Pa. PUC Trial Staff Opposes FirstEnergy Solutions Home Rule Opt-Out Aggregation Petition Email
This Story November 24, 2010
Opt-out municipal aggregation programs, regardless of whether they are run by home
rule municipalities, "operate in contravention to 66 Pa. C.S. § 2807(d)(1) and 52
Pa. Code § 57.173, thereby making them impermissible," the Pennsylvania PUC Office
of Trial Staff said in supporting petitions for a declaratory order from the Retail
Energy Supply Association and Dominion Retail asking for such a finding, and requesting
that the Commission deny a petition from FirstEnergy Solutions seeking authority
to conduct such aggregations (P-2010-2207062 et. al.; see 11/11, 11/4).
"The Commission maintains exclusive authority to regulate the actions of all jurisdictional
utilities within the Commonwealth. This authority includes oversight of the activities
of Electric Distribution Companies and Electric Generation Suppliers," Trial Staff
"To the extent the municipal aggregation programs rely on ordinances that conflict
with the Public Utility Code, they must be considered void. Local ordinances cannot
preempt the regulation of public utility activity as provided for in the Public Utility
Code," Trial Staff added.
Trial Staff maintained that the opt-out provision, absent authority from the General
Assembly, "violates the Public Utility Code because it allows for the switching of
a provider without an affirmative notification of consent."
"[F]ailing to respond to an opt-out notice does not constitute the type of affirmative
consent contemplated under the Public Utility Code," Trial Staff said.
Trial Staff cited 66 Pa. C.S. § 2807(d)(1) which holds that, "[t]he Commission shall
establish regulations to ensure that an Electric Distribution Company does not change
a customer's electricity supplier without direct oral confirmation from the customer
of record or written evidence of a customer's consent to change of supplier."
"Furthermore, the Commission's Regulations provide that an Electric Generation Supplier
must obtain the customer's consent to switch. This consent to switch can either
be in writing or by a voice recording acknowledging the request. The very nature
of the offered program conflicts with the provisions of the Public Utility Code and
the Commission's Regulations as it does not provide for the necessary affirmative
representation by the customer," Trial Staff added.
While FirstEnergy Solutions has attempted to rely on the Pike County order as "definitively"
setting precedent allowing opt-out aggregations, Trial Staff responded that the Pike
County circumstances are "[c]learly" distinguishable from the circumstances presented
in the opt-out aggregation plans sought by FirstEnergy Solutions.
"In fact, the Commission in its Pike County order explicitly stated that, 'this action
should not be construed as precedent in future proceedings, but as a solution to
a unique problem.' The Commission went on to say that '[it] supports opt-in programs
as its clear precedent with regard to retail choice,'" Trial Staff noted.
Trial Staff also rebutted FirstEnergy Solutions' arguments that the opt-out aggregation
would necessarily benefit customers since the programs would guarantee a rate lower
than default service.
"The authority to aggregate a large number of default service customers to an alternate
supplier will impact the purchasing plans of incumbent EDCs. This uncertainty may
result in an artificially high price to compare, thereby impacting any perceived
savings," Trial Staff said.
"Furthermore, municipal aggregation without adequate protections may drive suppliers
out of Pennsylvania resulting in a negative impact on competition. It is conceivable
that an EGS may view the risk of an aggregated customer source being transferred
from their service impacting the ability to operate profitably in Pennsylvania. Robust
competition will be attained when barriers are removed; not when they are constructed,"
Trial Staff added.
Trial Staff recommended that the stay of any electric distribution company or electric
generation supplier switching a customer pursuant to an opt-out aggregation, initially
instituted in a Secretarial letter pending resolution of the petitions for a declaratory
order, be extended pending resolution of the controversy through a, "thorough investigation
of the program with the development of a full and complete record to support any
Other Opposition FirstEnergy Solutions’ request that the PUC allow opt-out municipal
aggregations for home rule municipalities absent enabling legislation drew opposition,
or at least concern, from several additional parties, including the Office of Consumer
Advocate, Office of Small Business Advocate, Duquesne Light, Citizens Electric Company
and Wellsboro Electric Company, and industrial customers.
Citing Duquesne Light Co. v. Upper St. Clair Twp, OCA noted that the Pennsylvania
Supreme Court found that, "the General Assembly entrusted the regulation of public
utilities to a commission of statewide jurisdiction. Local authorities not only
are ill-equipped to comprehend the needs of the public beyond their jurisdiction,
but, and equally important, those authorities, if they had the power to regulate,
necessarily would exercise that power with an eye toward the local situation and
not with the best interests of the public at large as the point of reference. We
believe that the General Assembly never intended to bestow a power upon first class
townships which is in headlong conflict with the power already given the Public Utility
"This discussion is instructive to the matter here," OCA said. "While the OCA recognizes
the interest and desire of local officials to assist the families and businesses
in their communities, the action of removing a large number of customers from default
service, without their consent, can result in the imposition of additional costs
on an EDC's default service and the wholesale generation providers from whom they
purchase default service supplies. These costs are, in turn, passed on to the remaining
default service customers now and in the future. This is the very concern for the
public at large that the General Assembly has entrusted to the Commission through
the Public Utility Code," OPA said.
FirstEnergy Solutions has argued that the aggregations in question would not affect
default service since they amount to 1% of the load at the affected EDCs. However,
OCA noted that FirstEnergy Solutions has not included the load of other communities
that FirstEnergy Solutions has approached for an opt-out aggregation, but which have
yet to pass an aggregation ordinance, in its calculation, particularly the entirety
of Erie County. Furthermore, OCA noted that 71 communities have adopted some form
of home rule, and if opt-out aggregation were pursued at all of these municipalities,
the impact on default service would be "significant."
In arguing that home rule municipalities may conduct opt-out aggregation, FirstEnergy
Solutions has claimed that the municipality is not competing in the electric industry,
and thus does not run afoul on the prohibition of municipalities engaging in proprietary
or private business.
Duquesne Light rebutted this argument, stating that "[b]y taking customers at the
expense of an already PUC-approved default service plan and also the wholesale suppliers
providing power, the municipalities with FES are competing with the industry in taking
Furthermore, while FirstEnergy Solutions has said that the fact that the municipalities
will not receive revenue from the aggregation means the aggregation is not a private
business, Duquesne Light cited a three-prong test, established in Morris v. School
District of Township of Mount Lebanon and more recently in Beaver Dam Outdoors Club
v. Hazelton City Authority, which determines when an activity is proprietary. Under
this test, Duquesne Light said that an activity is proprietary if any of the following
conditions are met: a governmental unit is not statutorily required to perform it,
or if it may also be carried on by a private enterprise, or if it is used as a means
of raising revenue.
"Even if there is no compensation, the municipal aggregation meets the first and
second prong and it is thus a proprietary business," Duquesne Light said.
The Retail Energy Supply Association rebutted FirstEnergy Solutions' reliance on
Nutter v. Dougherty (Pa. 2007), which FirstEnergy Solutions had claimed limited the
PUC's pre-emption authority. As noted by Matters, FirstEnergy Solutions had argued
that pre-emption may occur only if a home rule program runs afoul of a specific law
enacted by the General Assembly. FirstEnergy Solutions claimed that because the
code is "silent" with regard to governmental aggregation, pre-emption cannot occur.
RESA, however, noted (as Matters did) that the Code is not silent with regard to
several PUC regulations which are directly impacted by opt-out aggregation, including
authorization for customer switches, access to EDC jurisdictional facilities, and
customer information. Accordingly, the PUC has pre-emption authority over opt-out
aggregations due conflicts with such regulations, RESA said.
Also notable is that Brighten Energy LLC, TXU's recently licensed affiliate in Pennsylvania,
has quickly become active in the Pennsylvania regulatory process and filed comments
in opposition to FirstEnergy Solutions' requested relief.