, may provide more of a challenge than regulators face in other states. In Pennsylvania, with few exceptions, utility rates are set prospectively and must always avoid the pitfall of “single issue ratemaking.” Single issue ratemaking is where a utility, or a customer, seeks to adjust rates based upon a change, often a dramatic change, that impacts an isolated cost center, without subjecting the whole of expenses, revenues, and allowed percentage of return on investment, to scrutiny and/or adjustment. The PUC and courts have consistently rejected this approach and instead have required utility rates to be set in consideration of all expenses, revenues, and authorized return. Consequently, it may prove to be a challenge for the PUC to reach the goal of having rates promptly reflect the reduced tax rate, while avoiding on one hand a claim of single issue ratemaking and on the other hand the time-consuming and costly process of adjusting each utility’s rates through either a PUC-initiated or utility-initiated general rate proceeding.

A utility’s costs of setting new rates are generally borne by ratepayers and are thus “baked into” the new rates, and so any plan to change rate should include a cost-benefit analysis of making a utility go through the process on a single ratemaking issue versus making a utility adjust rates to include not only new tax rates but all other changes to revenues, expenses and allowed return/profit. For small and mid-sized utilities, the cost of the ratemaking process—which can involve multiple parties, voluminous discovery, PUC staff data requests, expert witnesses, and potential hearings, often approaches, and sometimes exceeds, the amount of the dollar adjustment to rates: upward or downward. What is clear is that the PUC will have much to consider in determining the best way to approach the issue.

Uber Week for Uber in PA – Commonwealth Court Affirms PUC’s Authorization of Raiser’s Service (an Uber Subsidiary) and PUC Decreases Recommended $49 Mil Civil Penalty to $11 Mil

Whitney Snyder on April 25, 2016

In an April 19, 2016 Opinion, the Pennsylvania Commonwealth Court[1] affirmed the Public Utility Commission’s (PUC) grant of a certificate of public convenience (CPC) for experimental authority to operate as a common carrier to Raiser-PA, LLC (Raiser) in Pennsylvania, excluding Philadelphia.[2] Raiser is a subsidiary of Uber Technologies, Inc. (Uber), which licenses the technology to Raiser that allows users to request a ride via smartphone app.

Raiser requested PUC approval of its services in June 2014, although Uber and some of its subsidiaries had been illegally operating in Pennsylvania since February 2014, for which the PUC fined Uber approximately $11 million on April 21, 2016 in a 3-2 vote, as discussed below.

Raiser’s services do not fit squarely into traditional common carrier service and thus it applied for experimental service because, among other things, it does not own the cars used for service or employ the drivers and it utilizes smartphone app technology to allow customers to request service. The PUC approved Raiser’s application for experimental services on December 5, 2014, imposing numerous conditions on its grant of a CPC and denied reconsideration of its order.[3]

Commonwealth Court Opinion

Various competing “traditional” taxi companies petitioned for review of the PUC’s grant of Raiser’s CPC, arguing the PUC failed to follow its own regulations when it found jurisdiction over Raiser, abused its discretion in granting Raiser’s CPC, lacked substantial evidence in granting Raiser’s CPC, erred in applying its own regulations concerning the requisite rate specificity, erred in reversing the administrative law judge’s initial decision without substantial evidence, and abused its discretion in denying reconsideration. The court rejected all challenges and affirmed the PUC.

First, the court ruled that the PUC has great discretion in applying its experimental service regulation at 52 Pa. Code § 29.352 to find jurisdiction because Raiser is proposing to provide transportation services to the public for compensation. Rejecting the cab companies’ argument that Raiser is not a common carrier because it does not have custody of any vehicles, the court reasoned that Section 102 of the Public Utility Code does not require a carrier to own or operate its motor vehicles.

Second, the court ruled that the PUC’s decision was supported by substantial evidence because there is demand for Raiser’s services, Raiser will not bring unrestrained or destructive competition to the marketplace, and it is technically and financially fit. The court pointed out that the policy statement is just that, and not a binding norm, and dismissed the taxi companies’ arguments regarding competitive harm out of hand, finding that they had not carried the heavy burden required. The finding of demand for Raiser’s services is unsurprising – Raiser-type services are, at least for the tech savvy, undeniably easier and more convenient to utilize, and rates can be lower than traditional taxi rates depending on location and demand.[4] Moreover, as the court and PUC reasoned, there was evidence of other TNC service competitors’ success and multiple witness testimony of the need for service (the evidence usually relied upon to show demand for service in taxi certificate proceedings). The finding of technical and financial fitness concerning propensity to comply with PUC regulations and orders was a more interesting question given Uber’s noncompliance with PUC regulations and orders in the past. However, the court reasoned that since Raiser is now compliant with its PUC authorization “the mere fact of prior violation does preclude a carrier form obtaining lawful authority.”[5] The court upheld the PUC’s finding of adequate capital and resources and technical expertise and experience based on Raiser’s access to Uber’s resources and successful operation in other US cities. For the final prong of technical fitness, insurance coverage and driver and vehicle safety, the court concluded that the PUC could rely on the conditions imposed in the order granting Raiser’s CPC that require Raiser to comply with applicable PUC regulations and establish an ongoing reporting obligation to ensure Raiser is doing so.

Third, the court rejected the argument that the PUC owed deference to the ALJ’s decision because the PUC may supersede ALJ decisions where, as here, the PUC’s order is based on substantial evidence.

Fourth, the court held the argument concerning specificity of tariff rates was waived because it was not properly raised and preserved before the PUC, and that even were the court to address the issue the claim was meritless because “Raiser’s tariff reflects the circumstances of Pennsylvania’s TNC market, i.e., the economic climate in which Raiser will operate.”[6]

Fifth, the court dismissed the argument that the PUC abused its discretion in denying reconsideration because the PUC had already addressed each argument raised in the request for reconsideration in its original order granting Raiser’s CPC, and because the petitioner who raised the argument only appealed the order on reconsideration, not the PUC’s original order granting Raiser’s CPC, thereby depriving the court of jurisdiction to consider challenges to the original order.

PUC Civil Penalty

On April 21, 2016 the PUC voted 3-2[7] to decrease penalties recommended in the November 17, 2015 ALJ Initial Decision[8] regarding Uber and its subsidiaries’ (Gegen, LLC, Raiser, LLC, and Raiser-PA, LLC[9]) operations in Pennsylvania prior to obtaining PUC authorization via a CPC. The Initial Decision recommended fining Uber approximately $49 million based on the PUC’s statutory power to penalize up to $1,000 per violation[10] (each trip provided by Uber was one violation) and the PUC’s regulations at 52 Pa. Code § 69.1201(a), which describes nine factors the PUC will consider when imposing penalties. The ALJs held Uber clearly violated the Public Utility Code and were especially concerned with Uber’s flagrant disregard of the PUC’s July 24, 2015 Order requiring Uber to cease and desist operations in Pennsylvania.

The PUC chose to decrease the penalty to approximately $11 million, voting 3-2 to adopt Chairman Brown and Commissioner Coleman’s Joint Motion, which reasoned Uber and its subsidiary’s ongoing compliance with PUC regulations and conditions pursuant to the CPC for experimental service is a mitigating factor favoring a significant reduction in the penalty. The majority defended the appropriateness of this still record-breaking penalty, stating that Uber “deliberately engaged in the most unprecedented series of willful violation of Commission orders and regulations in the history of this agency.”[11]

Commissioners Witmer and Powelson both issued statements arguing for an even lower penalty, focusing on Uber’s continued compliance, lack of customer complaints, and the fact that the largest penalties imposed by the PUC in the past have involved actual harm to customers, including a $500,000 penalty for a gas explosion resulting in 5 deaths[12] and a $1.4 million penalty for deceptive practices in failing to honor savings guarantees made to customers for electricity supply resulting in actual financial harm to customers.

All of the Commissioners agreed that the service Uber provided was a common carrier public utility service, and thus jurisdictional, echoing the result the Commonwealth Court reached in its April 19, 2016 Opinion concerning Raiser’s similar service.

[1] Case Nos. 238 C.D. 2015, 240 C.D. 2015, 253 C.D. 2015. Judge Cohn Jubelirer authored the opinion in which Judges Leadbetter, Simpson, Leavitt, Brobson, and McCullough joined. Judge Pellegrini concurred in the result only.

[2] Taxi service in Philadelphia is regulated by the Philadelphia Parking Authority.

[3] Application of Rasier-PA LLC, Docket No. A-2014-2416127 (Dec. 5, 2014), reconsideration denied, Docket No. A-2014-2416127 (Jan 29, 2015).

[4] http://www.cnbc.com/2015/08/31/whats-cheaper-in-your-city-cabs-or-ride-shares.html

[5] April 19, 2016 Opinion, slip op. at 16-17 (citing Brinks, Inc. v. Pa. Pub. Util. Comm’n, 456 A.2d 1342, 1344 (Pa. 1983)).

[6] April 19, 2016 Opinion, slip op. at 21.

[7] The PUC’s final order is not available at this time.

[8] Pa Pub. Util. Comm’n v. Uber Technologies, Inc., et al., Initial Decision, Docket No. C-2014-2422723 (Nov. 2015) (“ID”).

[9] Raiser-PA, LLC did not provide any transportation services during the timeframe in question. Uber was precluded from asserting any claim that subsidiaries or affiliates were the provider of service in order to avoid liability as a discovery sanction. ID at 9-10.

[10] ID at 20-22 (citing e.g., Newcomer Trucking, Inc. v. Pa. Pub. Util. Comm’n, 531 A.2d 85 (Pa. Cmwlth. 1987) (interpreting 66 Pa. C.S. § 3301)).

[11] Joint Motion at 2.

[12] At the time, $500,000 was the maximum penalty the PUC was enabled to impose under 66 Pa. C.S. § 3301(c).

PUC Streamlines Gas Cost Rate Filings for Small Gas Companies

William Lehman on March 14, 2016

The Pennsylvania Public Utility Commission (PUC) recently issued a final rule making order concerning recovery of fuel costs by gas utilities at Docket No. L-2013-2346923. The full order can be found here: http://www.pabulletin.com/secure/data/vol46/46-4/110.html The Order is designed to simplify and streamline information and procedures for small gas utilities (gross intrastate operating revenues of $40 million or less) when submitting gas cost rate (GCR) filings with the PUC.

Specifically, in this Order, the PUC implements the following changes to its regulations: (1) classify all natural gas utilities not qualifying for 1307(f) treatment as small gas utilities; (2) modify the schedules included in small gas utilities’ GCR filings for purposes of efficiency; (3) provide small gas utilities with uniform time schedules to allow more accurate gas cost projections as winters approach; (4) allow small gas utilities to collect interest, at the prime rate for commercial borrowing, on both net over and under collections from ratepayers; (5) eliminate the requirement that at least 90% of a small gas utility’s annualized gas costs be rolled into base rates; and (6) implement a GCR interim tariff filing procedure to be effective on ten days’ notice.

Highlights of each Section:

52 Pa. Code 53.63 – classifies gas utilities into two types: Large (gross intrastate operating revenue over $40 million) and Small ($40 million or less).

52 Pa. Code 53.66 – sets filing requirements for small gas utilities when filing GCR tariffs under 1307. Subsection (a)(1) lists 11 Schedules that must be included with the filing. Subsection (a)(2) allows for small gas utilities to file a preliminary and a final GCR to be effective November 1. The preliminary filing is to be made by September 2. The final filing should be made on October 2. Subsection (c) requires small gas utilities to file a reconciliation statement under 1307(e) for the 12-month period running from Sept. 1 through August 31 by October 1. Subsection (d) allows small gas utilities to collect interest on both over and under collections from ratepayers. Subsection (e) states the notice requirements to customers when recovering fuel costs under the GCR and Subsection (g) requires small gas utilities to monitor GCR activity to avoid becoming materially over/under collected by more than 2% which would allow the small gas utility to submit an interim GCR filing to be effective on 10 days’ notice.

52 Pa. Code 53.68 – requires small gas utilities filing a GCR to provide notice within 5 days of the preliminary filing (or by Sept. 7) by publishing in a major newspaper within the utility’s service area.

First Energy Pays Price for Being First

Todd Stewart on September 24, 2012

The Pennsylvania Public Utility Commission (“PUC”) caused quite a stir with its August 16, 2012 Order[1] that partially approved the jointly filed default service plans of the four First Energy electric utility affiliates serving in Pennsylvania.

[1] Joint Petition of Metropolitan Edison Company, Pennsylvania Electric Company, Pennsylvania Power Company and West Penn Power Company for Approval of their Default Service Programs, Docket Nos. P-2011-2273650 et al. (Order entered August 16, 2012)(“First Energy Order”) .

The First Energy Order, the result of a binding pole of the issues conducted at the PUC’s August 2, 2012 Public Meeting, made substantial changes to ALJ Elizabeth Barnes’ Recommended Decision which had been issued earlier in the summer. Prominent among the modifications were the PUC’s changes to a Retail Opt-In (“ROI”) Auction program. The ROI program is intended to encourage default service customers to shop by offering a discount off of the Price to Compare (“PTC”) and a $50 rebate to customers and has been the centerpiece of the PUC’s suite of proposed market enhancements.

First Energy had proposed the ROI in a form that largely reflected the PUC’s wishes for such programs as expressed in its Retail Markets Investigation Order,[1] and with a few exceptions, notably cost recovery, the ALJ had largely adopted First Energy’s proposal. First Energy had proposed a 12 month ROI product with the discount set by a descending clock auction among participating electric generation suppliers (“EGS”). The PUC rejected the descending clock auction, and the very concept of an auction, and replaced it with a ROI aggregation program in which any eligible supplier raising its hand can receive an assignment of a percentage of participating customers. The PUC also modified the offer that would be provided to customers, replacing the 12 month fixed price with a four month offering at a fixed five percent (5%) discount off of the PTC at the time of the offer. Customers will still receive a fifty dollar ($50) bonus payment if they stay with their assigned supplier for the initial four (4) month term. In a new wrinkle, however, the PUC added an eight (8) month component to follow the initial 4 month term, but did not specify a price for the that component other than to say that the PUC would review the terms and conditions. Importantly, the PUC deferred the issue of how to pay for the ROI to a collaborative process between First Energy and the supplier parties. First Energy is required to make a compliance filing to the PUC within sixty (60) days — by October 15, 2012 that reflects a consensus proposal.

The uncertainty created by several aspects of the First Energy Order, and the ROI program in particular, provoked Petitions for Reconsideration by the Office of Consumer Advocate (“OCA”) and the Retail Energy Supply Association (“RESA”) among others (including First Energy). Answers were filed by a number of parties. In general, most agree agree that the PUC should have provided more specific direction for the eight (8) month component of the ROI product, and should have addressed cost recovery more definitively.

First Energy, in its Petition for Clarification, raised concerns about the finality of the First Energy Order with regard to its procurement plan — First Energy’s procurement plan has it beginning to purchase energy in October 2012. In an apparent effort to emphasize its concern, on September 6, 2012 First Energy filed a revised Default Service Plan that made revisions to its procurement plan as required by the PUC’s Order.

At its September 13, 2012 Public Meeting, the PUC granted reconsideration of all six (6) Petitions for Reconsideration and/or Clarification that had been filed, pending further consideration on the merits. The Commission’s action allows it to retain jurisdiction and effectively stops the appeals clock from ticking until the PUC enters an Order that clarifies and/or reconsiders its original Order. The next Public Meeting is scheduled to be held on September 27^th.

All of this drama has occurred while the Default Service Plans of the other three (3) large electric distribution companies, PECO, PPL and Duquesne Light Company, are pending. A Recommended Decision on PECO’s plan already has been issued by ALJ Dennis Buckley, and Exceptions and Replies to Exceptions were filed by a number of parties. Both PPL and Duquesne have been through the hearing phase and briefs are due in early October, with ALJ decisions expected in November or early December.

The First Energy Order has created palpable uncertainty, particularly concerning the PUC’s intention to use the Order as a model for the default service plans yet to come before it. The uncertainty has caused parties in those other proceedings, which were at various stages of litigation, to introduce alternative proposals that address the potential for the PUC to use First Energy as the standard. A rapid and decisive PUC decision that clarifies the First Energy Order will allow parties in those ongoing proceedings to have the benefit of that information; at least for PPL and Duquesne, where the briefs have yet to be written.

In other related developments, the PUC is expected to issue a Secretarial Letter seeking comments in the RMI proceeding in late September. That Secretarial Letter is expected to outline the PUC’s vision of the “end state” of the electricity market, and seek comments of interested parties prior to issuing final guidance on the “end state” in late November or early December 2012.

[1]Investigation of Pennsylvania’s Retail Electricity Market; Intermediate Work Plan, Docket No. I-2011-2237952. (Order entered March 2, 2012)(“IWP Order”).

PUC Seeks Comments On Smart Meter Procurement And Installation Issues

Todd Stewart on July 21, 2011

The PUC recently issued a Tentative Order seeking comment on a number of issues involved in the implementation of the deployment of smart meter technology throughout the Commonwealth and the data transactions required to support that implementation. Smart Meter Procurement and Installation, Docket No. M-2009-2092655 (Tentative Order entered June 30, 2011).

The PUC’s June 30, 2011 Order proposes a methodology for providing real time and time-of-use pricing for companies using dual billing and rate ready consolidated billing; the means by which historical interval usage data is transmitted; and, the monthly exchange of bill quality interval usage data recorded at meter level. The Commission also clarified its expectations with regard to the required functionality it wants to see in smart meter deployment plans including the ability for smart meters to provide customers with direct access to their hourly usage and price information, support for automatic control of the customer’s electric consumption by the customer, the utility or the customer’s agent (at the discretion of the customer) and to allow for direct meter access or electronic access to the customer meter data to third parties with customer consent.

Lacking in this order, and left for resolution elsewhere, is the issue of what type of customer consent is required for access to the meter and for access to interval meter data. The issueThe issue of interval usage data privacy has been raised recently by a number of privacy and customer advocates who are concerned that interval meter data in the wrong hands can pose many threats to customers. The specific concern is that in the hands of someone who is capable of correctly interpreting the data, it can be used to learn much about a particular household’s behavior, such as what times they are home or not home, what appliances they use and when and on and on. Accordingly, these advocates want to restrict access to such data and to require affirmative customer consent before such data is released, and in some cases, before it is even gathered. For some, the concerns even involve the potential for the government to use such information to spy on its citizens, creating a very real, “big brother” scenario, law enforcement agencies already have used electric usage information as a basis of probable cause for search warrants, so the idea is not much of a stretch. Some have even raised the concern that customers be able to opt out of having a smart meter installed.

The Office of Consumer Advocates comments in response to the PUC’s Reconsideration Order in Interim Guidelines for Eligible Customer Lists, Docket Nos. M-2009-2183412, et seq. (Order entered June 13, 2011); exerted significant effort on addressing the need for express and affirmative customer consent to the release of any real time usage data. The OCA argues that any data derived from real time metering is subject to such provision under Act 129, 66 Pa. C.S. § 2807(f)(3). Others would argue that only the real time data or access to the meter is subject to the restriction. It is clear that the statute requires some form of customer consent, but so far the PUC has yet to provide guidance on what form that consent must take.

Comments to the data exchange questions posed by the Order are due on July 30, 2011. Reply comments at Docket Nos. M-2009-2183412 are due July 28, 2011.

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.